Colorado’s orphan well program spent a record $10.2 million in 2023 and completed plugging on 61 wells, but in the last 90 days saw a “surge” with 200 new abandoned oil and gas wells and sites, state regulators say.
As of Sept. 22, Colorado had 445 orphan wells to plug and 1,151 associated sites to remediate, according to state data.
The 2023 annual orphan well report of the state Energy and Carbon Management Commission, formerly the Colorado Oil and Gas Conservation Commission, outlines the work at hundreds of sites in 19 counties across the state. The report covers a fiscal year from July 2022 to June.
The wells on the list need to be plugged and the sites, which can contain flowlines, tanks and other equipment, as well possibly spills and contaminated earth, need to be remediated.
It takes only a few days to plug a well, but remediating a site can take several growing seasons to complete, according to Dave Andrews, manager of the ECMC orphan well program.
This has led to a growing backlog of sites, Andrews said, with the number climbing to 1,116 for fiscal year 2023 from a little less than 1,000 a year earlier.
The program is planning to add another staffer to deal with the growing number of sites, Andrews said during a meeting Tuesday of the Orphan Well Mitigation Board.
The rise in orphan wells is being fed by smaller operators who no longer find it economical to operate in Colorado and the continued discovery of old wells, sometimes by developers looking to build houses on former oil and gas sites.
Adams County accounts for more than a quarter of the sites on the list and is the home to more than 100 plugging and remediation projects underway, according to the annual report.
While that may appear to be a lot of activity, Adams County Commissioner Eva Henry said in an interview, “it is not enough, when we are looking at so many sites.”
Adams County has its own oil and gas inspectors who have checked the orphan well sites in the county and found 95% are out of compliance and 44 had spills or were leaking, Henry said. County inspections led to 15 wells receiving priority plugging.
“We really need more resources,” Henry said. “We really need to go faster.”
Henry talked about the county’s inspection program Tuesday afternoon in a field along Imboden Road near a leaking well abandoned when its owner filed for bankruptcy in 2021. She said if the county didn’t have its own gear, the leak would not have been detected in a timely manner. The leak was fixed, she said, but the well site still must be cleaned up.
Henry was joined at the well by Gov. Jared Polis and U.S. Interior Secretary Deb Haaland, whose to Colorado visit was meant to highlight federal aid for addressing abandoned oil and gas drilling sites.
Twice as much spent on orphan wells this year than in 28 years combined
Andrews said the state program has been plugging 60 to 70 wells a year. “I don’t see that changing at least for the next few years,” he said.
In 2023, the orphan well program doubled its staff to 13 and spent $10.2 million — almost double of what the program spent in its first 28 years of operation, according to Julie Murphy, the ECMC executive director.
In prior years, a combination of bonds seized from defunct operators, industry levies and fines and state legislature appropriations financed the program, but in 2022 it got a $25 million boost in federal aid, over two years, from the Biden administration’s infrastructure bill.
As part of the ECMC’s financial assurance rules it also began imposing an annual per-well fee on operators of $125 for each low-producing well (those yielding less than the equivalent of 15 barrels or oil or 20,000 cubic feet of gas a day) and $225 for all other wells.
The so-called well mitigation enterprise fee is designed to raise $10 million from the industry. The Orphan Well Mitigation Board voted Tuesday to keep the fees at their current level.
Bond and legislative appropriation expenditures each decline about 40% in 2023 to a total of $3 million. Federal funds made up the bulk of the program at almost $6.8 million and the new enterprise fee contributed nearly $380,000.
For 2024, Andrews said the program is projecting a state appropriation of $3.8 million, $14 million in federal funds, $2.2 million from the orphan well mitigation fee and $2 million from a cooperative agreement with the federal Bureau of Land Management — although a portion of this $22 million will be spread over two to five years.
The biggest cleanup expenditure — $3.1 million — was to address issues at some of the wells of Englewood-based Petroshare Corp., which went bankrupt in 2020.
Two companies to whom Petroshare owed money took the defunct company’s profitable wells, leaving the state orphan well program with 53 wells, some dating back to the 1980s, and 58 well sites.
The ECMC seized Petroshare’s $325,000 in bonds. By the end of 2023, the orphan well program had spent $89,000 of the bond money, $857,000 of state appropriation funds and $2 million in federal funds on Petroshare projects.
Murphy said that in addition to the increased financing of the orphan well program, the state’s new financial assurance rules, requiring each operator to show that it has the financial resources to plug and abandon all their wells, is another way of addressing the risk.
“We can all agree that the collective goal and the collective best outcome is when operators plug oil and gas wells at the end of their useful life,” Murphy said.
So far, the commission has approved 151 financial assurance plans covering 38,000 of the state’s approximately 49,000 wells, with $570 million in bonds or financing if operators do not meet their obligations.