Orphaned Oil Wells and the Case for Stronger State-Based Regulation
By Liam BeriganPublished November 6, 2014By Liam Berigan, 11/6/14
Amid decreasing oil sales, oil companies have tried to secure the support of many politicians to support their industry and to resist a large-scale transition to a low-carbon economy. Their recalcitrance has invited public opposition against their dirty exploration and production techniques. Beyond climate change, the oil industry has also been responsible for another major environmental problem. The mismanagement and abandonment of oil wells is concerning because state governments are ill-equipped to deal with them and will face larger burdens if oil companies stop being profitable.
While some oil wells are run by large corporations with large profit margins, most American wells are owned by smaller companies that are barely profitable. When oil prices and operation costs fluctuate, these companies can go out of business quite easily. As a result, their oil wells become orphaned and become the responsibility of state governments.
Normally, a properly closed well will have several heavy cement plugs pumped into the wellbore. This prevents oil stored deep in geological formations from leaching to the surface and causing environmental damage. However, a company that goes out of business and abandons a well will not take these precautions. Often, orphaned wells are left open with equipment strewn across the site until government inspectors can relocate the well and find the funding to close it.
However, plugging oil wells is expensive. Louisiana, which has many orphaned wells, could only afford to plug 95 of its 2,846 already-orphaned wells in 2013. In that same timeframe, there were 170 more wells that were newly orphaned. This overload of orphaned wells has caused the Louisiana Department of Natural Resources to take a triage approach to plugging wells. The state focuses on inspecting as many orphaned wells as possible and plugging the wells that are most likely to cause spills. Still, orphaned oil wells are often very hard to find because they are shrouded by overgrown vegetation. Offshore wells are also notoriously difficult to inspect, as the wellbore is usually completely submerged. Even properly sealed wells can present significant hazards to boats that collide with old wellheads.
The Louisiana state government, which has kept tax rates low for decades in order to encourage oil drilling, faces a pressing environmental issue that is currently too expensive for it to manage. Oil companies should realize that well-funded government supervision is essential and that environmental accountability should not be avoided in order to reduce their operating costs.