WY - BLM - Lease Sale

[Deleted member 28227]

In 30 years are they actually gonna plug all the wells and reclaim the area?

I think 2050 will be quite different than 2022.

1. Nature of the wells, a lot of the orphaned wells were shallow marginal wells to begin with and drilled 40+ years ago. Peaked with a few barrels a day, they have a tank on site, and probably for the last 10 years of their life they had a pumper visiting them maybe every 3 or 4 months. When prices drop that pumper gets laid off, the amount of oil that well produces isn't worth driving out to collect so they get shut-in. Then the company goes bankrupt and those shut in wells are orphaned. These wells are all over the place, in 40 years things grow back and in some locations (not desert) it can actually be a chore to find the well.

Also sometimes operators do plug them, but the state agency doesn't have great record keeping for plugging, so everything was done correctly, the BLM or the state just doesn't have a record.

2. That's different than say a big HZ well that peaks at 2000 barrels a day and has pipe to the site, and where their 8+ wells on the same site.

I think the modern HZ wells won't have a reclamation issues, it's definitely the thousands of 1880-1970 vertical wells that are the biggest issue (there are definitely still lots of conventional vertical wells being drilled)

So in my mind from a reclamation stand point I'm not worried about EOG drilling 100MM pads, I'm worried about Johnson Brother's drilling 100k wells.


The other component is ESG, because folks have realized it's an issue and made it an issue big public companies (and some smaller privates) have made it a point to conduct big plugging campaigns.

... also if a vertical well is in the same common source of supply as a HZ well, when you frack the HZ well you will collapse the vertical well, so typically you plug the vertical wells you own when you go to frack.

I guess last, though I touched on it above record keeping, websites, etc for state agencies ie WOGCC are exceptionally janky.. in 2022...their was basically nothing in say 1990.

The BLM doesn't actually have a website or do record keeping.

The industry uses companies like IHS, Enverus, and Oseberg to get their well data.

I have zero faith that the BLM has any handle on orphan wells, I would take anything they say with a grain of salt.

 

[WesternWyoming]

Most of the Pinedale anticline is directionally drilled, IIRC and so was the Jonah. Technology from 20 years ago probably wasn't the best, but it was sold to everyone as being the best way to save some of that country.

But in the case of the Anticline, the company that did the first drilling sold everyone a tall tale, then got the BLM to reverse a lot of the stipulations.

True, the P. Anticline was mostly directionally drilled, but the Jonah was not until much later, which is why there are 16 well pads per section and it looks like it does in the photo above posted by elkduds. Encana insisted that it couldn't use directional drilling in the tight gas sands. The new leases being sold are on the boundary of the approved Normally Pressured Lance (NPL) field and ring only Greater sage-grouse winter concentration areas designated in the world.

 

[Deleted member 28227]

Yup. Oftentimes it falls on the taxpayer...

Seems like that's a failure of bankruptcy court?

If I was king for a day I would make a law that plugging liability comes before paying off service companies and banks.

 

[Dougfirtree]

Seems like that's a failure of bankruptcy court?

If I was king for a day I would make a law that plugging liability comes before paying off service companies and banks.

Call me a grump, but it seems like it might be a good idea to make companies pay (at least part of), the reclamation costs up-front. Or, skim a percentage of profits into a fund for clean-up, on a yearly basis. This is out of my wheel house, but at a gut level, I have little faith that the folks who put in the wells will actually be paying the reclamation costs, unless they're paying while they're actually making money.

 

[Deleted member 18333]

Seems like that's a failure of bankruptcy court?

If I was king for a day I would make a law that plugging liability comes before paying off service companies and banks.

Isn't there a reclamation bonding criteria required for oil and gas drillers? This is what is supposed to kick in when bankruptcy happens. If so then the burden falls on the Surety company for funds and the State for the actual work. Seems I cant cut a two track across the sage without first demonstrating adequate reclamation bonding.

 

[mtmiller]

I have zero faith that the BLM has any handle on orphan wells, I would take anything they say with a grain of salt.

Just received a scoping request for four orphan wells to be plugged....tax payer funded.

 

[Deleted member 28227]

Just received a scoping request for four orphan wells to be plugged....tax payer funded.

My comment was regarding aggregated projections of orphaned wells, not specific wells, i.e. I bet they drove out to those wells and know exactly who should have paid and confirmed that they were orphaned... probably a lot of work.

I do not think the BLM has any clue how many total orphaned wells there are on the landscape, they are taking wild guesses.

 

[Deleted member 28227]

Isn't there a reclamation bonding criteria required for oil and gas drillers? This is what is supposed to kick in when bankruptcy happens. If so then the burden falls on the Surety company for funds and the State for the actual work. Seems I cant cut a two track across the sage without first demonstrating adequate reclamation bonding.

There is now, I have no idea what the process was like decades ago... which when these wells were drilled.

Wells on federal lands have their own bonding rules, then states have their own bonding rules.

Legally when you drill or transfer ownership of a well, any well, it has to be bonded. Any company in the chain of the wells life can also be liable for the well. So if Devon drills a well, EOG buys it, then EOG sells it to Hilcorp and Hilcorp goes bankrupt (obviously these companies are bad examples) all of these companies are still on the hook regardless who was the ultimate operator.

Typically the good operators just plug a well if confronted by the state, cheaper than dealing with lawyers and bad PR.

