Congressional leaders want funding to reclaim state's orphaned wells

By:  Robert Nott

New Mexico congressional delegates are pushing for the creation of a federal fund to help cover the costs of plugging and reclaiming abandoned oil and gas wells.

U.S. Reps. Ben Ray Luján, Xochitl Torres Small and Deb Haaland, all New Mexico Democrats, participated in a virtual congressional hearing on the proposal earlier this week.

According to testimony at the Monday hearing, the cost of plugging more than 56,000 wells across the nation could be more than $1 trillion dollars, which would be left to state taxpayers without any federal assistance.

Some of the wells, abandoned for decades, continue to leak methane and threaten to contaminate groundwater sources, lawmakers and others said.

Adrienne Sandoval, director of the New Mexico Oil Conservation Division, spoke Monday to the House Subcommittee on Energy and Mineral Resources. She and other advocates for a federal cleanup fund emphasized another benefit of the program: jobs.

Some 4,500 workers in New Mexico’s oil and gas industry have filed unemployment claims in the past couple of months as production has slowed during the COVID-19 pandemic, Sandoval said. If a federal aid package became available to reclaim the wells, “the work [for those employees] can start tomorrow. … We could begin ramping up immediately.”

At least 100 new jobs would be created at the start of the program, she said.

New Mexico has over 700 abandoned wells, some that recently shut down due to plunging oil prices.

U.S. Rep. Alan Lowenthal, D-Calif., who heads the subcommittee, said the pandemic has made the issue “more timely” because of the shutdown of many oil and gas operations in the nation.

Lynn Helms, director of the North Dakota Department of Mineral Resources, which has 366 orphaned wells, said the proposal would provide “an immediate stimulus” to put hundreds of people back to work in his state.

Nationwide, the federal aid could lead to the creation of up to 12,000 jobs over several years, said Sara Kendall of the Western Organization of Resource Councils, a group of agencies that focus on sustaining the environment and providing economic opportunities.

Daniel Raimi, a senior research associate at the nonprofit research group Resources for the Future, said the average cost to plug and reclaim a well is $24,000.

It costs about $29,000 to plug and remediate a well in New Mexico, according to the state Energy, Minerals and Natural Resources Department.

The State Land Office requires each oil and gas operator to have a $25,000 minimum surety bond to help cover the costs of plugging any well that is shut down. The bond must be $50,000 for up to 10 wells or $250,000 for more than 100 wells.

Those bond amounts for producers operating on federal lands have not changed in decades, Sandoval and others said, which creates problems for states when it comes to covering the costs of abandoned wells.

Luján, Torres Small and U.S. Sen. Martin Heinrich, also a New Mexico Democrat, said in a statement Monday that Congress should provide funding for states and Native American tribes to address the backlog of orphaned wells.

The fund would help “put thousands back to work plugging them and restoring the land, and protect groundwater and curb hazardous emissions and greenhouse gases,” the statement said.