American Oil and Gas Reporter - September 2024 - 77

reported increased DENR efforts to notify
potentially responsible parties of planned
work and provide companies with the
opportunity to restore the sites themselves
in cooperation with the department.
This provides former operators an opportunity
to trim costs by performing inhouse
abandonment work. However, such
notices and requests for reimbursement
can come as a surprise to operators that
have divested now-orphaned properties
or that have acquired companies that
may have regulatory exposure for orphaned
wells.
To analyze the risk of liability as a
former owner of potentially orphaned wells,
companies often can confirm (through
public record searches and legal analysis)
whether their previously operated wells
have been registered as orphaned and identify
the status of any pipeline co-owners.
For example, operators with potential
exposure in Louisiana can use the DENR's
public records database to identify any
orphaned wells they previously operated.
Operators with potential liability also can
analyze whether there are other interested
parties that may be obligated to contribute
all or some of the closure costs. This
type of assessment can be particularly
helpful for companies that are successors
to liabilities of now-defunct operators
with historical liabilities that may not be
immediately apparent.
Despite the generosity of federal funding,
states are finding that the actual cost
of plugging orphaned wells can be highly
variable and unpredictable. Closing wells
in remote or environmentally sensitive
areas is particularly costly. In Louisiana,
for instance, orphaned wells located in
coastal wetlands require expensive, specialized
equipment to prevent environmental
damage, which raises costs significantly.
Thus far, the average cost to
plug wells in the state has ranged from
$35,800 to $54,500 per well.
State officials also have expressed
concerns about the sustainability of funding.
The IIJA and IRA funds are designed
to jump-start orphaned well closure efforts,
but there are no guarantees of long-term
federal support. Many states, such as
West Virginia and Oklahoma, have expressed
concerns that the orphaned well
backlog is so large that they will not be
able to plug all those wells before the
federal funds run out. This uncertainty
has led to calls for more stable, longterm
federal commitments.
Only Scratching The Surface?
Another concern stems from suspicions
that the quantity of orphaned wells may
be merely the tip of the iceberg, and that
accounting for the number of idle wells
more accurately reflects the task ahead.
For example, Louisiana has identified an
estimated 18,200 idle wells, which have
not been designated as orphaned but
either are designated by the operator as
idle or have not produced hydrocarbons
in five years, but also have not been
plugged and abandoned.
The estimated cost to plug all the
state's idle wells is $658.4 million, with a
total estimated cost to plug all onshore
orphaned and idle wells of $855.1 million.
This figure does not include offshore wells
located in Louisiana state waters, which
the state estimates will cost an additional
$1.725 billion to plug and abandon.
In 2023, Louisiana attempted to address
this issue when it passed the Future Utility
Rule, which aims to encourage proper
orphaned well closure. State regulations
allow wells to remain inactive for as long
as five years before they must be plugged.
However, owners that do not want to plug
a well can classify it as having a " future
utility " for producing oil or gas as long
as they pay a $250 annual fee. A well can
maintain that status virtually indefinitely.
The Future Utility Rule includes incentives
for operators to plug their nonproductive
wells, increases fees after
JESSICA
DUGGAN
Jessica Duggan is special counsel in Jones Walker's Litigation Practice Group and a
member of the Energy, Environmental & Natural Resources Industry Team and the Environmental
Litigation Team. She also represents tribal clients in transactional, litigation and regulatory
matters. Duggan has handled high-stakes litigation before the U.S. Court of Appeals for the
District of Columbia Circuit, the Ninth Circuit, numerous federal district courts and the
California courts. Duggan is also an enrolled and active member of the United Houma Nation.
PHIL
WOOD
Phil Wood is special counsel in Jones Walker's Litigation Practice Group and a member of
the Energy, Environmental & Natural Resources Industry Team and Environmental Litigation
Team. He represents energy clients in commercial disputes, focusing on historical contamination
and land loss claims. Wood also has represented energy clients in oil-and-gas-related disputes,
with a focus on paying quantity litigation, downhole tool incidents and royalty interest
disputes in state and federal court.
SEPTEMBER 2024 77

American Oil and Gas Reporter - September 2024

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