The problem is if a well was drilled by a small no name, the well sucked, and then that company goes under. No one else owned the well and who knows if they were bonded back then or how reputable their bonding company was.

Call me a grump, but it seems like it might be a good idea to make companies pay (at least part of), the reclamation costs up-front. Or, skim a percentage of profits into a fund for clean-up, on a yearly basis. This is out of my wheel house, but at a gut level, I have little faith that the folks who put in the wells will actually be paying the reclamation costs, unless they're paying while they're actually making money.

The life cycles on wells typically does outstrip companies, so yes agree to that point. I think the issue there might be inflation, in 1970 it cost less to plug then today. Not to push back, because I do agree mostly, but states do get royalties on public land and excise taxes on any well drilled... they have been spending money as fast as they get their hands on it. Looking at you AK and WY with your no income tax. Perhaps the lack of responsibility isn't totally on industry. AK has free big game tags for resident and oil taxes are used to fund the agency in part... just saying. Wyoming is going to get over $1Billion this year from OG, this year alone.

Also and to my point you would have to make a system that was pretty bullet proof so states didn't just plop the extra money into the general fund and use if for other stuff.

States not planning for the future, companies not planning... different sides of the same coin in my mind.

 

[Deleted member 28227]

The new leases being sold are on the boundary of the approved Normally Pressured Lance (NPL) field and ring only Greater sage-grouse winter concentration areas designated in the world.

The new leases are outside of the concentration area, as defined by the state, and there is only one lek site on a lease and it's right on the edge.

 

[Deleted member 18333]

There is now, I have no idea what the process was like decades ago... which when these wells were drilled.

Agree that each barrel or cf that comes from a new well should have a fee attached to it that is used to clean up old or abandoned wells. Just like the Abandoned Mine Lands fee attached to each ton of coal. I seem to recall reading about recent federal regulation to do just this. Not sure of its outcome or if I am mistaken.

 

[Deleted member 28227]

Agree that each barrel or cf that comes from a new well should have a fee attached to it that is used to clean up old or abandoned wells. Just like the Abandoned Mine Lands fee attached to each ton of coal. I seem to recall reading about recent federal regulation to do just this. Not sure of its outcome or if I am mistaken.

Colorado to request $25M in federal aid to help clean up its more than 1,200 orphan wells

Colorado will request $25 million in federal funds to plug orphan oil and gas wells, and could be eligible for millions more.

coloradosun.com

Some good info also some eye rollers lol

 

[Deleted member 28227]

Agree that each barrel or cf that comes from a new well should have a fee attached to it that is used to clean up old or abandoned wells. Just like the Abandoned Mine Lands fee attached to each ton of coal. I seem to recall reading about recent federal regulation to do just this. Not sure of its outcome or if I am mistaken.

PA, OH, OK... would not surprise me if a lot of those wells were from the 1870-1930s. Those states do have a lot of drilling currently, but they had huge booms a century ago. Killers of the Flower Moon is about the Osage oil rush in OK would not surprise me one bit if that's the era of wells that ~10,000 + of those wells are from.

I know a couple CO companies that had to do big plugging campaigns because their acreage had lots of wells from the 1940s that weren't plugged correctly and it was screwing up their fracks. When they would frack their wells water would blow out the old verticals because they didn't have plugs. Point being it drives the industry crazy as well.

There wasn't a lot of oversight for a long time...

https://iogcc.ok.gov/sites/g/files/gmc836/f/documents/2022/iogcc_idle_and_orphan_wells_2021_final_web_0.pdf

 

[Schism]

You mean all states didn't use Federal Covid CARES money to plug wells like we did in ND?

North Dakota to spend $66 million to plug abandoned wells

North Dakota plans to spend $66 million to plug wells abandoned by oil and gas companies in the U.S. state after the pandemic crushed demand for crude, causing a plunge in prices.

www.reuters.com

 

[Deleted member 18333]

You mean all states didn't use Federal Covid CARES money to plug wells like we did in ND?

North Dakota to spend $66 million to plug abandoned wells

North Dakota plans to spend $66 million to plug wells abandoned by oil and gas companies in the U.S. state after the pandemic crushed demand for crude, causing a plunge in prices.

www.reuters.com

As did Wyo.

 

[Deleted member 28227]

As did Wyo.

Over under these guy have some orphaned wells lol

 

[mtmiller]

Few orphans. Interesting road system.

 

[Khunter]

You mean all states didn't use Federal Covid CARES money to plug wells like we did in ND?

North Dakota to spend $66 million to plug abandoned wells

North Dakota plans to spend $66 million to plug wells abandoned by oil and gas companies in the U.S. state after the pandemic crushed demand for crude, causing a plunge in prices.

www.reuters.com

As did Colo. about 80 million of those fed funds to be used for plugging and abandonment. POf course we do not have all that many ophon wells as compared to most other O&G states.

And the state just competely redrafted financial assurance requirements that likely precludes any significant future orphan well issue or public liability to pay for plugging and abandonment.

 

[Khunter]

BLM is about to conduct a finanacial assurace rulemaking to overhaul how it plans for and addresses/prevents orphan wells.

 

[COEngineer]

Few orphans. Interesting road system.
View attachment 222006

"System" is being awfully generous. It implies some kind of design. I do not think a 3 year old in a sandbox could do any worse than these yahoos.

 

[mtmiller]

"System" is being awfully generous. It implies some kind of design. I do not think a 3 year old in a sandbox could do any worse than these yahoos.

It’s about efficiency.