Wyoming governor calls for increased effort to plug abandoned wells
Houston (Platts)--26 Dec 2013 611 pm EST/2311 GMT
Faced with a growing number of idle abandoned natural gas wells across the state, Wyoming officials are working to head off the problem before it grows worse.
Earlier this month, Governor Matt Mead announced a plan to accelerate the process of plugging abandoned oil and gas wells, which includes a recommendation for the state to spend an additional $3 million over the next four years.
Mead estimated that there are about 1,220 wells, for which no responsible party is available to plug and abandon them, on state and fee (private) land in Wyoming.
Article continues below...
Request a free trial of: Gas Daily
Gas Daily offers the most detailed coverage of natural gas prices at interstate and intrastate pipeline and pooling points in major U.S. markets. Gas Daily keeps you informed about complex state and federal regulations that affect competition in the gas industry. You will also learn about business-critical issues such as storage levels, pipeline projects, capacity sales, and company strategies.
That number is expected to increase in coming years, particularly in the region of the Powder River Basin, as relatively low gas prices and a shift in focus to more lucrative oil and liquids production have caused producers to allow thousands of coalbed methane-producing wells to remain idle.
Under the state's oil and gas regulations, operators are required to post a so-called blanket bond of $75,000 to cover the costs of environmental damage and remediation for their operations on state and private lands. In addition, the state requires an additional bond of $10/foot for wells that have been designated as shut-in or idle.
For wells that have been abandoned, or orphaned by their operator, it falls to the state to plug them.
This governor's plan calls on the Wyoming Oil and Gas Conservation Commission to hire a project manager to direct the well-plugging effort. Other state agencies that are expected to take part in the program include the Department of Environmental Quality, Office of State Lands and the State Engineer.
Mead's accelerated plan anticipates plugging at least 305 wells per year.
In a letter to the two co-chairmen of the state legislature's Joint Minerals, Business and Economic Development Interim Committee, Mead said the 1,220 abandoned wells on state and fee lands need to be plugged or converted to other uses.
In addition, the Wyoming Oil and Gas Conservation Commission is expected to decide on the status of about 900 additional CBM wells, held by a company that had tried and failed to launch a CBM "farming" operation in the Powder River Basin, to extract more methane from the play using microbes.
Another approximately 2,300 wells, most located in the Power River Basin, are currently idle and may eventually need to be plugged, Mead said.
Additionally, the governor recommended that the WOGCC review its bond requirements for oil and gas wells and review the conservation tax, which helps fund plugging and reclamation efforts. His plan also includes a recommendation that the WOGCC establish minimum standards for plugging and reclaiming orphaned wells.
CBM production in the Powder River Basin has been on the decline for several years. According to WOGCC data production has declined from about 1 Bcf/d in October 2012 to 790,000 Mcf/d in October 2013.
Observers say it is not economical to operate in the basin while gas prices remain well below $6/MMBtu.
Producer advocates and environmental groups agree that the state should increase the fees charged to oil and gas companies to help the WOGCC fund the effort to plug abandoned wells. "We support raising the mill levy," Bruce Hinchey, president of the Petroleum Association of Wyoming, said Thursday.
One big player plugged about 500 idle wells this year, while another plugged 300, Hinchey said.
According to WOGCC data, Anadarko Petroleum has the highest number of idle wells in Wyoming, at 5,936. BP comes in second with 3,470 idle wells followed by WPX Energy with 3,035 such wells.
The problem with abandoned wells on federal lands in Wyoming does not seem as severe as that on state and private lands.
Currently, there are about 400 idle wells and one orphan well on lands administered by the US Bureau of Land Management, Beverly Gorny, a spokeswoman for the Wyoming office of BLM, said Thursday.
The BLM classifies a well as idle if it has not been in production status for seven consecutive years. A well is considered to be orphaned if no responsible operator can be found to meet bonding requirements and take liability for plugging the well.
Gorny said in the case of the orphan well on federal land, the state BLM office will have to apply for funds from BLM headquarters in Washington to plug the well.
--Jim Magill, firstname.lastname@example.org --Edited by Katharine Fraser, email@example.com