One apparently is hiding under the driveway of a million-dollar home in Placentia.
Another lurks beneath a parking lot at Ontario International Airport.
And another is under a commercial building in Culver City — much to the surprise of the upscale window company doing business there.
Thanks to its once expansive, 150-year-old oil and gas industry, Southern California has one of the nation’s highest concentrations of so-called “orphan wells,” or wells that companies abandoned without first plugging them up for safety. The state has documented nearly 2,000 orphan wells in Los Angeles, Orange, San Bernardino and Riverside counties alone, while estimating that thousands more could be paved over, unrecorded, and waiting to be rediscovered.
Just five years ago there were only 16 orphan wells on record in all of California, according to a report from the Interstate Oil and Gas Compact Commission. But regulators started paying attention as researchers sounded the alarm over the hazards such sites might pose, from contaminating the air and groundwater with cancer-causing toxins to leaking methane that could worsen global warming and trigger explosions. And starting in 2021, after federal lawmakers announced they’d be doling out $4.7 billion in coming years to help plug such wells, California rushed to account for more, with at least 5,300 orphan wells now on record statewide.
California also is kicking in unprecedented funds to deal with deserted oil and gas wells. Over the past six years, the state has spent $9.3 million to plug 70 such wells. In the next two years, California has budgeted to spend $100 million to secure perhaps 700 more.
There’s a good chance much of that work will happen in Southern California, according to Adam Peltz, a senior attorney with the Environmental Defense Fund and director of Energy Transition for the nonprofit. That’s because many local wells are very close to homes, businesses, earthquake faults and other sites that elevate the risks they pose.
Such factors are included in a proposed ranking system that California’s Geologic Energy Management Division, or CalGEM, spent the past six months working up, with public input, to determine which wells should be prioritized with initial rounds of funding. Very soon, the agency is expected to release a draft of a plan that will spell out how oil-well capping funds will be spent over the next several years.
One thing is clear: It won’t be enough.
Seth Shonkoff, executive director of PSE Healthy Energy, an Oakland-based nonprofit that studies how energy production and use impact public health and the environment, said when you stack even the unprecedented government spending on oil well capping against the true scope of the problem, the money made available to date will be “a drop in the bucket.”
CalGEM has estimated that there are another 18,000 orphan wells throughout California that haven’t yet been documented, plus nearly 40,000 idle wells that are likely to become orphans in coming years. And the picture is similar in many other states, with a 2020 estimate of up to 1 million orphan oil wells nationwide.
That means to truly solve the orphan well problem, Peltz said states need to prioritize how they spend the money that’s now available, change laws to make it harder for companies to abandon wells without plugging them or fully covering those costs, and work to get more money for oil capping down the road.
While that’s a tall order, Peltz said he’s optimistic that the current momentum on this issue will continue.
“There’s an extent to which the horse is out of the barn. So you can’t hide it anymore like you used to.”
How we got here
California’s orphan well problem is a century and a half in the making.
Companies have been drilling for oil in California since the mid-1800s. But production peaked in 1985 and has been in decline ever since, leaving thousands of inactive wells scattered throughout the state.
For decades, the state has required companies to plug wells they’re no longer using with cement, so they don’t leak oil, gas and other chemicals into the air or surrounding land, and to restore the area. Some of California’s orphan wells were deserted before those rules were passed. There’s often not even records of those wells, which may go undetected until they’re discovered as development takes place.
But most orphan wells in California and other states are the consequence of companies taking advantage of loopholes in state law. Bigger oil companies typically drill these wells, then sell them to smaller companies as the wells become less valuable. By the time wells reach the end of their operating lives, they’re often owned by companies with such limited resources that the owners simply dissolve their business or file for bankruptcy before plugging the wells and restoring the sites. Then states are left holding the bag.
In anticipation of that maneuver, California, like most states, requires oil companies to provide some form of financial assurance, such as surety bonds, to pay to plug and restore well locations even if the operator defaults. But for years the minimum requirements for those funds were well below the actual cost of capping a well, Peltz noted, and the rules have remained frozen even as older wells have been transferred between companies.
Even as California has raised its financial assurance rates in recent years, with required minimums now higher than in most states, its maximums are still lower than many other places. California’s assurance rate tops out at $40,000 for a single well, for example, while Utah is at $60,000, Oklahoma is at $100,000 and Alabama is at $500,000. And based on what the state has spent to cap wells in recent years, the average cost of capping a well in California runs closer to $150,000, with costs potentially much higher in dense urban environments with complicated topography like the Los Angeles basin.
Also, operators that own multiple wells are allowed to post “blanket bonds” that cover all of them. Bonds are only required to be $200,000 for up to 50 wells, which equals out to just $4,000 per well. And blanket bonds cap out at $3 million for companies that have more than 10,001 onshore wells, which equates to less than $300 available for each one.
