Written by Soleil Gaylord
In a classic example of the tragedy of the commons, oil and gas corporations often sell off their no-longer-productive lands with haste, altogether avoiding the responsibility of reclamation. Unsurprisingly, the number of “orphaned,” or unattended, wells continue to multiply on our lands — with that, the risk to Colorado taxpayers who often shoulder the cost of cleanup. This reckless, no longer excusable behavior places our state and its citizens under immense financial pressure and leaves the environment subject to profound air and water pollution.
Many Coloradans would be shocked to find that our state is riddled with 60,000 unplugged wells — the remnants of 150 years of extraction — only a fifth of which produce even marginal amounts of oil and gas. Unplugged wells are an enormous environmental and human health liability, leaking methane, volatile organic compounds, and soil contaminants. Harrowingly, many, if not all of these wells are at significant risk of being “orphaned” or left unattended without a responsible party to plug, remediate, and reclaim the site.
Executive order D-2018-012 called for a system of “financial assurances that prevents future orphaned wells and orphaned sites by providing sufficient funding for plugging, remediation, and reclamation activities.” While sound in intent, Governor Hickenlooper’s ask has not yet come to fruition — the state’s oil and gas industries are not required to assume the costs of fully reclaiming and plugging retired wells. Companies, enabled by weak regulations, shift clean-up costs to the taxpaying public and the environment.
The state of Colorado enables this habit by granting oil and gas companies large blanket bonds that assume only a fraction of the well plugging cost. In the case of Colorado energy corporation PetroShare, a $100,000 blanket bond “covered” the estimated $16 million price tag required to plug 89 Colorado wells — talk about a government handout. This last-resort bankruptcy court strategy placed the burden of Petroshare’s clean-up costs upon taxpayers. Put simply, a $100,000 flat fee does not suffice to effectively plug hundreds to thousands of wells that come in at an estimated $250,000-per-well plugging expense. In North Dakota, the median single well bond costs the oil producer $180,000, in Alaska, $400,000. It’s time to get up-to-date, Colorado.
The financial liability of Colorado’s wells will cost an estimated seven billion dollars. The state has secured an estimated two percent of that sum in surety bonds, meaning the vast majority of drilled wells in Colorado are not financially insured. If Colorado fails to adjust bonding requirements appropriately, oil and gas operators will continue to drill while placing the cleanup of orphaned wells on the back burner, or worse, ignore their responsibilities outright.
The State of Colorado must increase its bond requirements to reflect the actual social and environmental costs of drilling — making industries responsible for their adverse impacts. Financial assurances should be tied to any transfer of ownership, and companies should be prohibited from separating assets at transfer.
The leniency of current regulations allows for the accumulation of more orphaned wells, and the more wells that exist, the more will have to be reclaimed. Failing to establish well-needed financial obligations for oil and gas producers exposes a massive and potentially catastrophic risk for Colorado taxpayers, who will likely shoulder the costs of cleaning up the industry’s mess.
As the fossil fuel industry continues to see its profits plummet and global energy trends shift towards renewable energies, a scenario in which oil and gas producers cannot pay for the environmental and social debts they owe becomes increasingly likely. This risk should not be the State of Colorado’s responsibility, already strained by the COVID-19 pandemic and a slew of other financial shortfalls. Nor should the burden fall on Colorado taxpayers. No other entity should fund oil and gas’s cleanup than the fossil fuel industry itself.
This article originally appeared in Colorado Politics.