For Immediate Release,
January 24, 2020
SACRAMENTO, Calif. — California taxpayers could be on the hook for more than $500 million to plug thousands of so-called “orphan” wells drilled and abandoned by oil and gas companies, according to a report by experts with the California Council on Science and Technology.
Idle wells may pose a risk to public health and to groundwater, the report notes, and plugging costs for California’s oil and gas wells could ultimately reach billions of dollars.
“California’s oil companies have drilled and drilled without any thought of how to clean up their mess,” said Hollin Kretzmann, an attorney at the Center for Biological Diversity. “This study shows it’ll ultimately cost billions to plug these dangerous wells, yet the companies profiting from the oil have set aside a tiny fraction of that money for cleanup. If state officials don’t impose stronger rules, California taxpayers will end up paying big bucks to fix this toxic problem.”
The CCST identified more than 5,500 oil and gas wells that are orphan (i.e., idle for five years with no owner) and highly likely to become orphaned (idle for five years with smaller, partially active owner). It would cost $550 million to plug and abandon just these old wells, the report says. Almost 70,000 other wells that are currently idle or nominally active will eventually need to be plugged, bringing the possible cost to $5 billion. Plugging all 107,000 wells in the state would cost more than $9 billion. Tens of thousands of other wells may need to be replugged. Oil companies are required to pay for plugging and abandonment costs of their wells.
Yet the bonds collected to cover the cost of plugging wells currently total a little over $100 million, the report notes. That amounts to roughly one percent of the cost to plug and abandon all of California’s wells. “[O]ur initial analysis implies that the potential cost to the state still substantially exceeds the value of these assurances,” notes Judson Boomhower, the report’s lead author.
The report’s key findings:
- CCST identified 5,540 oil and gas wells that are orphan (i.e., idle for five years with no owner) and highly likely to become orphaned (idle for 5 years with smaller, partially active owner)
- It would cost $550 million to plug and abandon just these wells.
- Another 69,425 wells are “active” but produce less than 5 barrels a day. Add those in and the cost would be $5 billion to plug.
- This does not include wells that are currently plugged but may need to be replugged due to improper plugging or outdated standards (another 40,000 – 120,000 wells). (California has been identified as being in the “bottom tier” of states in terms of the strength of decommissioning regulations.)
- The bonds that are supposed to cover the cost of plugging and abandoning currently total $107 million, plus a couple extra million each year from idle well fees.