U.S. Sen. Michael Bennet, D-Colo., this week unveiled bills aimed at helping pay for plugging of orphaned oil and gas wells while also expanding opportunities for local input in oil and gas lease sales on public lands.
Bennet’s office said in a news release that the measures “would restore local governments’ and tax payers’ important role in public land management decisions, while ensuring they are not left on the hook for future cleanup and remediation costs.”
One of Bennet’s bills would create a fund his office says would dramatically expand cleanup of orphaned wells on federal, state and tribal lands. The fund would tap $500 million a year in federal oil and gas royalty revenues for the first two years and then $250 million a year through 2029. Seventy-five percent of revenues would go to states and tribes for use on wells under their jurisdictions.
Bennet’s bill defines orphaned wells as ones where the owner or operator can’t be located, or is unable to plug and abandon the well. It cites an estimate that at least 56,600 orphaned well sites exist nationwide.
Also under the bill, companies’ bonding requirements for federal oil and gas operations would increase from $10,000 per individual lease to $75,000, and from $25,000 for all of a companies’ wells in a state to $200,000.
Bennet’s Public Engagement Opportunity on Public Land Exploration (PEOPLE) Act “would increase transparency for lease sale nominations and bids, establish adequate and consistent public notice and comment periods, and require outreach to local governments, landowners, and public land user groups to minimize future conflict,” Bennet’s office says.
Among its requirements, federal agencies would have to provide direct notification of upcoming actions to public land user groups, local governments and surface owners (the latter in cases involving federal minerals under private lands). Lease sales would require a minimum 30-day scoping period for public comment, 30-day public notice and comment period for draft environmental determinations, and 45-day protest period.
The Trump administration has reduced comment periods to streamline the leasing process, over objections from entities such as conservation groups and local governments.
Before a lease sale, the BLM also would have to get consent from other federal agencies that manage the surface lands, such as the Forest Service. A proposed new Forest Service rule would remove explicit confirmation of Forest Service consent as a standard step in the leasing process, critics of that proposal say.
Last September, the Government Accountability Office found that 84% of oil and gas bonds linked to wells administered by the BLM are likely too low to reclaim all the wells they cover. It said most bonds are set at regulatory minimums that haven’t been adjusted since the 1950s and 1960s to account for inflation. The BLM concurred with GAO’s recommendation to adjust bond levels to more closely reflect expected reclamation costs. It said it updated its policy in 2019 to require field offices every five years or less to review the adequacy of the bonds required of individual companies, taking into account the companies’ compliance history and what potential risk they pose.
“The BLM is engaged in reducing the idled well inventories to ensure that operators reclaim well sites and that these wells do not become orphaned wells. The Department (of Interior) looks forward to reviewing the bills when/if they are taken up by … committee,” the agency said in a statement Tuesday to The Daily Sentinel on Bennet’s bills.
The state of Colorado also has been focusing on funding for orphaned wells. Senate Bill 181, passed last year, required the Colorado Oil and Gas Conservation Commission to consider new financial assurance measures, such as a new pooled fund to address orphaned wells and adequate bonding that would remain tied to a well when its ownership changes.
The state legislature also boosted the 2019 fiscal year budget for COGCC’s orphaned well program to $5 million. According to the program’s annual report released this month, 61 orphaned wells were plugged in the 2020 fiscal year, an all-time high for the program.
The focus on funding for orphaned wells comes as many oil and gas companies are struggling financially due to low prices. Recently Ursa Resources, which operates hundreds of wells in western Colorado’s Piceance Basin, filed for Chapter 11 bankruptcy protection.
Steve Allerton, president of the Western Colorado Alliance, said in a prepared statement about Bennet’s orphaned-well measure, “With a new wave of bankruptcies looming, it is critical to fix federal bonding rates now to protect taxpayers and our public lands. This bill is a step towards common-sense solutions that can prevent a catastrophe.”
Asked about Bennet's bills, Kathleen Sgamma, president of the Western Energy Alliance industry trade group, said Wednesday in an email, "The public and county officials already have multiple rounds of public comment in all the land use, leasing, and environmental analysis that occurs before lands are designated and then offered for lease. Messaging that attempts to ignore that is disingenuous and indicates this is not a serious bill that will actually move in the Senate.
"As far as orphan wells, again, the rhetoric doesn’t match reality. While any orphaned well is not good, Colorado has a manageable number of orphan wells, a fund for covering costs sourced from the industry, and bonding requirements and laws to ensure that companies are held responsible for reclaiming their wells."