State officials say they are struggling to comply with Interior Department requirements for $4.7 billion of funds meant to help plug old oil and gas wells that have been abandoned for decades.
Some of the money to address orphaned wells — made available through the 2021 bipartisan infrastructure law — has already helped to cap more than 8,800 wells nationwide.
But the Bureau of Land Management estimates that more than 130,000 old wells remain unplugged across the country, and groups like the Interstate Oil and Gas Compact Commission estimate the number could be as high as 740,000.
As the federal orphaned well program wears on, state agencies responsible for using the federal funds say new requirements tied to later tranches of funding have made progress difficult. The issues could make it more difficult for states to apply for — and receive — funding to plug wells, which EPA estimates leak more than 6 million metric tons of methane annually. Methane is a potent gas, retaining 80 times more heat over two decades than carbon dioxide.
“We have more questions than answers because of pending legislation, the presidential campaign coming up — things may be vastly different than they are today,” said Brandy Wreath, director of administration at the Oklahoma Corporation Commission, which regulates oil and gas operations. “We just don’t know what to expect and don’t believe in rushing to spend money.”
At issue are formula grants that constitute about $2 billion of the $4.7 billion federal orphaned well program. Twenty-six states in 2022 were awarded initial grants worth $25 million each that included few requirements on how the money needed to be spent or what needed to be reported to Interior.
The new formula grant funds — the total value of which could range from $1.6 million to over $318.7 million depending on the number of orphaned wells states reported to Interior — have more strings attached.
States are now required to measure and report the methane emissions from every orphaned well plugged before, during and after they are sealed shut. They must assess each orphaned well site to see if endangered or threatened species have habitats nearby, and Interior must agree with a state agency’s determination within 10 business days. They must hire cultural monitors to oversee some well plugging sites to ensure compliance with the National Preservation Act.
Those measures, state agencies complain, have forced them to use funds earmarked for plugging wells instead for reporting and compliance — leading to less funding left to fill abandoned wells and slowing the process.
The Railroad Commission of Texas, which oversees the state’s oil and gas industry, said it has plugged 62 percent fewer wells in the first seven months of the formula grant funding portion of the program than during the first seven months with just the initial funds.
“The successful deployment of these Initial Grant funds by Texas and other states was due in large part to the fact these funds had very little in the way of new requirements or conditions for recipient states,” Texas Railroad Commissioner Jim Wright testified in prepared remarks before a congressional committee in July.
He said that stands in “stark contrast” to requirements that are part of the new formula grants.
“These additional requirements have resulted in a substantial increase in the average cost to plug a well, while simultaneously adding significant time to complete each plugging job,” he said.
In a statement responding to questions from POLITICO’s E&E News, Interior spokesperson Giovanni Rocco said that more than $1 billion has already been distributed to states, tribes and federal land managers that applied for the program. That has led to more than 8,800 wells being plugged, which has led to a reduction of 155,000 metric tons of methane pollution.
Rocco also pointed to prepared remarks from Steve Feldgus, the department’s principal deputy assistant secretary for land and minerals management, focused on the methane measurement requirement that is part of later phases of funding.
Feldgus said that testing for methane is among the best metrics to show whether a well-plugging job was done well and that methane data will be part of a report required by Congress on the program.
“Methane emissions from these wells contribute significantly to environmental, health, and safety challenges, necessitating accurate data for effective mitigation,” Feldgus said.
Adam Peltz, a senior attorney with the Environmental Defense Fund who has studied orphaned wells for years, said the program is in a tough spot for everyone involved.
“I’m sympathetic with states on this but also sympathetic with [Interior] because I think they’re genuinely trying to make this work, but their hands are tied behind their backs by solicitors and they’re told what is required,” Peltz said in an interview. “They need to figure out what is solvable, what is reconcilable and what can be ironed out to make the most of this large but limited pile of cash.”
Plugging programs
It’s hard to quantify the U.S. orphaned well program, partially because states and the federal government still don’t have a firm grasp on how many of these wells dot the country.
The onset of oil and gas production in the late 1800s and early 1900s led producers to drill exploratory and production wells across the country. Many of those wells became abandoned after oil companies folded or production stopped in absence of state laws meant to require operators to plug and remediate wells they drilled.
