This leaves taxpayers on the hook for potentially billions of dollars in cleanup costs for orphaned wells.
The case against the three Texas oil executives is a stark example of the lengths some in the industry will go to avoid their responsibility for cleaning up old wells. The lawsuit alleges that the men engaged in a fraudulent scheme to transfer ownership of profitable wells to shell companies, LLCs, and partnerships they created, while leaving the state of New Mexico to foot the bill for plugging and cleanup.
Unplugged oil and gas wells pose significant environmental and health risks, emitting methane, carcinogenic gases, and briny, radioactive wastewater. The state of New Mexico is now facing the daunting task of plugging these wells, with estimated costs reaching up to $1.6 billion.
Environmentalists and regulators are sounding the alarm about the growing problem of orphaned wells in New Mexico and across the country. The issue has prompted a broader discussion about the inadequacy of current regulations and safeguards in place to ensure that oil companies are held accountable for the full cost of cleanup.
As the oil boom in New Mexico ages and more wells become low-producing, the risks associated with orphaned wells only continue to grow. The potential financial burden on taxpayers is immense, highlighting the urgent need for stronger regulations and oversight in the oil and gas industry.
The lawsuit against the Texas oil executives is a step in the right direction towards holding polluters accountable and protecting the public from shouldering the costs of environmental cleanup. It serves as a reminder of the importance of robust regulatory measures to prevent similar cases of fraud and negligence in the future. A recent analysis by ProPublica and Capital & Main has revealed that the 15 states responsible for the majority of oil and gas production in the United States are severely underprepared to cover the costs of plugging abandoned wells. These states collectively hold bonds that would only cover less than 2 percent of the projected $151.3 billion needed for well plugging.
In response to this alarming revelation, New Mexico has taken steps to reform its bonding regulations. The state’s Oil Conservation Commission has proposed amendments that would require companies to provide a $150,000 bond for each inactive or low-producing well. These wells are more likely to become abandoned, leaving the state responsible for plugging them.
The proposed regulations also target companies with a high number of inactive wells, requiring them to purchase bonds for each well. Additionally, the rules would impose greater scrutiny on the sale of wells to financially unstable companies and limit the time that wells can remain idle before needing to be plugged.
New Mexico’s State Land Office, which oversees publicly owned land in the state, has also initiated a process to increase bonding requirements for well plugging. With an estimated 15,000 unplugged wells on its land, the agency recognizes the need for stronger bonding regulations to ensure funds are available for cleanup in case companies abandon their wells.
Ari Biernoff, general counsel of the State Land Office, emphasized the importance of these reforms, stating that the current bonding requirements are inadequate and need to be updated to reflect the true cost of cleanup.
However, the proposed regulations have faced opposition from industry groups. The New Mexico Oil & Gas Association and the Independent Petroleum Association of New Mexico have submitted counterproposals with significantly lower bonding increases. They argue that excessive bonding requirements could drive smaller operators out of business, leaving only a few major companies in the market.
The challenges of abandoned wells in New Mexico were highlighted by the case of Remnant and Acacia, two companies that accumulated hundreds of wells in southeastern New Mexico before facing regulatory violations. The companies eventually filed for bankruptcy, leaving behind a complex web of transactions among their owners.
Ultimately, the responsibility for plugging abandoned wells falls on the state, with the State Land Office now managing 172 wells from Remnant and Acacia. While some progress has been made in plugging these wells, there is still a significant number that require attention. The state’s efforts to reform bonding regulations aim to prevent similar situations in the future and ensure that companies are held accountable for the cleanup of abandoned wells. New Mexico is facing a significant challenge when it comes to plugging orphaned oil and gas wells. With the state estimating a per-well cleanup cost of over $25 million, the financial burden is substantial. The State Land Office was able to claim a single bond worth $20,000 from Remnant, highlighting the need for an upgrade to the bonding rule.
One of the most lucrative wells in the state belongs to Solis Partners, but even this company is at risk of leaving its wells orphaned. With around 120 inactive wells on state trust land, Solis Partners’ parent company, New Era, is reportedly selling the wells. This move has drawn criticism, with accusations that the company is seeking to walk away from the plugging and remediation costs.
Ecologist Charlie Barrett, from the environmental group Oilfield Witness, has been documenting pollution at Remnant’s and Acacia’s wells for years. He describes these wells as old and falling apart, emblematic of the small oil and gas operators that are leaving their wells as orphans. Barrett notes that this situation is unfortunately not unique in the industry.
The challenges faced by New Mexico in dealing with orphaned oil and gas wells highlight the need for stricter regulations and oversight. As the industry evolves, it is crucial to ensure that companies are held accountable for the environmental and financial impact of their operations. Addressing these issues will require cooperation between government agencies, environmental groups, and industry stakeholders to find sustainable solutions for the future.
