Colorado oil and gas wells can’t fund their own cleanup. Taxpayers may foot the bill
A Carbon Tracker report shows the cost to safely shut down low-producing wells is $3bn more than what they earn
Joe Fassler
Fri 28 Jun 2024 13.00 CEST
This story is co-published with DeSmog
Thousands of oil and gas wells across Colorado cannot generate enough revenue to cover their own cleanup costs, according to a new report. Unless state officials act “simply and quickly”, it says, Coloradans can expect to be on the hook for a $3bn shortfall.
In its report, the thinktank Carbon Tracker found that 27,000 low-producing oil and gas wells in Colorado – more than half the state’s total – will generate, at most, $1bn in revenue. The state’s oil and gas reserves peaked five years ago, with production volumes declining dramatically in all but one region. It will cost $4bn to $5bn to decommission those sites responsibly, the analysts found – meaning the state can expect a cash crunch of at least $3bn.
Unless properly decommissioned, unplugged wells can leak carcinogens and methane, a potent greenhouse gas. But according to Colorado’s energy and carbon management commission (ECMC), the state’s energy regulator, it can cost $110,000 or more to close a single site. Many companies have avoided paying those costs, either by delaying cleanup indefinitely, selling off ageing wells to smaller competitors or simply going out of business. Today, there are at least 120,000 “orphan” wells across the US that lack financially solvent operators, making them instead a problem for government entities to solve.
“The biggest problem here is just the nature of this activity: You make a lot of cash at the beginning, and then you have a big cost at the end,” said Rob Schuwerk, executive director of Carbon Tracker and a co-author of the report. “The way you cover a cost like that is you make people save along the way, and this is not done now.”
In 2022, Colorado rolled out a much-lauded approach to ensuring fossil fuel companies foot the cleanup bill. The regulations, which Colorado governor, Jared Polis, last year called “an example the nation can follow”, included major changes to the state’s bonding requirements – the system of financial assurance it uses to make it harder for operators to walk away from polluting wells.
Yet a review of public financial documents by DeSmog and the Guardian showed that Colorado’s modest reforms failed to keep pace with the fossil fuel industry’s ballooning liabilities.
“Even under the new rules, the gap between projected cleanup costs and secured bonding is measured in the billions of dollars,” said Margaret Kran-Annexstein, director of the Sierra Club’s Colorado chapter. “It’s frankly dangerous for Colorado to imply this is the best we can do.”
https://www.theguardian.com/us-news/art ... ll-cleanup