States eventually instituted bonding rules, requiring operators to insure wells they drill and pay into a state fund in case the wells were abandoned. But environmental and community groups say bonding requirements in many states fall short of the costs associated with plugging orphaned wells and let operators escape plugging responsibility in cases where they go out of business.
Even so, states for decades have created their own programs for plugging orphaned wells, but the issue received little attention from the federal government until the Infrastructure Investment and Jobs Act, or bipartisan infrastructure law, was enacted in 2021.
Rep. Glenn “G.T.” Thompson (R-Pa.) said he voted against the infrastructure law because he was unsure it was a good investment for taxpayers. Ultimately, he said he’s glad it included funds to help plug wells in Pennsylvania and beyond.
“We have 27,000 documented orphaned wells [in Pennsylvania], and I’m confident there are potentially thousands more left undocumented and a large concentration of these wells in all oil- and gas-producing states,” he said. “We have to contend with these wells.”
Pennsylvania was made eligible for the second-highest amount of bipartisan infrastructure law funds for plugging orphaned wells, with the potential to be awarded more than $330 million through the program’s initial and formula grant funding.
Thompson, however, said issues began to arise after the initial grant funds were awarded, particularly with methane monitoring requirements.
“This additional testing requirement, which was not included in the [bipartisan infrastructure law], includes confusing guidelines from [Interior],” he said. “It adds to states’ response. They have to hire more staff, and it costs thousands of dollars per well and creates a significant delay to plugging operations.”
‘Unnecessary costs’?
Peltz with EDF said it can cost about $5,000 per well to do methane monitoring. The Texas Railroad Commission said its costs for methane monitoring have hovered between $2,200 and $5,500 on average, on top of the average well-plugging costs of between $30,000 and $35,000 per well.
Wright, with the Railroad Commission, testified that the methane testing equipment required by Interior as part of the formula funding is 100 times more sensitive than those required under the Inflation Reduction Act’s Methane Emissions Reduction Plan, which is run by EPA and the Department of Energy.
“Such a requirement makes little sense and, again, represents additional and unnecessary costs due to their rigor,” Wright said. “This inflexibility is self-defeating to the underlying goals of the [bipartisan infrastructure law] and ultimately limits a state’s ability to innovate and stretch these taxpayer dollars further.”
Thompson authored a bill that has gained some bipartisan support that would relax the methane reporting requirement — H.R. 7053, the “Orphan Well Grant Flexibility Act.” The act would make methane testing requirements optional for states. The bill has been introduced but has not been passed by either the House or Senate.
In a hearing about the bill before the Natural Resources Subcommittee on Energy and Mineral Resources, Interior’s Feldgus said measuring methane is necessary to verify that wells are being successfully plugged.
“Since background levels of natural methane exist, there is no way to certify the effectiveness of the plugging operation other than comparing direct methane measurement before and after plugging,” he said. “Instruments that detect methane can also detect toxic gases like hydrogen sulfide, ensuring that mitigation steps can be taken to keep the public and workers safe before well plugging begins.”
Feldgus said the amount of methane emitted from orphaned wells can vary dramatically, from some that emit virtually no methane to others that spew out the gas. He said measuring methane can help states prioritize plugging the biggest emitters.
But Peltz with EDF said that prioritization could only happen if states first started measuring methane off of all of their orphaned wells before plugging any, rather than what they’re doing now, which is identifying a well to be plugged and then measuring the methane it’s emitting.
Focusing on methane emissions too much may lose Interior support among community members and among some state agencies, Peltz said, which may have other concerns about the wells.
He and some state agency heads also worry that some measures meant to protect the environment and cultural sites may also be getting in the way of plugging abandoned wells.
Endangered species
In June, the Texas Railroad Commission learned that an orphaned well was leaking produced water — extra-salty ancient seawater that can be tainted with naturally occurring radioactive materials, drilling fluid and other potentially harmful chemicals.
There were five animal species subject to the Endangered Species Act that could be present in the area, species that only need to be considered if there is a wind project going up or for a project that will affect the flow of water in rivers and streams.
Railroad Commission staff determined plugging the well would have no impact on the species, but it took Interior five days to reach a similar conclusion, and federal approval to plug the leaking well with infrastructure law funds was received 18 days after that.
