Repost: Who Will Pay for Abandoned Frack Wells?
February 3, 2016
Political/economic commentator discussing an issue I (and the NYTimes) brought up in 2014.
When fracking wells are abandoned, many of them can be slowly leaking toxins, or methane, into the surrounding land, water, and atmosphere. Fracking companies, in a classic “privatize the wealth, socialize the costs” maneuver, simply declare bankruptcy and walk away from wells they’ve sucked dry.
In today’s oil crash, is this practice accelerating? Who will pay?
The companies that once operated the wells have all but vanished into the prairie, many seeking bankruptcy protection and unable to pay the cost of reclaiming the land they leased. Recent estimates have put the number of abandoned drilling operations in Wyoming at more than 1,200, and state officials said several thousand more might soon be orphaned by their operators.
Wyoming officials are now trying to address the problem amid concerns from landowners that the wells could contaminate groundwater and are a blight on the land.
This month, Gov. Matt Mead proposed allocating $3 million to pay for plugging the wells and reclaiming the land around them. And the issue is expected to be debated during next year’s legislative session as lawmakers seek to hold drilling companies more accountable.
“The downturn in natural gas prices has forced small operators out of business, and the problem has really accelerated over the last couple of years,” said the governor’s policy director, Shawn Reese. “Landowners would like their land to be brought back to a productive status and have orphaned wells cleaned up.”
Drilling companies in Wyoming typically lease land from the state, private owners or the federal Bureau of Land Management, depending on who owns the mineral rights.
The state’s Oil and Gas Conservation Commission already budgets $1 million a year to plug abandoned wells. And under the governor’s proposal, the commission would appropriate another $3 million over the next four years in an effort to restore property value and reduce the risk of contamination.
The money would come from a conservation tax that oil and gas companies pay.
Still, given the number of wells already abandoned and the concern that more will soon be deserted, the money is not expected to go far. The state estimated that closing the 1,200 wells already abandoned would cost about $8 million.
One such company, Patriot Energy Resources, which owns about 900 idle wells on state and private land, said in an October letter to Governor Mead that it was $1.9 million short of full bonding on those wells after the bankruptcy filing of Luca Technologies, its parent company.
Patriot has proposed allowing another drilling company to take on a part of its debt, saying it will have to abandon its wells otherwise. “Without this deal or something similar, Patriot will be forced to file for bankruptcy and turn these wells and reservoirs over to the state of Wyoming,” a company official wrote in the letter.
Renny MacKay, a spokesman for Mr. Mead, said the state was weighing the offer.
State Senator John J. Hines, a Republican who represents mineral-rich Campbell and Converse Counties, said it was vital for lawmakers to take up the issue swiftly, because natural gas was so important to Wyoming’s economy.
“All of this just came to a head at once,” said Mr. Hines, who heads the Senate’s minerals committee.
Last spring, Mr. Hines was told by Patriot that the hum of gas drilling activity on his own sprawling cattle ranch would soon grow quiet.
Soon after, the company, which leased parcels of Mr. Hines’s land, disappeared completely — leaving behind more than 40 coal-bed methane wells and a jumble of pipes and pumps.
“They informed me that they were shutting down because they were short of funds,” Mr. Hines said. “All of it, in my opinion, needs to be cleaned up.”
As debate roils over EPA regulations proposed this month limiting the release of the potent greenhouse gas methane during fracking operations, a new University of Vermont study funded by the National Science Foundation shows that abandoned oil and gas wells near fracking sites can be conduits for methane escape not currently being measured.
The study, to be published in Water Resources Research on October 20, demonstrates that fractures in surrounding rock produced by the hydraulic fracturing process are able to connect to preexisting, abandoned oil and gas wells, common in fracking areas, which can provide a pathway to the surface for methane.
A recent paper published in the Proceedings of the National Academies of Science showed that methane release measured at abandoned wells near fracking sites can be significant but did not investigate how the process occurs.
“The debate over the new EPA rules needs to take into account the system that fracking operations are frequently part of, which includes a network of abandoned wells that can effectively pipeline methane to the surface,” said the new paper’s lead author, James Montague, an environmental engineering doctoral student at the University of Vermont, who co-wrote the paper with George Pinder, professor of environmental engineering at the university.
The study focused on an area in New York State underlain by the Marcellus Shale formation, which had been fracked until a ban went into effect in the state in the summer of 2015.
The formation, composed of layers of shale and hydrocarbons, is beneath land that has been the site of conventional oil and gas drilling since the 1880s, when American oil companies first began operating.
About 40,000 existing wells in New York, 30,000 of them located within the footprint of the Marcellus formation, are documented by the state’s Department of Environmental Conservation. But the department estimates that 70,000 wells in all have been drilled.
Because the location of so many wells is not known – a common phenomenon in many regions where fracking takes place – the study uses a mathematical model to predict the likelihood that the hydraulically induced fractures of a randomly placed new well would connect to an existing wellbore.
The model put the probability that new fracking-induced fractures in the Marcellus formation would connect to an existing well bore at between .03 percent and 3 percent.
But industry-sponsored information made public since the paper was published vastly increased assumptions about the area impacted by a set of six to eight fracking wells known as a well pad – to two square miles — increasing the probabilities cited in the paper by a factor of 10 or more.
While all fracking sites are different, most have a similar enough hydrocarbon profile that they attracted conventional oil and gas drilling in the past and most, like the Marcellus, have a large number of abandoned wells, many with unknown locations.
Not all abandoned wells provide a pathway to surface for methane. Only those that are damaged, largely when the concrete that buffers the well from the surrounding earth loses integrity, can act as a conduit.
But even a small percentage of damaged wellbores, given the large number of abandoned wells, can potentially pose an environmental risk, Pinder said.