How California Could Ramp Up Plugging Abandoned Oil and Gas Wells
Authors: Ashna Aggarwal and Lauren Wagner
Over 350,000 Californians live within 600 feet of an “unplugged” oil or gas well. Unplugged wells, which are disproportionately located near marginalized communities, are known to: leak toxic chemicals, contaminate water sources, and contribute to greenhouse gas emissions. The revenue generated from current policies is insufficient, leaving the state fiscally liable for decommissioning abandoned wells. We recommend tripling the yearly penalty fee for existing long-term unplugged wells in order to generate revenue for well remediation and to avoid well accumulation while mitigating the burden on the taxpayer.
California’s unplugged wells are abundant
Of California’s 225,000 oil and gas wells, approximately 38,000 are unplugged and have been inactive for at least two years, and are designated “idle”. An estimated 2,565 of California’s unplugged wells lack a fiscally responsible owner and are thus a liability to the state. The number of these “orphaned” wells will likely continue to increase due to declines in the oil market. Another 2,975 are at high risk of becoming orphaned, and 69,425 may become orphaned in coming years.
Unplugged wells threaten residential and environmental health
Exposure to drilling activities is associated with increased rates of cancer, preterm birth (see also), and birth defects, as well as asthma, headaches, nosebleeds. Unplugged wells also threaten the surrounding soil and groundwater reservoirs, acting as conduits for oil, toxic brine, and naturally-occurring heavy metals and radioactive materials to leak to the surface and into water sources. Unplugged wells can also leak methane, a major greenhouse gas. For example, orphaned wells caused an estimated 4–7% of Pennsylvania’s anthropogenic methane emissions in 2010 and produce equivalent emissions as 2.1 million passenger vehicles annually across the U.S.
Well distribution is socioeconomically inequitable
Oil and gas wells are disproportionately located in low socioeconomic and largely nonwhite communities. Californians living within one mile of an oil or gas well in areas most vulnerable to environmental pollution are 92% nonwhite, and within a quarter mile populations are 64% Hispanic/Latinx (compared to 38% statewide). Residents living within 600 feet of the AllenCo oil field near downtown Los Angeles are 80% Latino, compared to 29% countywide, and in Kern County, 76% of residents living near wells are nonwhite. Many communities subjected to disproportionate placement of toxic facilities also experience reduced access to healthcare resources. Paired with higher prevalence of pre-existing health conditions, such communities are particularly vulnerable to the health effects of unplugged wells.
Existing policies and revenue
Inactive oil and gas wells are meant to be plugged with at least 100 feet of cement. Plugging costs range from $40,000 to $152,000 depending on the well’s age, depth, location, and condition. Recent California legislation instituted an annual idle well penalty of $150 to $1,500 depending on how long wells have remained idle. Approximately $110 million has been collected from indemnity bonds (sums that are supposed to cover the future cost of plugging), and $4.3 million was collected from the idle well fee in 2018. By comparison, the estimated cost of plugging California wells currently or at risk of becoming orphaned is over $500 million and approaches $6 billion when considering all economically marginal wells that could soon become orphaned.
Current policy remains insufficient
Through the Idle Well Program, the California Geologic Energy Management Division (CalGEM), has spent only $29.5 million closing 1,400 wells since 1977. Governor Newsom’s proposed 2022–2023 budget would allocate $200 million of taxpayer money for well plugging, but this would cover less than half of the projected $500 million cost of remediating all currently orphaned and economically marginal wells.
California’s framework for the prevention and remediation of unplugged wells is insufficient and has contributed to the abundance of idle and orphaned wells in regions such as Kern County and south Los Angeles. Operators can drill new wells without providing realistic capital for their closure, leaving taxpayers fiscally responsible for the harmful results of private drilling practices. At CalGEM’s current funding rate, it would take approximately 100 years to remediate all orphaned and economically marginal wells.
A way forward: Triple the yearly idle well penalty.
We recommend that California triple the annual penalty for idle wells and use the revenue to fund well plugging efforts through CalGEM’s Idle Well Program. Based on the $4.3 million collected in 2018, tripling the fee from $150–$1500 to $450–$4500 would generate an additional $8.6 million per year, which could be used to increase CalGEM’s funds for well remediation. In turn, this would create state-funded job opportunities for environmental cleanup, all the while holding oil and gas companies financially accountable for their private drilling practices. However, this policy would meet opposition from the drilling industry and, in the long run, the added financial pressure could expedite the closing of smaller drilling companies, which could increase the number of orphaned wells.
Properly plugging wells reduces the health and environmental impacts of drilling activities. High-polluting wells and those in proximity to residences can be addressed first, as the top few emitters account for most emissions. Funding could also be directed towards adequate staffing and oversight, and a survey to identify unplugged wells. Notably, Mississippi and Nebraska have successfully funded well plugging with idle well fees, which is an encouraging precedent for this approach. Tripling the idle well fee in order to raise funds for plugging orphaned wells would demonstrate a commitment to the health and safety of Californians, and prioritize underserved communities and environmental justice.
Acknowledgements: Thanks to Kristen Tam and Zoe Guttman for their brainstorming help during early versions of this project.
