Oil Companies Must Set Aside More Money to Plug Wells, But It Won’t Be Enough

"The new Bureau of Land Management regulation, which applies to nearly 90,000 wells on federal public land, is hampered by math errors and overly optimistic cost projections."

"For the first time in more than 60 years, the Bureau of Land Management will force oil and gas companies to set aside more money to guarantee they plug old wells, preventing them from leaking oil, brine and toxic or climate-warming gasses.

The rule, finalized this month, comes at a critical time. Money previously set aside to clean up wells on federal land would have covered the cost of fewer than 1 out of 100, according to the government’s own estimates, and the vast majority of the country’s wells sit inactive or barely producing, meaning they’ll soon need to be plugged.

But the federal agency’s work falls short of protecting taxpayers from the oil industry’s cleanup costs, according to a ProPublica and Capital & Main review of contracts or other cost estimates at tens of thousands of wells across the country. While the updated rule will shrink the gap between companies’ financial guarantees to plug wells, known as bonds, and the cost of the work, it still leaves a significant shortfall.

One math error alone leaves taxpayers on the hook for roughly $400 million more than they should be. A Bureau of Land Management employee’s arithmetic mistake yielded an incorrect average cleanup cost for wells that the agency has plugged, largely at taxpayer expense. That artificially low cost estimate became the foundation of the new bonding requirements."

Mark Olalde reports for ProPublica and Nick Bowlin reports for Capital & Main April 22, 2024.

Source: ProPublica/Capital & Main, 04/23/2024