By Nicholas Kusnetz
May 23, 2021
When North Dakota directed more than $66 million in federal pandemic relief funds to clean up old oil and gas wells last year, it seemed like the type of program everyone could get behind. The money would plug hundreds of abandoned wells and restore the often-polluted land surrounding them, and in the process would employ oilfield workers who had been furloughed after prices crashed.
The program largely accomplished those goals. But some environmental advocates say it achieved another they didn’t expect: It bailed out dozens of small to mid-sized oil companies, relieving them of their responsibility to pay for cleaning up their own wells by using taxpayer money instead.
Oil drillers are generally required to plug their wells after they’re done producing crude. But in practice, companies are often able to defer that responsibility for years or decades. Larger companies often sell older wells to smaller ones, which sometimes go bankrupt, leaving the wells with no owner.
These “orphaned wells” become the responsibility of the federal or state governments, depending on where they were drilled. While oil companies are required to post bonds or other financial assurance to pay for plugging them, in reality those bonds cover only a tiny fraction of the costs, leaving taxpayers on the hook. One estimate, by the Carbon Tracker Initiative, a financial think tank, found that those bonds cover only a tiny fraction of the expected costs of cleaning up the nation’s oil and gas wells.
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