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.”
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.
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.
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 effort is championed by many around the country however if the results of the UN climate summit is an indicator, adding the years of inaction by the so called peoples representatives/regulatory agency’s We The people will continue to pay the ultimate price—monetarily, as well as ill health and welfare—as corporate profits, lax corporate taxing and corporate irresponsibility continues. And are defended by elected officials as well as large parts of the general population, the effort will succumb to the same deleterious end as the years of such other efforts.
As one individual living in Weld county colorado, Your Neighbor, I stand In Solidarity with this effort
Should show current aerial photos of the same locations.
In the list of points from the petition I didn’t see mention of “split estate”. This is when the surface is privately owned, but the subsurface mineral rights were retained by the federal government at the time the land was homesteaded. Industry can condemn not only development on private land, but also access across private land in order to reach leases. That applies to a lot of Wyoming. I hope that when reclamation bonding is updated that split estate lands will be included in the new regulations. .
Thanks, Linda – good point. The petition covers all federal wells, including split estate.
It’s amazing how energy industry like ranching industry depends on Federal welfare & taxpayers. Undoubtedly, most of the leadership of this industry despises people receiving social welfare benefits but depend on the Feds to clean up their messes & disaster and support their ranching with inadequate fees to cover the costs they incur. Hypocrisy lives on in Wyoming–& elsewhere.
The industry spokesman says: “ I think the problem is … trying to make it more expensive for the entire industry.”
So, if “more expensive for the industry” equals they pay for the cleanup of their own damn messes, well I’m for that! It should not be paid wholly by taxpayers, though we users of fossil fuels should also be on the hook.
The main reason Wyoming spent considerable AML funds on reclaiming non-coal mine impacts was simply because we had more funds coming to us than any other state. The funds were raised by charging $0.25 per ton of coal mined per year, and since Wyoming led the nation in coal production, it was allocated back to us based on coal production. We has an incredible amount of funding for AML reclamation projects.
On the other hand, states like Arizona with its large copper mines and Minnesota with its large iron mines received almost no money since they mined virtually no coal. How about Florida with their large phosphate strip mines and no coal production at all – they got next to nothing. We got so much money it created animosity and the Federal government withheld some of our funds since we were over funded. And, Wyoming DEQ administered the AML funds in Wyoming with only one employee and farmed the engineering work out as separate contracts – thats right, only one employee – unheard of.
Bottom line is that we have been extremely lucky on this one and wisely spent the additional funds on reclaiming old bentonite mines and such. We be the lucky ones.
More: The $0.25 tax per ton of coal was not paid by Wyoming residents in large part because most of our coal was shipped out of state and the consumers in those states paid via their electric bills. The exception was the coal mined in Wyoming that was burned at our own power plants like Wheatland, Wydak of Black Hills Power and Light, Jim Bridger, Kemmerer, etc. Therefore the consumers who benefited from exported coal paid the vast majority of the AML funds we received – we were basically compensated for the impact on the environment in Wyoming which is the way it should be. If they depend on Wyoming to provide 17% of the nations energy the effect on our environment must be in the equation – the end user must pay for reclamation.
It’s not just oil/gas. Mining too. Even if taxpayers are picking up the tab, it is always unlikely that Wyoming will fully direct funds to cleaning up much of anything. We need watchdogs every step of the way with industry or government.
Here is an example from WYOFILE 2012:
“A 2011 report from the Office of Surface Mining (OSM) on Wyoming’s Abandoned Mine Reclamation Fund activity put it plainly. “Wyoming has spent much of its AML funds on non-coal mining related problems.” According to OSM documents, Wyoming has, thus far, spent only roughly 10 percent of its AML-related distributions, $151.6 million, reclaiming coal mine hazards.” https://wyofile.com/13963/
While in office, Keith Gingerly, a lawyer and a member of the House from District 23 (Teton Couty) during that time period, insisted that the vast majority of AML funds were going to cleaning up the enviroment. I saw it redirected many times, knew better.
Perhaps too much of government spending is impossible for most politicians to keep track of. Some are truly clueless, others exploit loopholes and/or the lack of oversight to redirect funds. The misdirection of funds is one reason Wyoming lost access to AML funding for a period of time. We couldn’t be trusted.
Can we be trusted to clean up our messes no matter who pays? If history is any guide, we will kick the can down the road. It’s the Wyoming way. Expect WyoFile to be covering the issue in 2050.
Excellent insight, George Wilten.