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Texas Taxpayers Face $117 Billion Bill For Orphaned Oil Wells

The state of Texas and its taxpayers could be on the hook for paying up to US$117 billion for the cleaning-up of abandoned wells as a growing number of U.S. oil companies go bust, and the guarantees for paying for the cleanup cover only 1 percent of estimated costs, a report by climate finance think-tank Carbon Tracker showed on Thursday.  

U.S. oil and gas producing states and taxpayers may have to pay in total as much as US$280 billion in cleanup costs, with Texas leading with US$117 billion, followed by Oklahoma with US$31 billion and Pennsylvania with US$15 billion, Carbon Tracker’s report says.

The US$280-billion estimate is for 2.6 million unplugged onshore oil and gas wells in the United States, while there may be another estimated 1.2 million undocumented onshore wells, Carbon Tracker said.

While operators are obliged to pay for the cleanup of oil and gas wells, the so-called surety bonds - the guarantee that the operator will indeed pay those costs - currently cover around 1 percent of the closure costs for plugging and cleanup of the wells, the think-tank said.

The growing number of defaults in the U.S. shale patch may put taxpayers “at risk of picking up costs in excess of available bonds,” Carbon Tracker said.

The lower-for-longer oil prices and the high debt levels of many U.S. oil companies resulted in as many as 16 filings for bankruptcy protection in the shale patch in July alone, bringing the total since the price crash to 50, the latest bankruptcy monitoring data from law firm Haynes and Boone showed at the end of August.

According to Carbon Tracker, “States can lower their orphan well liability risk and protect taxpayers by demanding higher bond rates and forcing companies to plug long-inactive ‘zombie’ wells. These actions will shift responsibility for oilfield cleanup costs to industry and also position states to qualify for U.S. federal aid.”

By Josh Owens for Oilprice.com

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  • Guy Daley on October 05 2020 said:
    I have no idea what is "required" in order to clean up a well site. How much of that effort is BELOW ground? As far as the cost above ground, aside from spillage, the clean up would be free if they let recyclers come in and dismantle whatever is above ground.

    The wellhead hole is NOT that big. So what do they mean by "plug". Does it have to be filled with concrete all the way? ZERO details in the article but I have no doubt they are exaggerating their dollar amount of what the taxpayers are on the hook for, to sensationalize of course.
  • One Second on October 01 2020 said:
    When it is all said and done, the fracking industry as a whole will have destroyed wealth, not created wealth. Of course some people got very rich in the process, but for the society it will have been a losing game.

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