Report: Abandoned oil/gas wells expose risk of inadequate BLM bonds

WYOMING — A new report warns that the U.S. Bureau of Land Management’s low bonding requirements for oil and gas operations on public lands could result in hundreds of abandoned wells across Wyoming and other western states.

Long before the outbreak of a coronavirus, Wyoming oil and gas production was already experiencing an alarming economic downturn. The result is hundreds of oil and gas wells abandoned as over-leveraged operators declare bankruptcy due to historically low oil prices and falling demand because of coronavirus restrictions. Considering low bonding requirements by the BLM, it could make it easier for operators to walk away from wells.

Bob LeResche with the Western Organization of Resource Councils, the group behind a new report that highlights concerns over abandoned wells, says that’s a problem because rusted-out well casings can release toxic chemicals including benzene.

“And drinking water that people get out of their wells will contain these poisonous chemicals sometimes. So, it’s very important that the wells get plugged, which means filled with cement, and cleaned up,” LeResche said.

Industry groups have argued that critics of low bonding requirements are overstating risks because most wells are not abandoned, and are adequately plugged by oil and gas companies. Currently, the BLM requires just a $25,000 minimum bond to cover all of an operator’s expenses in an entire state, while the cost of reclamation can be as high as $150,000 per well, according to regulators. The BLM has not yet responded to a request for comment on the report’s findings.

LeResche says while it’s true that financially stable operators who don’t want to lose their bonds do clean up their former well sites to continue business as usual. But he says that’s not the case for an increasing number of drillers headed for bankruptcy.

“Which leaves no culpability beyond the small bonds. They’re correct that most are plugged by industry, but that doesn’t mean that of tens of thousands of wells that there’s not going to be a lot more obligation than there are bonds.”

The BLM has the authority to increase bonds, but according to a 2019 Government Accountability Office report, 82 percent of federal bonds are set at the minimum amount. The report’s recommendations call for the BLM to end blanket bonding, and establishing bonds based on the actual cost of reclamation at each well.

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