US Gulf states’ idle, uncompleted oil and gas wells a $30 billion liability – Ars Technica
Oil and gas producers in the United States are required by law to seal and cap their wells when they are done producing. But a new survey of wells along the Gulf of Mexico coast indicates that there are 14,000 wells that are not producing, are unlikely to be brought back into service, and have not been capped.
The bad news is that the estimated cost to contain them all will run in the $30 billion range. The good news is that in most cases one of the major oil companies will cover these costs.
Put a cork in it
The basic risk with uncapped wells is that material does not necessarily stop coming out of them when the equipment the well was connected to is turned off and removed. An obvious potential problem is continued seepage of hydrocarbons. Light material such as methane and simple hydrocarbons usually end up being digested by microbial life, which converts it into carbon dioxide which usually finds its way into the atmosphere. More complicated molecules will be insoluble and remain behind as contamination.
But other contaminants can also find their way out of wells, including brine. If they escape from the well, they can contaminate drinking water and agricultural water by seeping into sediments.
Usually this is handled by filling the upper area of the borehole with cement plugs. When that is done, the upper parts of the pipes are cut off and the site is abandoned. Generally, this process is required by law. Federal lands and waters are governed by rules that cause the lease on an area to expire one year after production ceases; the operator then has an extra year to plug the well. State laws differ in detail, but generally follow the same principle: When wells go a period of time without producing, owners have a limited amount of time to cap them.
The risk with these systems comes from the possibility that a company can avoid the costs by transferring ownership of the wells to a company that then declares bankruptcy. But that̵[ads1]7;s not really an option for federal leases where, if the owner of a well goes bankrupt, the liability is distributed among all previous owners.
So, how many wells are left without lids? To find out, a team of researchers focused on oil and gas producers along the coast of the Gulf of Mexico (meaning the states of Alabama, Louisiana, Mississippi and Texas). Using a mix of private company sources and government data, they identified the production history of offshore wells, along with those in coastal areas such as marshes and shallow bodies of water.
They identified over 82,000 individual wells, of which only 6,500 are actively producing. The majority (64,000) are already retired. But there are still over 14,000 wells that are not currently producing and that do not have a permanent cap in place. (About 3,500 of these have a temporary cap.) While some of these wells can be revived due to changes in technology or fossil fuel prices, it is quite rare. Based on data from wells in federal waters, the researchers find that less than 4 percent of wells that have been inactive for five years ever return to production.
The complexity of plugging a well increases considerably with the depth of the water it is in. The good news here is that most of the wells – 85 percent of them – are in shallow water. For these wells, the average cost is about $660,000 for each foot of water they are in, with the total commitment being $7.6 billion.
Despite being in the minority, however, it is the deepwater wells where the costs pile up. Here, the average cost of decommissioning and capping is over $1 million per foot of water, so the roughly 1,600 deepwater wells ready for capping will take about $35 billion to decommission. Narrowing things down to only wells that are currently inactive results in a total cost of about $30 billion.
Of course, if these are orphan wells where responsibility belongs to a long-gone company, getting them to limit them may be difficult. But given the federal rules on liability, things aren’t so bad. The researchers say that 87 percent of the offshore wells were owned by one of the major oil companies (things like Exxon and Chevron); Exxon could have paid to cap every idle well last year and still made a profit of over $80 billion.
However, it raises a very obvious question: If the wells are required by law to be capped, and the companies can easily afford to cap them, why aren’t they? One explanation is that while the supermajors may eventually be on the hook due to previous ownership, they are not the current owners, and the current owners may not be as well positioned financially to pay for liquidation. Another possibility is that forcing someone to follow these rules requires the federal government to enforce them, and its willingness to do so likely changes depending on which administration is running things.
Nature Energy, 2023. DOI: 10.1038/s41560-023-01248-1 (About DOIs).