The Federal Role in Orphan Oil and Gas Well Reclamation

The Federal Role in Orphan Oil and Gas Well Reclamation

June 15, 2022
The Federal Role in Orphan Oil and Gas Well Reclamation
Production of oil and gas in the United States began in the
issued at the federal or state level that governs all aspects of
late 19th century and continues to contribute to meeting U.S.
an oil and gas operation. Other permits also may be
fuel and petrochemical demands. Over time, federal and
required to ensure compliance with other requirements that
state requirements were put in place to manage such aspects
govern particular facets of an operation, such as air quality
of oil and gas development as siting, safety, emissions, and
and water quality permits.
reclamation. Prior to federal and state regulations, many oil
and gas wells were “orphaned,” or left unreclaimed. In
On federal lands, oil and gas operators are required to
many cases, particularly for early oil and gas development,
provide a surface use plan prior to construction at the site to
little is known about the status, location, and depth of those
identify how the site will be disturbed and reclaimed, as
wells. Additionally, more recent oil and gas wells,
part of the permit issued by BLM. Federal requirements for
operating subject to federal or state regulation, could
oil and gas well sites may include capping the well, the
become orphaned if a well operator is unwilling or
removal and disposal of equipment and wastes, the
financially unable to complete reclamation of a well site
regrading and contouring of the site, and revegetation of the
that has ceased production operations. The federal role in
well pad and related disturbed lands. As part of a federal
reclaiming orphan oil and gas wells has been limited to
permit, BLM requires an operator to provide a bond, or
wells located on federal lands. In the 117th Congress, the
financial assurance, which could be forfeited to BLM to
Infrastructure Investment and Jobs Act (IIJA; P.L. 117-58)
complete the reclamation if the operator does not complete
expanded the federal role in reclaiming orphan oil and gas
the reclamation requirements. In the event that the bond is
wells by increasing funding for the federal reclamation
not sufficient, the ability of BLM to complete the site
program and establishing a grant program to assist state and
reclamation would depend on its federal land management
tribal orphan well programs. This In Focus discusses the
authorities and funding. On nonfederal lands, state or tribal
federal and state roles in permitting wells, background of
reclamation and bonding requirements may vary or be
orphan oil and gas wells, potential environmental impacts,
similar in scope and purpose to federal requirements,
and related provisions in the IIJA.
depending on their respective laws and regulations.
Federal and State Roles in Permitting Oil Orphaned Wells Background
and Gas Wells
In general, oil and gas wells may become orphaned under
The scope of regulations that govern oil and gas well
two differing sets of circumstances, depending on whether
operations may vary from one operation to another
the well operated prior to federal or state regulation. First,
depending on the applicability of federal, state, or local
operators of oil and gas wells may have left these sites
regulations to specific activities, and the regulatory
abandoned or unreclaimed years or decades prior to the
jurisdiction in which an operation is located. Congress has
development of federal or state permitting and reclamation
not authorized nationwide federal requirements for
requirements. Wells that operated prior to regulation
permitting and reclaiming oil and gas wells. Under current
sometimes are referred to as “legacy” wells. As of 2016, the
law, the federal role for permitting oil and gas wells or
U.S. Environmental Protection Agency (EPA) estimated the
reclaiming orphan wells is generally limited to those on
total national inventory of orphan oil and gas wells was
federal lands. The Bureau of Land Management (BLM) of
3.11 million, but EPA noted other researchers have
the U.S. Department of the Interior (DOI) is the principal
estimated that the inventory of orphan wells ranged
permitting agency for oil and gas production operations on
between 2.1 million to 3.0 million at that time. Although
federal onshore lands pursuant to the Mineral Leasing Act
EPA has estimated the national inventory of orphan oil and
of 1920, as amended, and certain other authorities. The
gas wells, the actual number, geographic location, and
scope of reclamation of oil and gas wells in the regulations
condition of each well and well site may not be fully
includes plugging and capping the well, as well as
understood. Because of the lack of information collected
reclaiming any equipment and land disturbances at the site
prior to regulation, federal and state agencies have faced
resulting from the production operations. On nonfederal
challenges in estimating the numbers, locations, and
lands, a state or tribe would be primarily responsible for
conditions of these “legacy” orphan wells within their
permitting oil and gas wells or reclaiming orphan wells
respective jurisdictions.
within their respective jurisdictions under their own laws,
regulations, and programs. Compliance with federal and
For more recent operations subject to federal or state
state regulatory requirements is enforced mostly through
regulation, an oil and gas well could become orphaned if a
permits. Performing oil and gas operations without the
well operator does not complete the site reclamation
requisite permits is unlawful and may be subject to
following production operations. In those instances,
enforcement by federal or state regulators, depending on
completing the well site reclamation may become the
their respective jurisdictions. There is no singular permit
responsibility of the federal or state regulatory authority
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The Federal Role in Orphan Oil and Gas Well Reclamation
depending on whether the site is located on federal or
as threats of potential combustion or land that may be
nonfederal land, respectively. Generally, a bond is required
unsuitable in its present condition for redevelopment.
as a condition for the issuance of a permit to operate an oil
or gas well, which would be forfeited to the regulatory
Infrastructure Investment and Jobs Act
agency to complete the well site reclamation if the operator
