BLM Proposal Would Increase Drilling Well Bonds To Cover Cleanup And Reclamation

The Bureau Of Land Management is considering new rules for federal oil and gas wells, which has drawn mixed reaction within Wyoming.

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Information Courtesy: Powder River Resource Council. Scroll down further to read reactions from Wyoming Governor Mark Gordon and WY US Senator Cynthia Lummis

After more than half a century of waiting, members of the Western Organization of Resource Councils applaud the Bureau of Land Management (BLM) for releasing new rules for federal oil and gas wells.

The proposed rules will help ensure that federal and tribal wells are plugged and reclaimed in a timely way, and shield taxpayers from footing the cleanup bill.

The new standards will require operators to post bonds that will better cover the costs of plugging federal wells and reclaiming the landscapes impacted by oil and gas development on public and private split estate lands and minerals.

“American taxpayers have for too long subsidized oil and gas corporations, and it’s long overdue for BLM to require bonds that ensure full cleanup and reclamation of federal wells. This common-sense rule should easily move through the process and we look forward to its protections becoming reality sometime soon.” – Bob LeResche, WORC Board Chair and Board Member of Powder River Basin Resource Council from Clearmont, WY.

The proposed rules will phase out nationwide bonds that allowed oil and gas companies to cover all of their federal wells across the country with bonds as low as $150,000, and phase in new minimum bond amounts of $500,000 for all of an operators wells in a state (increased from $25,000 currently) and $150,000 for all of an operators wells on one lease (increased from $10,000 currently).

Under the proposed rules, BLM will also require inactive wells to be plugged and reclaimed sooner, ending the practice of non-competitive leasing, and make it harder for “bad actor” companies that are out of compliance with BLM rules from receiving new leases.

Oil and gas companies have left behind an estimated four million orphaned federal and non-federal wells in this country (Carbon Tracker, 2020).

Because BLM’s bonding requirements have not been updated since 1960, they have failed to ensure that oil and gas companies are held responsible to plug their wells and restore the land.

Through company bankruptcies, oil and gas field sales, and other operational changes, thousands of federal and tribal wells have been left for taxpayers to clean up.

As a result, oil and gas companies profit, and communities, landowners and taxpayers are left dealing with the negative effects of unreclaimed sites left behind by the oil and gas industry.

Background information: (Source: GAO 19-615 unless another source is noted)

Under current rules, the minimum reclamation bond amounts are just $10,000 for all wells on a single lease, $25,000 for all wells in one state, or $150,000 to cover all wells nationwide.

Although BLM has the authority to increase bonds over the minimum amounts set in the rules, they seldom do — 82% of bonds are set at minimum amounts.

BLM’s average clean up costs are $20,000 per well for a low-cost cleanup, and $140,000 per well for a high-cost cleanup.

Plugging and reclamation costs vary well to well depending on depth, site and well conditions, and other factors.

At least 99.5% of federal wells carry bonds that are insufficient to cover the cost of reclamation.

As a result, federal wells often remain idle for years or decades before they are declared orphaned and plugged and reclaimed.

The Government Accountability Office has identified 5,100 wells that have been idle for seven or more years, including 2,313 that have been idle for more than 25 years. (GAO 11-292)

According to BLM, in 2021 there were an estimated 16,020 orphaned federal and tribal wells. (BLM Testimony)

The Inflation Reduction Act allocated $4.7 billion for orphaned well cleanup, including $250 million for federal orphaned wells. (DOI Press Release, 2022)

The Western Organization of Resource Councils (WORC) is a network of nine grassroots organizations in seven Western states with 19,935 members, many of them ranchers and farmers committed to common-sense reform in agriculture, oil and gas development, coal mine reclamation, and rural economic development.

Headquartered in Billings, Mont., WORC also has an office in Washington, D.C.

The Powder River Basin Resource Council, founded in 1973, is a family agriculture and conservation organization in Wyoming. Resource Council members are family farmers and ranchers and concerned citizens who are committed to conservation of our unique land, mineral, water, and clean air resources.

Northern Plains Resource Council is a grassroots conservation and family agriculture group that organizes Montanans to protect our water quality, family farms and ranches, and unique quality of life.

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Governor Gordon’s Reaction:

It has been my experience that when Washington, DC talks about balanced development as we transition to clean energy, it is merely code for placing additional burdens on the fossil fuel industry. Today the oil and gas industry is that target. The Bureau of Land Management’s proposed rule shows a disregard for the protections already in place in Wyoming for wildlife, cultural and historic sites and reclamation of oil and gas wells. 

Wyoming’s energy industry is composed of many smaller operators who are committed to responsible development. Huge bonding requirements – regardless of the type and location of wells – piled on top of increased leasing costs and other fees, may very well make it impossible to operate. Unnecessary costs to producers will result in less oil and gas for consumers across the nation and less revenue for Wyoming and her citizens. Revenue from the oil and gas industry has funded education, highway maintenance, law enforcement, mental health programs, and other vital services for Wyoming’s people. 

We have just seen major utilities request substantial rate increases based upon their argument of past increases to the price of oil and gas. Yet this Administration is doing everything it can to make things worse for those struggling to pay their bills.

Wyoming has a long history of working with companies to identify appropriate bonds and fees to assure that should a well be orphaned, that well will be appropriately plugged and the site reclaimed. The Administration should look to Wyoming as a leader in idle and orphan well management and leave this work to states. Burdensome federal regulation is not the answer.

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Senator Lummis Reaction:

“As Americans continue to feel the pain of record inflation, the Biden administration today chose to further ignite the flames by increasing royalty rates on domestic oil and gas producers. This shortsighted action will only raise the price at the pump for people in Wyoming while discouraging domestic energy production and increasing our energy dependence on foreign adversaries. Mr. President, this continuous onslaught on the people of Wyoming has to stop,” said Sen. Lummis. “It’s time for Congress to take up and pass my POWER Act to prohibit the president – once and for all – from blocking energy production on federal lands and waters without Congressional approval.” 

This rule would increase the cost to drill on public lands by nearly 17%. 

Lummis is an ardent defender of domestic energy production. The first bill Sen. Lummis introduced when coming to the Senate was the Protecting Our Wealth of Energy Resources (POWER) Act to prohibit the president or his secretaries of Interior, Agriculture or Energy from blocking energy or mineral leasing and permitting on federal lands and waters without Congressional approval. She reintroduced the POWER Act at the beginning of this Congress alongside 16 of her colleagues.