Colorado is seeking $25 million from a federal fund to plug orphan oil and gas wells, state officials said, in what could be the first installment of millions in cleanup aid.
The money is part of the Biden administration’s infrastructure program, passed by Congress last November. A total of $1.4 billion in plugging and abandonment funds are being made available to 26 states in the initial round of grants.
Colorado was eligible for an additional $14 million in federal assistance, but accepting it would have required the state to designate projects within 90 days, and complete them within one year, which it couldn’t do.
The infrastructure law allocates a total of $4.7 billion for the orphan well program, and Colorado could be in line for tens of millions more.
The awards were made based on a formula accounting for job losses and the documented number and cleanup costs of 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) is working to revise its rules to require oil and gas drillers provide financial assurance they can plug their wells and to increase state funds for plugging and abandoning sites with no solvent operator, so-called orphan wells.
COGCC Chairman Jeff Robbins said in a statement that the award of the federal funds showed “excellent timing.”
“We are thankful to receive these funds and look forward to implementing these programs to be protective of public health, safety, welfare, wildlife and the environment,” Robbins said.
Colorado has 411 orphan wells to plug and 811 orphan well sites to remediate, according to state data.
Those numbers are up 70% the past four months as the COGCC moved to shut down derelict operators and seize their wells and clean-up bonds
The commission is planning on moving on additional defunct operators, according to Megan Castle, a COGCC spokeswoman.
Julie Murphy, the commission director, said the Interior Department, under its criteria “has identified 129,000 [orphan wells] nationally and Colorado has 625 orphan wells, which shows that our state’s proactive approach is working and we are fulfilling our mission.”
The Colorado numbers, however, may only represent a small eddy before a big wave, environmentalists say. An analysis of the 52,000 wells in Colorado done by a coalition of environmental groups, including Conservation Colorado, identified 2,917 wells likely to be abandoned.
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This included 329 wells owned by companies that had zero oil and gas production in 2020 and 2,588 wells owned by operators whose wells average less than the equivalent of one barrel of oil a day – a level regulators and the industry say is uneconomical.
In the face of those numbers the federal money is a drop in the bucket, Kate Merlin, an attorney with the environmental group WildEarth Guardians, said.
Colorado’s orphan wells have historically cost an average of $93,000 to plug. Even if the state got the full $39 million for which it was eligible, it would cover only 400 orphans, Merlin said.
“This federal money is another taxpayer bailout of an industry that refuses to clean up its own messes,” Merlin said.
In the coming weeks, the Interior Department will release detailed guidance for states to apply for the initial grant equal to $25 million and then Colorado will be eligible for another $14 million in performance grants.
The total money allocated to orphan wells in the infrastructure law is $4.7 billion, of which Colorado could be in line for $79 million.
“These abandoned sites are dangerous for Colorado communities and release harmful methane into the atmosphere,” Colorado Democratic Sen. John Hickenlooper, who lobbied for the orphan well funding, said in a statement. “Now we’ll create jobs by capping and remediating abandoned wells.”