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Groups petition to keep taxpayers from cleaning oil and gas messes

Insufficient bonds to ensure cleanup of wellsites is a particular concern in Wyoming, petitioners say, where federal minerals make up the bulk of production.

by Dustin Bleizeffer, WyoFile

WYOFILE — Conservation and taxpayer advocacy groups filed a petition Wednesday asking the Interior Department and U.S. Bureau of Land Management to make good on promises to reform reclamation bonding requirements that help ensure the cleanup of oil and natural gas production facilities.

Current minimum federal bond requirements are not nearly enough to cover the actual cost of cleanup to protect human health and the environment, leaving local residents to suffer the consequences and taxpayers to foot the bill, according to the groups. The Inflation Reduction Act includes $4.7 billion to clean up abandoned oil and gas facilities — a gift to the oil and gas industry that should not continue with future development, they say.

“Taxpayers should simply not be on the hook for dealing with these messes,” Natural Resources Defense Council Senior Policy Advocate Josh Axelrod said in a prepared statement.

The petition filed by NRDC, Western Organization of Resource Councils and Taxpayers for Common Sense asks the federal agencies to “promulgate rules to ensure oil and gas companies — not the public and taxpayers — are the responsible parties to plug and reclaim all federal oil and gas wells,” the groups stated in the petition.

“Taxpayers have bailed out the richest industry on Earth with over $4 billion in taxpayer monies allocated to pay for the plugging and reclamation of orphaned and idle oil and gas wells,” Powder River Basin Resource Council former Executive Director Jill Morrison told reporters at a live-streamed press conference Wednesday. “These are wells that have given the industry billions of dollars in profits, and a lot of it from public minerals.”

A drill rig in Converse County. (David Korzilius/BLM/FlickrCC)

Reforming the program with higher bond amounts and more stringent reclamation standards is especially important in Wyoming, Morrison said, because most oil and gas production in the state takes place on federal lands and minerals. Wyoming is also the largest target for federal onshore oil and gas lease sales, including a pending sale offering up to 251,000 acres — 392 square miles — in 2023.

Despite the industry’s legacy of abandoned facilities, full reclamation — on the operator’s own dime — is the industry standard, Petroleum Association of Wyoming Vice President Ryan McConnaughey told WyoFile. Large operators could meet higher bond amounts, he said, but it would add to the cost of production — and it would inhibit the ability of medium- and small-sized companies to operate in Wyoming.

“This is another opportunity for groups who don’t want to see oil and gas drilled in Wyoming to add more costs,” McConnaughey said.

Federal bonding

Companies that develop federal onshore oil and natural gas are required to remediate disturbed surfaces, as well as plug wells at the end of their production life and remove industrial infrastructure such as tanks and pipelines. They’re also required to post a bond to cover those costs in case they go bankrupt or otherwise fail to perform required reclamation work.

Lessees can post a $10,000 bond per lease parcel, $25,000 for statewide operations or $150,000 to cover the entirety of their federal onshore operations nationwide, according to the BLM. Those minimum bonding amounts — established in the 1950s and 1960s — are woefully outdated and, in most instances, don’t cover the actual cost of reclamation, according to the petitioners.

Former Powder River Basin Resource Council Executive Director Jill Morrison and rancher Kenny Clabaugh discuss the impacts of coal-bed methane gas on ranching operations in the Powder River Basin in 2006. (Dustin Bleizeffer/WyoFile)

Depending on the depth and complexity of a well, it can cost between $20,000 and $140,000 on average to plug and reclaim a single well, according to a 2019 report by the U.S. Government Accountability Office. Each federal lease parcel can include multiple wells. The majority of bonds posted by oil and gas developers are not sufficient to cover cleanup costs, according to the report.

The same report suggested the BLM “adjust bond amounts to better reflect the costs of cleanup.” The BLM has failed to take action despite promising to undertake reformation efforts in the past, according to the petitioners.

“The system is broken and the federal government needs to fix it immediately,” Taxpayers for Common Sense Vice President Autumn Hanna told reporters.

The groups’ petition asks the Interior and BLM to:

  • Eliminate blanket bonds for new drilling.
  • Require oil and gas companies to put down a “full-cost bond” that matches the real amount needed to reclaim and clean up wells for any new drilling on federal lands.
  • Include the costs of surface reclamation in bonds.
  • Phase in “full-cost bonds” for existing drilling sites on federal lands.
  • Ensure the reforms apply to leases on tribal lands.
  • Update reclamation standards so cleanup is comprehensive and restorative.
  • Review required bond amounts periodically for inflation and other factors.

Legacy and modeling states

There are more than 2,307 orphaned oil and natural gas well sites in Wyoming, according to recent state and federal estimates. Both the Infrastructure Investment and Jobs Act and Inflation Reduction Act set aside billions of dollars to clean up abandoned oil and gas facilities nationwide.

That’s a good thing, Powder River Basin Resource Council and Western Organization of Resource Councils board member Bob LeResche told WyoFile in September. But, “they’re doing it with taxpayer money, which is wrong,” he said.

An aerial view of a pond associated with coal-bed methane gas development in 2015. (Dustin Bleizeffer/WyoFile)

Industry isn’t arguing there should not be sufficient reclamation bonding to meet the actual risk of companies walking away from their obligations, McConnaughey said. “I think the problem is … trying to make it more expensive” for the entire industry.

Apart from federal lands and minerals, states can set their own reclamation and bonding rules for oil and gas production facilities on private and state lands. Wyoming and Colorado, for example, have strengthened their bonding rules and increased minimum bond amounts in recent years, providing templates for federal reforms, according to groups pressing the BLM.

Wyoming also has been more aggressive than the BLM to identify high-risk lessees to demand higher bond amounts on a case-by-case basis, Morrison said. The BLM, at times, seems willing to follow suit, she added. After pressure from conservation groups, the BLM demanded full-cost bonds to cover the reclamation of large water pits in the coal-bed methane gas industry in Wyoming.

“Those pits today are reclaimed because full-cost bonds were required to fund the reclamation when [some operators] walked away [from their reclamation obligations],” Morrison said. “The BLM can do it, and this industry can afford it.”

Oil and gas operators in Wyoming have no qualms meeting the state’s own reformed bonding rules, PAW’s McConnaughey said. But conservation groups are petitioning the BLM to go even further with full-cost bonding. That would make Wyoming — where the industry depends on federal permitting — too expensive for most operators other than large companies, according to McConnaughey.

“Some of these smaller companies are where it really becomes a concern,” McConnaughey said. “Most companies, by far the majority in Wyoming, are operating in good faith and will meet their [reclamation] obligations.”

This article was originally published by WyoFile and is republished here with permission. WyoFile is an independent nonprofit news organization focused on Wyoming people, places and policy.


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