Orphan wells

Orphan, orphaned or abandoned wells are oil or gas wells that have been abandoned by fossil fuel extraction industries. These wells may have been deactivated because of economic viability, failure to transfer ownerships (especially at bankruptcy of companies), or neglect and thus no longer have legal owners responsible for their care. Decommissioning wells effectively can be expensive, costing millions of dollars,[1] and economic incentives for businesses generally encourage abandonment. This process leaves the wells the burden of government agencies or landowners when a business entity can no longer be held responsible. As climate change mitigation reduces demand and usage of oil and gas, its expected that more wells will be abandoned as stranded assets.[2]

Orphan wells are an important contributor of greenhouse gas emissions causing climate change. Wells are an important source of methane emissions through leakage through plugs, or failure to plug properly. A 2020 estimate of US abandoned wells alone was that methane emissions released from abandoned wells produced greenhouse gas impacts equivalent of 3 weeks US oil consumption each year.[2] The scale of leaking abandoned wells are well understood in the US and Canada because of public data and regulation; however, a Reuters investigation in 2020 could not find good estimates for Russia, Saudi Arabia and China—the next biggest oil and gas producers.[2] However, they estimate there are 29 million abandoned wells internationally.[2][3]

Abandoned wells also have the potential to contaminate land, air and water around wells, potentially harming ecosystems, wildlife, livestock, and humans.[2][4] For example, many wells in the United States are situated on farmland, and if not maintained could contaminate important sources of soil and groundwater with toxic contaminants.[2]

Economic limits

A well is said to reach an "economic limit" when its most efficient production rate does not cover the operating expenses, including taxes.[5] When the economic limit is raised, the life of the well is shortened and proven oil reserves are lost. Conversely, when the economic limit is lowered, the life of the well is lengthened.[6] When the economic limit is reached, the well becomes a liability and is abandoned.

At the economic limit there often is still a significant amount of unrecoverable oil left in the reservoir. It might be tempting to defer physical abandonment for an extended period of time, hoping that the oil price will go up or that new supplemental recovery techniques will be perfected. In these cases, temporary plugs will be placed downhole and locks will be attached to the wellhead to prevent tampering. There are thousands of "abandoned" wells throughout North America, waiting to see what the market will do before permanent abandonment. Often, lease provisions and governmental regulations usually require quick abandonment; liability and tax concerns also may favor abandonment.[7]

In theory, an abandoned well can be reinstated and re-entered to production (or converted to injection service for supplemental recovery or for downhole hydrocarbons storage), but reentry often proves to be difficult mechanically and expensive. Traditionally elastomer and cement plugs have been used with varying degrees of success and reliability. Over time, they may deteriorate, particularly in corrosive environments, due to the materials from which they are manufactured. New tools have been developed that make re-entry easier, these tools offer higher expansion ratios than conventional bridge plugs and higher differential pressure ratings than inflatable packers, all while providing a V0 rated, gas-tight seal that cement cannot provide.[8]

Reclaim and reuse

Some abandoned wells are subsequently plugged and the site is reclaimed; however, the cost of such efforts can be in the millions of dollars.[9] In this process, tubing is removed from the well, and sections of wellbore are filled with concrete to isolate the flow path between gas and water zones from each other, as well as the surface. The surface around the wellhead is then excavated, and the wellhead and casing are cut off, a cap is welded in place and then buried.

Plugging

The main method of plugging wells is through elastomer and cement plugs.[8] Government-led campaigns to plug wells are expensive but often facilitated by oil and gas taxes, bonds, or other fees applied to production.[4] Environmental non-profit organizations, such as the Well Done Foundation, also carry out well-plugging projects and develop programs alongside government entities.

CO2 injection
See also: Carbon capture and storage and Enhanced_oil_recovery

Unused wells, especially from natural gas might be used for carbon capture or storage. However, if not sealed properly, or the storage site is not sufficiently sealed, there is a possibility of leakage.[10]

Geothermal generation

A 2014 study in China evaluated the use of oil wells for geothermal power generation.[11] A similar study followed in 2019 for natural gas wells.[12]

Environmental impacts

Hydraulic fracturing
Main article: Hydraulic fracturing

Hydraulic fracturing, also known as fracking, is the process of fracturing bedrock with pressurized liquids. This process creates cracks in well-formed rock formations to allow natural gas, petroleum, and brine to move more effortlessly. When hydraulic fracturing is done in nearby geographies to an orphaned well it can cause breaches of poorly sealed or unsealed abandoned wells further contaminating local ecosystems.[4] These orphaned wells can allow gas and oil to contaminate groundwater due to improper sealing.

