Hickenlooper Signs Executive Order That Regulates Orphaned Oil and Gas Wells

Governor John Hickenlooper calls on the oil and gas industry to help the state with its $25 million orphaned well problem.
Governor John Hickenlooper calls on the oil and gas industry to help the state with its $25 million orphaned well problem.
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Governor John Hickenlooper triumphantly penned an executive order on so-called orphaned wells, pounding the table and exclaiming "It's done!" during a signing ceremony today, July 18.

Surrounded by people who had a hand in the executive order, including Tracee Bentley, executive director of the Colorado Petroleum Council who once served as Hickenlooper's legislative director, the governor shared concerns about the long-term issues that such wells pose. Orphaned wells and drilling sites have been abandoned by operators, usually as a result of bankruptcy or other issues. When a site is orphaned, the financial burden shifts to the state to plug the wells and remediate the site to prevent environmental issues such as groundwater contamination.

Managing orphaned wells comes at a hefty price to the state — costs that Hickenlooper today agreed should be the operator's responsibility.

The executive order sets the goal of reducing the backlog of orphaned wells to zero by 2023, mandates the release of locations of so-called priority wells and well sites by August 1, and asks the Colorado Oil and Gas Conservation Commission, the state's regulatory agency, to look into increasing the up-front costs for operators to minimize the financial burden the state has to carry when a well is abandoned.

Hickenlooper estimated that the state has custody of 262 "medium- to high-priority" orphaned wells that need to be replugged to ensure that they don't create environmental calamities and 373 associated orphaned well sites that also require environmental remediation.

It would cost a whopping $25 million to plug old, abandoned wells and remediate old drilling sites in the existing backlog of orphaned wells, a price tag that legislators have slowly chipped away at since 2016, which is when they authorized the COGCC to manage orphaned wells with a mere $515,000. This year, legislators approved $5 million for the program. The Bureau of Land Management, too, has paid for reclamation projects, spending more than $2 million in the state between 2009 and 2017.

Companies are supposed to give the state a "plugging bond" in case they go belly-up, and that money is supposed to cover things like plugging abandoned wells and soil reclamation. The state's bonding requirements vary depending on the depth of the well and the number of well sites, but statewide operators can put up a blanket bond of $100,000 if they have more than 100 wells in the state, or $60,000 if they have fewer than 100 wells.

What this executive order doesn't do is require oil and gas operators to put up more money in the event that they go bankrupt. Hickenlooper says it's on legislators to make that change.

"Yeah, ultimately, I think that's a long-term, probably better solution. ... Those companies that are drilling the wells should ultimately have responsibility. Right now what's happening is [that] the entire industry is participating in making sure we take care of these wells. That's the second-best solution. The best solution is have the people that take the risk — and, in capitalism they get the gain, the benefit, if they're successful in their operation — they should also have responsibility in making sure the well is reclaimed back to its original state," Hickenlooper says.

Read the executive order below.

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