Colorado’s orphan wells will attract nearly $39 million in federal cleanup aid

Colorado is eligible for $39 million in federal funds to plug orphan oil and gas wells — the first installment of what could total $79 million in cleanup funds for the state — announced today the US Department of the Interior.

The money is part of the Biden administration’s infrastructure package, passed by Congress last November. A total of $1.4 billion in patching and abandonment funds is being made available to 26 states.

The awards were granted based on a formula taking into account job losses and the documented number and costs of cleaning up orphan wells in each state. Texas got the largest grant, at nearly $108 million.

The federal money comes as the Colorado Oil and Gas Conservation Commission (COGCC) works to revise its rules to require oil and gas drillers to provide financial assurance that they can cap their wells and to increase funding for the State to plug and abandon sites without a solvent operator, so-called orphan wells.

COGCC Chairman Jeff Robbins said in a statement that the federal funds allocation showed “excellent timing.”

“We are grateful to receive these funds and look forward to implementing these programs to protect public health, safety, welfare, wildlife and the environment,” Robbins said.

Colorado has 411 orphan well sites to plug and 811 orphan well sites to remediate, according to state data.

These numbers have increased by 70% in the past four months as the COGCC moved to shut down abandoned operators and seize their wells and cleanup obligations.

The commission plans to relocate other defunct operators, according to Megan Castle, a COGCC spokeswoman.

Julie Murphy, the director of the commission, said the Home Office, according to its criteria “has identified 129,000 [orphan wells] nationwide and Colorado has 625 orphan wells, showing that our state’s proactive approach is working and that we are fulfilling our mission.

Colorado’s numbers, however, may only represent a small eddy before a big wave, environmentalists say. An analysis of Colorado’s 52,000 wells by a coalition of environmental groups, including Conservation Colorado, identified 2,917 wells at risk of abandonment.

This included 329 wells owned by companies that had no oil and gas production in 2020 and 2,588 wells owned by operators whose wells averaged less than the equivalent of one barrel of oil per day – a level that regulators and the industry say is not profitable.

Against those numbers, federal money is just a drop in the ocean, said Kate Merlin, an attorney for the environmental group WildEarth Guardians.

“Orphans in Colorado have historically averaged about $93,000, which means that $39 million will only cover about 400 orphans,” Merlin said in an email. “We have at least 10 times as many wells in Colorado that are likely to be orphaned or are already pretty much abandoned.”

An analysis of the cost of plugging Colorado wells whose bonds have been seized put the average price at nearly $93,000. The overall historical plugging costs for the state’s orphan well program are $82,500.

“This federal money is another taxpayer bailout of an industry that refuses to clean up its own mess,” Merlin said.

In the coming weeks, the Department of the Interior will release detailed guidelines allowing states to apply for the initial grant equal to $25 million, and then Colorado will be eligible for an additional $14 million in performance grants.

The total money allocated to orphan wells in the Infrastructure Act is $4.7 billion, of which Colorado could be in line for $79 million.

“These abandoned sites are dangerous to Colorado communities and release harmful methane into the atmosphere,” Colorado Democratic Sen. John Hickenlooper, who has lobbied for funding for orphan wells, said in a statement. “Now we will create jobs by plugging and repairing abandoned wells.”

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