Federal program on orphan wells is causing states to take action!
Three of the country’s largest oil and gas producing states are considering new rules to prevent the abandonment of oil and gas wells.
For the first time, Texas and Oklahoma’s legislatures could create restrictions on how long wells can be inactive or idled before operators must plug them. In New Mexico, the state’s oil and gas regulator is proposing new rules that would require operators to pay more in insurance to cover the cost of plugging abandoned wells.
The new rules are part of broader efforts to tackle the tens of thousands of old oil and gas wells that are left unplugged and without an owner that can properly seal them shut. Once an oil and gas well is orphaned, any contamination and leftover equipment becomes a government and taxpayer liability.
The issue of orphan wells began to gain more prominence in 2022, after Congress passed the Infrastructure Investment and Jobs Act. That law included $4.7 billion to help states plug and remediate orphaned wells. As of September 2024, states had plugged nearly 10,000 orphan wells with a little more than $1 billion of those funds.
The number of idle or inactive wells, defined nationally as those not producing for 12 or more months, varies widely from state to state. Operators often ask state regulators to keep wells in idled status for years, saying they plan to revisit and produce from them in the future.
But many inactive and idled wells end up being sold and transferred to smaller companies, which often don’t have the resources to plug them once they stop producing at a profitable threshold. Smaller operators sometimes go bankrupt, orphaning those inactive wells and making them the state’s responsibility.
In December 2021, states reported abandoned wells to the Interior Department as part of the then-new orphaned well program. Pennsylvania reported the most wells, at 26,900. New Mexico, the country’s second-largest producer of oil and gas, reported only 1,741 orphaned wells. According to the Railroad Commission of Texas, there were 116,828 inactive production wells in Texas. Of those, 26,394 have been inactive for 15 or more years, the data shows.
The Texas Legislature is considering whether to pass Senate Bill 1150, which would put time limits on well-plugging extensions for inactive wells. The bill would require operators to plug wells that were drilled more than 25 years ago and have been inactive for 15 or more years. In Oklahoma, meanwhile, lawmakers are considering Senate Bill 132, which would require operators to plug inactive natural gas wells or restart production within 10 years of the bill becoming law. The bill excludes oil wells.
Oil and gas regulators in New Mexico are also looking at tightening their rules about inactive and idle wells. The state’s Oil Conservation Division is undertaking a rulemaking aimed at changing several existing rules, including those related to bonding and plugging extensions.
Operators in New Mexico currently have to put up a $25,000 surety bond for a single well, plus $2.00 a foot for the length of the well. Operators can also get a blanket surety bond for all of its wells across the state, which can total up to $1 million if an operator has more than 25 inactive wells.
