Shale Daily / Gulf Coast / Regulatory / Mid-Continent / Northeast / Rockies/Other / NGI All News Access

GAO Says Costs, Liabilities of Orphaned Wells Increasing, But BLM Not Keeping Track

In a sobering report, auditors with the U.S. Government Accountability Office (GAO) said the costs and liabilities associated with orphaned oil and natural gas wells are likely increasing, but the Interior Department's Bureau of Land Management (BLM) has been doing an inadequate job of keeping track of the trends.

According to data gleaned from 13 of the BLM's 33 field offices, GAO said it was able to determine that the annual reclamation cost for an orphaned oil or gas well averaged $267,600 in fiscal year (FY) 2017, compared to $171,500 in FY 2010, the last year GAO examined such wells. BLM data also showed that the total number of orphaned wells was 219 in FY 2017, up from 144 in FY 2010.

But BLM isn't currently collecting information on the costs incurred, or the potential liabilities from, an increase in the number of orphaned wells, GAO said. The bureau also doesn't have the assurance that it could financially cover the costs of reclaiming orphaned wells.

"Precisely how the agency's actual reclamation costs and potential liabilities have changed is unclear because BLM does not systematically track them at an agency-wide level," GAO said in its 49-page report, which was released last month. "BLM headquarters officials we interviewed told us that they did not have any information on actual costs incurred to reclaim orphaned wells and stated that BLM's data systems were not designed to track incurred reclamation costs."

GAO interviewed BLM officials from six state offices -- California, Colorado, Montana-Dakotas, New Mexico, Utah and Wyoming -- associated with the 13 field offices, two of which cover the entire states of North Dakota and Oklahoma. The BLM officials estimated that reclamation costs associated with orphaned wells, as well as inactive wells that were in danger of becoming orphaned, totaled $46.2 million.

Five of the field offices sampled by GAO (Buffalo, Casper, Pinedale, Rawlins and Worland) are located in Wyoming, while three (Carlsbad, Farmington, Hobbs) are in New Mexico. California, Colorado and Utah each had one field office sampled -- at Bakersfield, Colorado River Valley and Vernal, respectively.

Officials with the Colorado Oil and Gas Conservation Commission, the Interstate Oil and Gas Compact Commission and the Wyoming Oil and Gas Conservation Commission were also interviewed by the GAO.

GAO issued a list of seven recommendations, including that the BLM director track the actual costs the bureau incurs when reclaiming orphaned wells and any information needed to determine its potential liabilities. GAO also recommended that the BLM director "strengthen its approach to monitoring field offices' implementation of the well review and bond adequacy review policies," and that the director clarifies how BLM field offices should identify and manage shut-in wells. GAO said BLM agreed with its recommendations.

Rep. Raúl Grijalva (D-AZ), the ranking member of the House Committee on Natural Resources, said the report's findings were worrisome.

"Oil and gas drillers shouldn't be able to pass their cleanup costs on to the public," Grijalva said Tuesday. "Despite what Republicans keep telling us, the fossil fuel industry isn't being regulated into the ground. Too often, it's freeloading off the American people, and this report tells us we don't even know how much it's costing us.

"It's time to fix these data gaps and make sure this walkaway culture ends once and for all."

Copyright ©2018 Natural Gas Intelligence - All Rights Reserved.
ISSN © 2577-9877 | ISSN © 2158-8023

Recent Articles by Charlie Passut

Comments powered by Disqus