Section 40601 of the IIJA expanded the federal role in
does not complete the permit requirements. In the event that
orphan oil and gas well reclamation by providing $4.68
the bond is not sufficient to complete site reclamation, the
billion in supplemental appropriations for the federal
remainder of the well reclamation may be subject to the
reclamation program and grants to state and tribal programs
availability of additional resources. The availability of
to complete reclamation within their respective
funds for sites located on nonfederal land generally would
jurisdictions. The cost to reclaim an orphan well site may
depend on the resources of the state or tribe with
vary considerably, depending on the site-specific
jurisdiction of the site. Funding for sites located on federal
conditions. Some researchers have estimated the median
land generally would be subject to annual appropriations to
cost to plug and reclaim an orphan well site at $76,000, and
federal land management agencies for well site reclamation.
assert certain orphan well sites may exceed $1 million. The
extent to which the IIJA funding would be sufficient to
In September 2019, the Government Accountability Office
reclaim the inventory of orphan wells would depend on the
(GAO) issued a report that examined the adequacy of oil
site-specific costs for a well site, the actual inventory of
and gas well reclamation bonds at sites located on federal
wells, and the implementation of reclamation programs. Of
lands. GAO reported that BLM identified 89 oil and gas
the total appropriation provided in Section 40601 of the
wells that were newly orphaned between July 2017 and
IIJA, Congress appropriated funding for grants for various
April 2019, and that BLM estimated $46 million in
purposes, which are briefly described below.
reclamation costs for these 89 wells. GAO observed that
Federal Program—$250 million. The $250 million
operators may leave a site unreclaimed, as the “bonds have
appropriations for DOI to carry out orphan oil and gas well
not prevented orphaned wells because bond values may not
reclamation on federal lands.
be high enough to cover the potential reclamation costs for
Initial Grants to States—$775 million. Initial grants to
all wells under a bond, as may be needed if they become
states would support administrative actions necessary to
orphaned.” GAO recommended that Congress consider
assess and update the inventory of their orphan well sites,
authorizing an additional mechanism to recover funds from
prepare applications for obtaining formula and performance
orphan well operators if a bond proves insufficient to pay
grants, and would be used to carry out the activities under
the reclamation costs. Additionally, GAO recommended
those grants. Each state may request up to $25 million for
that BLM adjust bond levels to more accurately reflect the
these grants, subject to the Secretary of the Interior’s
costs to complete site reclamation. States and tribes may
approval.
face similar issues at former well sites on nonfederal lands,
Formula Grants to States—$2 billion. The amount a state
depending on the adequacy of their respective bonding
receives for a formula grant would be dependent upon the
requirements if a well site operator does not complete the
factors considered in the state’s application. Congress
reclamation, and the availability of other resources if a bond
prescribed those factors in the IIJA as oil and gas industry
proves insufficient to cover the costs.
job losses between March 1, 2020, and November 15, 2021,
and the amount of documented orphan oil and gas wells in
Potential Environmental Impacts
the state. To be eligible to receive a formula grant, a state
Stakeholders have expressed concerns regarding the
must submit an application documenting, among other
environmental impacts of orphan oil and gas wells,
information, the state program’s current authorities and
including the threat of contamination to adjacent
activities, activities to be carried out using the formula
groundwater, the release of fugitive greenhouse gas (GHG)
grants, and the means by which reclamation activity
emissions (i.e., methane and CO2) from uncapped or
information are made public.
partially capped wells, and potential public safety hazards.
Performance Grants to States—$1.5 billion. Performance
For orphan oil and gas wells abandoned decades ago, prior
grants consist of two types of grants, regulatory
to establishment of applicable regulations, potential
improvement grants and matching grants. Regulatory
environmental and public safety issues may not become
improvement grants are subject to the demonstration that
apparent until years or decades after abandonment. The
the state has, within a 10-year period after the initial grant
type and magnitude of environmental impacts and potential
application, strengthened state plugging and reclamation
risks would depend on a host of site-specific factors, such
standards and financial assurance mechanisms. Matching
as the geology, the nature of the extraction operation, the
grants would be provided in equal amounts to the difference
design and construction of a well, and the technique and
between the annual state spending between 2010 and 2019,
material used to plug the well opening (if capped). While
and the amount the state expects to spend during the fiscal
fugitive emissions from individual orphan wells may be
year the state receives the grant. Those grants are limited to
relatively small compared to other anthropogenic
a cumulative total of $30 million per state from FY2022 to
greenhouse gas sources, some have expressed concern
FY2031.
about the cumulative emissions from all orphan wells
Tribal Orphan Well Reclamation—$150 million. Tribal
combined that may have a broader impact in terms of their
grants are intended to address orphaned oil and gas wells on
scale or magnitude in comparison to other sources. In
tribal lands. An Indian tribe may apply for a grant to carry
addition to potential environmental impacts from orphan oil
out orphan well reclamation projects. Alternatively, an
and gas wells, unreclaimed sites may pose safety risks or
Indian tribe may submit an application for the Secretary to
present economic issues among affected communities, such
carry out reclamation on tribal lands, in lieu of a grant.
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The Federal Role in Orphan Oil and Gas Well Reclamation

IF12134
Lance N. Larson, Analyst in Environmental Policy

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