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SHERIDAN — There are approximately 80 orphaned or abandoned coal bed methane wells in Sheridan County that are unplugged and unreclaimed. Most of the sites are just east of Sheridan and are leftover evidence of methane drilling ambitions from years ago.
Because the wells were surrendered by the companies that established them, the responsibility to clean up the aftermath is diverted either to state or federal resources. The situation has prompted legislature to re-assess the bond fees for gas wells to ensure that if a company goes belly-up, the land can be restored to its original state.
Spokesperson for the Powder River Basin Resource Council Jill Morrison said the wells represent a potential environmental hazard.
“If you do not plug one of those wells, they can be conduits for aquifer contamination,” she said, explaining that the longer a well sits inactive, the more likely the casing around it will leak.”
When a well becomes abandoned or orphaned on state, federal or private land, it’s up to each respective agency overseeing the area to determine how to address the situation. The Bureau of Land Management handles federal land, while the Wyoming Oil and Gas Conservation Commission deals with state land.
“Our bonds are performance-based bonds,” explained Supervisory Petroleum Engineer at the BLM Buffalo Field Office Matthew Warren.
“As long as you’re doing what you’re supposed to be doing, our policy is that the bond is adequate. You might look at the numbers and not think that, but that’s how it works.”
Warren said a minimum leasing bond for a single well on federal land is $10,000. However, a developer can get a state-side bond that allows them to operate multiple wells all around the state for $25,000. Nationwide, the bond for unlimited drilling on federal land is $150,000.
“Those are minimum bond amounts,” Warren said, adding they’ve been in place for decades. “We do have a process to increase bonds for operators that are in non-compliance. We may catch them before they’re bankrupt, or it may not happen until after.”
Morrison said bankruptcy is a commonplace occurrence for a small oil and gas company.
“It’s sort of their life cycle,” she said. “Once the decline curve starts in terms of production, the big companies try to sell off these wells. These smaller companies will get what’s left and then go bankrupt.”
Warren said ultimately, the BLM is only responsible for plugging and reclaiming orphaned wells, meaning there is absolutely no responsible party.
State Lands and Investment Board Assistant Director Jason Crowder said orphaned or abandoned wells on state land stand a slightly better chance of having a responsible party left behind to do the clean-up.
“What hopefully happens is we’ve required sufficient bonding to cover any amounts they leave unsatisfied with us or delinquencies with our office,” Crowder said, adding that if a well is not producing, the bond is then set at $10 per foot of well depth, which goes into a general conservation fund. As a last resort, state agencies can pursue mineral lease holders for the reclamation costs.
However, the fact there are dozens of unplugged, unreclaimed wells that are several years old suggests an underlying issue.
“The fundamental problem goes back to the fact we do not require a high enough bond for plugging and reclamation,” Morrison said, adding that oil and gas blanket bonds are “ridiculously low.” PRBRC calculations estimate the average cost to reclaim a single well site are around $25,000. If a developer has hundreds of wells across the state or the nation, the bond money can’t stretch that far.
“The coal industry is required to post a reclamation bond for the exact cost of reclamation, and that bond is updated each year based on the number of acres that needs to be reclaimed,” Morrison said. “That’s the type of bond we need for the oil and gas industry.”
“The other big issue that isn’t accounted for in all this is not only are these companies not plugging and reclaiming, but not paying landowners for surface use and agreement, loyalties to mineral owners, taxes owed to county and state governments,” she said.
Lawmakers are expected to consider modification of the bond processes during the upcoming legislative session, to include potentially increasing mill levies associated with each well along with site-specific bond adjustments.
Estimates from the PRBRC indicate there are approximately 1,200 abandoned or orphaned wells in the Powder River Basin, and that number is growing because low methane prices make production unprofitable.