Colorado’s Democratic governor, John Hickenlooper, on Wednesday signed an executive order focused on addressing the safety concerns around orphaned wells— while simultaneously admitting that the order is a “second-best solution.”
The governor’s unilateral executive action will use $5 million per year, raised from the Colorado Oil and Gas Conservation Commission’s mill levy tax, to clean up orphan wells, or wells relinquished to the state because a previous operator is either no longer in business, can’t be found or is unable to clean up the well. While emphasizing the importance of the order, Hickenlooper said it still wasn’t the best option.
“Those companies that are drilling the wells should ultimately have the responsibility,” said Hickenlooper, a former oil-and-gas geologist, adding that cleaning up the wells after they’ve already been relinquished to the state isn’t the most ideal solution.
The best solution, he said, is that oil-and-gas companies who take the risk and gain from it should be the ones responsible.
Oil-and-gas companies typically do that through bonds, which the COGCC requires them to budget for clean up before they start digging. The COGG is the state’s governor-appointed panel tasked with regulating the state’s oil and gas development. Hickenlooper says the bonds should be higher.
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Hickenlooper’s order does not address the bond issue.
“That’s something the general assembly didn’t want to take on and probably at some point should take on,” said the governor, who is term-limited and leaving office next year.
His order prioritizes 262 medium-to-high-risk orphaned oil-and-gas wells and 360 orphaned sites. That’s a small number compared to Colorado’s 50,000 active wells; however, each well costs about $80,000 to plug and reclaim— a total of $20.96 million.
Colorado’s legislative budget-writing committee directed $5 million a year to the state’s Orphan Well Fund to address the orphan well safety concern— a 10-fold increase from the previous allotted $445,000. The money comes from the COGCC’s mill levy tax on oil and gas companies, which was increased in February.
Normally, an oil-and-gas company would plug its wells with cement. But when fossil fuel prices tumbled in 2008, some companies closed up shop without properly cleaning up equipment it left behind.
Abandoned wells pose environmental and public health risks. As cement plugs, casings and steel structures age, they can release methane, and older wells have an increased risk of rupturing or leaking and polluting groundwater resources.
Last spring, a home in Firestone exploded, killing two people, because of a leaking gas line. A month later, the COGCC said it had no record of the abandoned storage and processing site where the severed line initially led.
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Hickenlooper said the deadly blast moved the state to act.
Although the fatal explosion was linked to an active well flow line, not an abandoned one, it spurred Hickenlooper to order a review of the safety risks of the oil and gas industry in general.
“It was a great motivator to say, ‘Alright, even though in this particular case the damage wasn’t done by the orphan well by itself, we wanted to make sure we took this opportunity to eliminate risks every place we could,’” Hickenlooper said.
But he stressed the state has water testing wells and data controls to mitigate the chance of leaky wells. “I’m not saying there couldn’t be some small leaks somewhere, but this is an effort to get way out ahead of an issue before it becomes a problem,” he said.
His executive order outlines three primary goals with their associated deadlines. First, the state will treat, plug, remediate and reclaim all 262 medium-and-high-risk orphaned wells regulators know about, and will release a list to the public about where they are by Aug. 1. The state will prioritize cleanups based on population density, proximity to sensitive resources, and any history of violations or incidents at the well site.
The state also will look for voluntary engagement from the oil-and-gas industry in treating the orphaned wells and well sites. And Hickenlooper’s order sets up a financial assurance system and a working group, led by the COGCC, to review existing financial requirements, like bonds, and recommend changes by next fall to ensure the system is sufficient to address clean up costs.
Colorado Oil and Gas Association’s spokesman Scott Prestidge said the group working on the financial system faces a big challenge.
“There are a variety of operators in Colorado, from large to small, and any changes to the bond rates could have significant consequences,” he said. “We hope this group draws from a variety of perspectives to make sure all sides are considered.”
According to Bruce Baizel, the energy program director for the environmental group Earthworks, the oil-and-gas industry has fought “tooth and nail” against bond increases for years.
He said the bonds should probably be in the six-digits to cover full remediation of sites and any contamination leftover. Baizel acknowledged that higher bonds could make some small operators go out of business.
“It often is the small operators that cause problems,” he said. “If they don’t have the money to do things right, then they shouldn’t be in the business.”
In the long run, the state needs to address the bond amount, Baizel said. “In this legislature, industry can block anything. So maybe with a new governor and a new legislature, they’ll actually address the issue.”