California’s policies to prevent idle wells from becoming orphan wells also are more lax than in some other states. It’s one of the few states, for example, that doesn’t require official approval for companies to leave wells idle or limit how long they can stay that way, per the Interstate Oil and Gas Compact Commission. Instead, California simply declares a well idle if it hasn’t produced anything for 24 months. It then requires companies to pay annual fees once they’ve been declared idle for three years, with fees starting at $150 a year and escalating to $1,500 for wells idle 20 years or more.
Those fees go into a special fund that CalGEM can use to plug orphan wells. The state can also use up to $5 million each year out of a fund filled by an annual fee on operators to plug wells. And recent legislation lets the department spend an extra $7.5 million from that fund each year for the next two years to remediate deserted wells.
This all means that there are states with more documented orphan wells, including Pennsylvania, Ohio and Oklahoma. But there also are states with larger oil industries and far fewer orphan wells, with Texas, for example, reporting it’s plugged thousands each year for the past several years using fees paid by the industry.
Today, CalGEM says Los Angeles County has 1,581 known onshore orphan wells plus two offshore. Orange County has 287 documented orphan wells, while San Bernardino County has 36 and Riverside County has 29. Many more are expected to be recorded in coming years.
What’s the risk?
Unplugged oil wells can create problems in a number of different ways.
They can collapse, potentially harming people, animals and property. The oil, gas or saltwater inside can migrate into nearby freshwater sources, soil and other resources. They can leak methane, which warms the atmosphere faster than carbon dioxide. Methane also is highly flammable. So if it leaks and builds up in an enclosed space, it can trigger an explosion, which has occasionally happened with properties built on top of abandoned wells across North America.
PSE Healthy Energy is getting ready to publish a paper that looks at other hazards orphan wells might present. Shonkoff said a Pennsylvania state agency asked his research firm to come out and take samples of the gases inside open wells. In short, he said they found the same mix of toxic chemicals in orphan wells as what’s typically found in an active well. That includes cancer-causing benzene, among other things. “The closer you are,” Shonkoff said, “the higher the risk of exposure to these types of hazardous air pollutants you get.”
In Los Angeles, it’s estimated that nearly 600,000 people live a half-mile or less from oil or gas wells. That helped drive a law that took effect Jan. 1 prohibiting any new or retrofitting oil and gas wells within 3,200 feet of homes, schools, nursing homes or hospitals. Opponents are trying to qualify a measure for the 2024 ballot to block the bill and to stall its implementation, with the Secretary of State now reviewing signatures. But either way, that buffer zone law won’t have impact older wells already near homes and buildings throughout the state.
There’s also mounting research to show that orphan oil wells reduce property values and halt development. Peltz noted a study out of Pennsylvania, for example, that showed a 50% drop-off in building activity in areas with lots of abandoned wells.
Given that combination of health, environmental and financial risks, Peltz said they were able to get bipartisan support for federal funding to help states address their orphan well problems.
Some help arrives
The Bipartisan Infrastructure Act approved in 2021 includes $4.7 billion to address orphan oil and gas wells nationwide.
A total of $33 million of that will be used to plug well on public lands. In California, that includes wells in Channel Islands National Park, where work is expected to take place later this year, and on Bureau of Land Management territory in Bakersfield, where the Interior department says work has already started.
Tribes will get $50 million to deal with orphan wells in their territories. The Interior department recently released guidance for tribes to apply for grants, with news on that front expected soon.
But the bulk of the $4.7 billion will go to states. The Department of the Interior in August announced initial grants of $25 million each for 24 states, including California, for “rapid deployment of plugging crews.” California plans to plug 171 wells with that money. States also are eligible for performance grants of up to $70 million if they improve their state programs. And they could get a share of another $2 billion in grants that will be awarded based on a formula the Secretary of Interior is developing, with the department soon expected to release guidance for states to apply for those second two pots of grants.
By 2030, Peltz predicts California might receive upwards of $200 million in federal money to deal with its orphan wells. Combined with the $100 million California has budgeted over the next two years, that could be enough to plug nearly half of the 5,300 orphan wells now on record based on recent costs.
More work is needed
Along with continuing to fund such efforts and aggressively document orphan wells, Peltz said he hopes to see changes in state law that make it harder for companies to create orphan wells in the first place.
One step would be to follow Colorado’s lead and strengthen assurance bond requirements. California could also tighten up well transfer rules, including allowing regulators to reassess the required assurance bond anytime a well is sold. That way they can ensure the bond fully covers current costs to plug the well if it ends up abandoned.
The state could also tighten rules around idle wells, such as requiring companies to get approval, pay heftier fees and add extra assurance bonds when wells aren’t in use.
“That would at least stop the bleeding,” Peltz said.
“It’s an industry problem, so industry should be the ones to solve it.”
Source: Orange County Register
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