Four years later, the couple finished building their home on the lot just east of Brighton, but the so-called orphan well is still on the property, and there’s no timeline for when it might be plugged. That’s because the company that owned it went bankrupt, shifting the responsibility for cleanup to the state government, which has a backlog of nearly 650 wells it needs to plug.
“The company that promised to do all those things basically went bankrupt, and nothing will be done,” Cindy says. “I just cannot believe this happens. … I was just shocked that they could do that.”
The McCormicks, both in their fifties, were told it could be years before the state addresses the well on their property. So far they've had to pay out of their own pocket to extend power lines and a driveway to the back of their property in order to keep their home as far away from the well as possible. However, outsiders constantly trespass on the front of their land now, according to the couple, dumping trash or riding ATVs because the property is assumed to be abandoned.
“I know that we're liable if something were to happen, and we're trying to stop people from doing it, but it's an attraction site,” Cindy says. “They think that it's a dumping ground, so we've had mattresses, couches, tires, a foosball table. They just come in; they dump it right by the well site.”
Cindy and Ronald are class representatives for a lawsuit filed in Adams County District Court on February 22 against HRM Resources, the oil company that used to own the wells on the McCormicks’ property and allegedly left 200 other property owners in the lurch. Nonprofit environmental law group ClientEarth, which is headquartered in London and has offices around the globe, is representing the plaintiffs along with Borison Firm LLC and Denver law firm Richards Carrington LLC.
The lawsuit alleges that HRM Resources purposely sold all of its wells to a Texas shell company, Painted Pegasus Petroleum, with both companies entering the agreement knowing that Painted Pegasus would go bankrupt, therefore avoiding any liability to clean up the wells.
According to ClientEarth, this is a common practice in the oil and gas industry: companies purchase wells knowing they won’t make enough money to cover the costs of plugging them, only to sell the wells again to another business that is built to fail. The only people on the hook are citizens in the state where the orphaned wells are, ClientEarth attorney Camille Sippel argues.
“In the U.S., the problem of abandoned wells is very large,” Sippel says. “There are around 2.1 million abandoned wells across the United States that are unplugged, and there is what we identify as this industry practice of oil and gas companies extracting profit from these wells and then transferring them to smaller companies that are often undercapitalized.”
Painted Pegasus went bankrupt in 2021. The lawsuit argues that HRM’s transfer of the wells to Painted Pegasus was fraudulent because both companies knew Painted Pegasus would soon shut down, so plaintiffs are asking the court to help them collect cleanup costs from HRM.
The plaintiffs are still awaiting a legal response from HRM Resources, which did not respond to a request for comment. Representatives of Painted Pegasus could not be reached.
If the lawsuit succeeds, it would create a new precedent, as property owners could pursue previous well owners for plugging costs if the wells were sold fraudulently.
Unplugged Oil Wells in Colorado
Unplugged wells emit an estimated 100 kilograms of methane, a gas that contributes to global warming, into the air each year, according to the Environmental Protection Agency. Methane has also been linked to respiratory and cardiovascular diseases. “There's also risk of water contamination, because if the wells leak, they can contaminate groundwater sources,” Sippel adds. “Unfortunately, some of these wells have actually blown up in Colorado.”
In 2017, a home in Firestone famously exploded because of a leaking, abandoned gas line that hadn’t been properly retired. During construction of the McCormicks’ home, United Power accidentally cut through an unmarked pipe leading away from the well. Nothing exploded, but there are now orange flags on the property marking that pipe in addition to the well.
“That causes more concern,” Cindy McCormick says. “We don't know what else is underground.”
A 2023 study by the Colorado Fiscal Institute estimated that there are almost 60,000 unplugged wells in Colorado. According to the state Energy & Carbon Management Commission’s Orphaned Well Program, the plugging process requires a team to remove equipment, perform environmental remediation and reclaim the site for each abandoned well, costing $92,710 on average.
Funding to plug wells comes from the federal government as well as levies, financial assurance and penalty revenue paid by oil and gas operators. The state legislature allocated nearly $4 million to the work for the 2023-2024 fiscal year.
As of February 27, there were 1,410 sites currently being worked on or planned for plugging, with 649 wells on those sites. Orphaned sites account for areas where there is no longer oil and gas production but where environmental remediation is required.
In 2019, state lawmakers changed the Colorado Oil and Gas Conservation Commission's mission to regulating oil and gas in a manner that protects public health rather than fostering oil and gas. About three years later, the commission mandated stronger rules around the financing of oil wells.
Colorado's oil and gas regulations now require operators to create financial assurance plans that include asset retirement. Companies must also demonstrate that they have the “wherewithal to actively and timely retire their own assets,” according to the Orphaned Well Program.
The new rules also address cases like the one in the HRM lawsuit, requiring sellers to maintain financial assurance until the buyer proves it has the proper financial means to take care of the assets. However, the HRM and Painted Pegasus transaction happened before those new rules kicked in.
State senators Sonya Jaquez Lewis and Kevin Priola and representatives Andrew Boesenecker and Julia Marvin have recently sponsored Senate Bill 24-159, which would phase out new oil and gas permits by 2030 and allows for prior well owners to be considered responsible for paying for cleanups.
“We have to address the orphan well problem,” Jaquez Lewis said at a March 1 press conference promoting the bill.
Current law enables the state to require mitigation of adverse environmental impacts from oil and gas operations by responsible parties, but prior owners aren't considered a responsible party. This bill would add prior owners to the definition of responsible parties so they could also be tapped by the state — and even sued by it — to recover the costs of environmental mitigation from wells. The bill is scheduled for its first hearing in the Senate Agriculture and Natural Resources Committee on March 14.
The goals of the lawsuit and the legislation are the same: to legally require former owners of wells to contribute to their plugging.
“Companies should not be allowed to do what they've done,” Cindy McCormick says. “They've made profit off of these wells. It should remain their responsibility.”
