American Oil and Gas Reporter - September 2024 - 75

Federal Funds Pose Key Challenges
By Jessica L. Duggan
and Philip Wood
NEW ORLEANS-The Infrastructure
Investment and Jobs Act (IIJA) and Inflation
Reduction Act (IRA) provide billions
of dollars in federal funding to address
environmental hazards, including
orphaned wells. The IIJA earmarked $4.7
billion for identifying, capping and remediating
these sites, marking the largestever
federal investment in orphaned well
cleanup. These funds are distributed to
states to help map and assess abandoned
wells and prioritize closures that reduce
the most harmful emissions and public
health risks.
Although the availability of funds represents
a major step forward, state agencies
that are tasked with implementing orphaned
well closures have encountered
several challenges in doing so. In addition,
some pipeline owners have found themselves
under increased regulatory scrutiny.
Several states have ramped up efforts
to close orphaned wells with these federal
funds. Each state faces unique challenges,
from geography to well maturity, and is
attempting to create tailored solutions to
address the challenges and make the most
of these federal dollars. Those federal
dollars can go a long way to addressing
the orphaned wells scattered across the
country (Figure 1).
Specific States
Louisiana has focused its efforts on
the state's regions that contain the most
orphaned wells-Monroe, Shreveport and
Lafayette-closing a total of 536 wells
under the Federal Orphaned Well Program
as of February 2024. The state used $25
million in federal funds initially awarded
through the IIJA. Louisiana also updated
its closure regulations to implement
methane emission and water contamination
measurement standards in order to qualify
for as much as $156 million in additional
federal funds.
The state has focused on areas with
high concentrations of easily accessible
orphaned wells but plans to shift future
efforts to coastal areas, where orphaned
wells pose risks to wetlands and critical
ecosystems serve as natural barriers to
hurricanes and sea-level rise.
Texas, home to the country's largest
number of orphaned wells, has accelerated
its closure programs, using the federal
funds to close more than 700 wells. The
Texas Railroad Commission has received
a federal grant of more than $76 million
to help address its estimated 7,000 orphaned
wells.
The state is relying on a mix of local
contractors and state employees to plug
the wells, focusing first on those that are
leaking methane or contaminating groundwater.
The aim is to plug 1,000 wells annually,
which is significantly more than
in previous years.
Meanwhile, Pennsylvania's history of
oil and gas production, which dates back
to the 19th century, makes it another key
player. The state is home to an estimated
350,000 orphaned wells, many of which
are poorly documented. Pennsylvania
has received $25 million and closed 200
wells as of March 2024. The state is eligible
to receive as much as $400 million
during the next decade. It is prioritizing
wells near residential areas, focusing on
those that may pose immediate health
and safety risks.
Another example is California, where
oil production in the Los Angeles Basin
and Central Valley has left thousands of
aging wells. The state was granted $165
million to accelerate its orphaned well closure
efforts. California is prioritizing those
closures in disadvantaged communities
disproportionately affected by pollution.
Variable And Unpredictable
The use of these funds, however, does
not lack challenges both for the relevant
state agencies and for those in the oil and
gas industry, which may be under increased
scrutiny, given the complex issues inFIGURE
1
120°
110°
U.S. Orphaned Wells
100°
90°
80°
70°
volving landownership and liability.
Agency and industry challenges in implementing
funding for the federal orphaned
well program include:
· Staffing and expertise difficulties;
· Landowner and liability issues;
· Unpredictable costs and funding
constraints; and
· Uncertainty about idle wells.
On the first matter, many states, particularly
those with a high concentration
of orphaned wells, have struggled to ramp
up staffing and acquire the appropriate
expertise to handle the increased workload.
Often, agencies that oversee orphaned
well closures were underfunded and understaffed
for years prior to the federal
funding influx, which makes rapidly scaling
operations a significant challenge.
Public bid laws may add further administrative
and logistical burdens on the
agencies tasked with overseeing orphaned
well closures.
Moreover, legal and liability concerns
also can arise during orphaned well closures.
In many cases, it is unclear and
costly to determine who owns the land
or wells (especially when ownership has
changed hands over the course of decades
and/or the companies that originally drilled
the wells no longer exist).
The Louisiana Department of Energy
and Natural Resources (DENR) can recover
plugging and remediation costs
from former operators when its costs, on
a per lease or site basis, exceed $250,000.
Former operators of orphaned wells have
40°
30°
EXPLANATION
Orphaned wells per
100 square miles
1
2
180°
65°
60°
55°
160°
140°
5-8
0 300 KILOMETERS
300 MILES
250
250
Base map from U.S. Geological Survey digital data;
Albers Equal-Area Conic. U.S. Geological Survey contiguous United States projection;
Alaska Albers Equal-Area Conic projection; North American Datum of 1983
500 MILES
500 KILOMETERS
3-4
5-8
9-16
17-32
33-64
65-128
129-256
257-512
513-1,024
1,025-2,064
SEPTEMBER 2024 75
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