Some officials have been frustrated that laws meant to protect endangered species could slow progress in stopping pollution events in their habitats.
“I appreciate endangered species, I do, but let’s think about that,” said Wreath with the Oklahoma Corporation Commission. “If we have a well spewing water and we can’t plug it because a bird is nesting there, isn’t that also a risk to the bird? I don’t think those conversations have happened enough [at the federal level].”
Rocco with Interior said the department’s Office of the Solicitor determined that state formula grants were subject to sections of the Endangered Species Act and the National Historic Preservation Act — requirements that Rocco said were communicated to state agencies as soon as it was determined they would be required.
“The Department’s Orphaned Wells Program Office will continue to prioritize collaborative work with states to ensure compliance with the ESA and NHPA so that states can continue the historic work underway across the country to plug and reclaim orphaned wells,” Rocco said in a statement.
Peltz said states have also had to use well-plugging funds to hire consultants to help them adhere to the National Historic Preservation Act. Even then, there remains confusion about whom state officials would need to contact if they found anything potentially historically or culturally significant.
The Endangered Species Act and National Historic Preservation Act rules are well intended, Peltz said, but in some cases may be working against the goal of reducing pollution and the number of orphaned wells across the country.
“We don’t want to toss out the lesser prairie chickens and people’s bones and stuff, but if we’re not accomplishing anything, we should look for ways to streamline costs,” Peltz said.
He said Interior could investigate creating a waiver system similar to what was created for rules like the Build America Buy America Act — which allows companies to get a waiver if buying American materials for taxpayer-funded projects turns out to be impractical or impractically expensive. The Build America Buy America Act was enacted as part of the 2021 bipartisan infrastructure law, applying to projects funded by the law as of May 14, 2022.
‘So much red tape’
Wreath in Oklahoma said the requirements for the final two tranches of orphaned well funding from the 2021 infrastructure law are convoluted. His agency opted out of applying for one of the grants — the performance grant — altogether.
That grant would have allowed the Oklahoma Corporation Commission to receive up to $40 million if it could show that it both strengthened the state’s plugging standards and made improvements to state programs aimed at reducing orphaned wells in the future — like increasing required insurance liability oil and gas companies must pay for the wells they drill.
“It was a few million we could have gotten, but there was so much red tape it was not worth our money to take that risk,” Wreath said.
Instead, his state is focusing on two applications for two rounds of formula grant funding, which could be worth up to $153.9 million combined for Oklahoma alone. The Oklahoma Corporation Commission withdrew its first formula funding application and plans to resubmit it in December, with the hopes of hiring a third party to administer the grant.
But finding a company to take that on has been tough, Wreath said, because there are still so many unknowns with how the program will work.
“One bid may have 50 options in it. It’s a nightmare. It’s hard to even get an administrator,” Wreath said. “Spending state resources to get a bid for things we may never need, and it’s not cheap to put together a bid like this. It’s making a lot of people spend a lot of money, and it’s not getting one hole plugged in the ground.”
Wreath said he’s grateful for the federal funds. The nation benefits from oil and gas production, he said, so it should be a collective responsibility to help clean up wells in states that produce oil and gas. But if the rules remain unclear and overly burdensome, Wreath said, his agency may not apply for any of the formula grant funds.
“I will tell you: Yes, there’s a chance if this stuff stays this convoluted, and we can’t get someone to bid to be third-party administrator and to accept the risk in the contract — we won’t move forward without a third-party administrator,” Wreath said. “We don’t have expertise. We operationally can’t move forward. I can’t do it.”
Peltz with EDF said Interior could benefit from having a sit-down meeting with all parties involved — the White House, Interior and key officials from the state agencies in charge of using the grant funds. Interior is in communication with states on an individual basis, Peltz and Wreath said, but a group meeting could help both the federal government and states navigate growing pains associated with the grant funding.
Still, Peltz said, the federal funding has created more awareness and has already helped states plug thousands of abandoned wells that would have remained open for years.
“It was hard six years ago to have a conversation about how so many operating wells were going to be orphaned. Now, that conversation is happening every day, and I credit this federal funding to opening this conversation,” Peltz said. “This new funding phase has additional requirements and clearly some issues that need to be resolved for the program to be as successful as it could be.”