By context

Alberta, Canada
This section is an excerpt from Orphan wells in Alberta, Canada.[edit]

Orphan wells in Alberta, Canada are inactive oil or gas well sites that have no solvent owner that can be held legally or financially accountable for the decommissioning and reclamation obligations to ensure public safety and to address environmental liabilities.[13][14][15] Companies that profit from Alberta's energy revenue are liable for the responsible and safe closure and clean-up of oil and gas well sites. The Alberta Energy Regulator (AER) requires them to retire their inactive wells following provincial guidelines as a legal asset retirement obligation (ARO).[16] This includes the proper plugging of inactive wells and remediating and reclaiming the well site.[17]

Orphaned wells, pipelines, and facilities are the responsibility of the industry-led Orphan Well Association (OWA)—an independent, non-profit organization—established in 2002.[18]: 2  There are also tens of thousands of inactive, suspended, and abandoned wells in Alberta that require plugging or reclamation and have no solvent owner, but have not yet transitioned to orphan status.

The OWA manages the potential environmental and public safety risks that these orphaned properties present. It also maintains an inventory, and oversees the decommissioning, remediation, and reclamation of these sites.[18]: 2  Orphan wells are fundamentally the responsibility of the oil and gas industry under the polluter pays principle. A levy decided by and are funded through a levy paid by the oil industry which is collected by the AER.[19] An abandoned well that is decommissioned is considered to be a "responsible abandonment" by the OWA.[20]: 6  The AER prescribes the amount of the OWA's orphan fund levy each year.[19] Prior to 2017, the energy industry paid $15 million a year into the fund. It doubled to $30 million in 2017. For the fiscal year 2021/2022 it was set at $65 million.[19]

The OWA also receives funding from the federal and provincial governments through grants and loans.[18]: 4  In 2017, the federal government provided a grant of $30 million for decommissioning and reclamation projects.[21] The provincial government used the federal funds to advance a loan of $235 million loan to the OAW to be paid back by industry over a ten year period. The $30 million covered the interest.[18]: 2  Since the beginning of the COVID-19 pandemic in Canada, OWA received over $1 billion from the federal government,[22] and another $1 million in provincial loans through the Alberta Site Rehabilitation Program (ASRP),[23] In 2023, the Premier of Alberta introduced a controversial Liability Management Incentive Program, as a follow up to the ASRP to clean up inactive and orphan wells in the province that have been inactive for over two decades.[24] The $100 million incentive to individual companies in the form of credits against the company's royalty payments would accumulate over a three year period and would apply to well sites that have been inactive for two decades or more.[25] Critics say this violates both the polluter pay principal and the royalty regime.[25] Others ask how these incentives could affect orphan wells as, by definition, they have no owners.[25]

The 100% industry-funded AER is a corporation that is the sole regulator of the province's energy development, from a project's first application, licensing and production, through to its decommissioning, closure, and reclamation. The AER, which replaced the Energy Resources Conservation Board (ERCB) in 2013—following the passing of the Responsible Energy Development Act—operates at arm's length from the provincial government.[26][27] As of July 2022, there were about 170,000 abandoned wells in the province that were the responsibility of the licensees for all abandonment and reclamation costs. This represents 37% of all the wells in Alberta.[28]

The boom and bust nature of the energy industry results in cyclical periods where energy companies become insolvent. This results in an increase in orphaned oil and gas sites. The global oil price decreased in the 2010s culminating in the "largest oil price declines in modern history" in 2014 to 2016. It led to the longest decline in oil prices since the 1980s.[29] From 2012 to 2017, the number of orphan wells increased from 100 to 3,200. In 2017, there were 450,000 wells registered in Alberta with about 155,000 "no longer producing but not yet fully remediated". In their 2017 report, C. D. Howe Institute estimated the " potential social cost of well liabilities" was as high as $8 billion.[30]: 1 

By February 2018, there were 1,800 orphan wells that had been licensed by the AER with combined liabilities of over $110 million.[16] According to the National Observer, by January 2019, there were about "80,000 inactive wells around Alberta".[16]

According to a 2018 collaborative investigation by journalists from major media outlets and universities, entitled The Price of Oil, the overall clean-up cost for "oil sands mining operations facilities"—which includes oil sands tailing ponds—is about $130 billion.[31]

Prior to the 2019 Supreme Court of Canada decision in Orphan Well Association v. Grant Thornton Ltd.—the Redwater case—bankrupt energy companies were able to avoid paying for their abandoned wells.[30]: 8  The SCC clarified that in the case of a bankruptcy, a company's first priority is to fulfil its environmental obligations—not as a debt—but as a duty to "citizens and communities."[20]

By February 1, 2023 there were 3,114 orphan sites AER designated for decommissioning in Alberta.[32] This does not include abandoned legacy wells that are under AER "long term care and custody".[32] As of 2019, there were approximately 15,000 legacy or "geriatric" wells—originally drilled before 1964 when environmental laws were not in place—"that have not been remediated."[33]

United States
This section is an excerpt from Orphaned wells in the United States.[edit]
Abandoned gas well pump

Though different jurisdictions have varying criteria for what exactly qualifies as an orphaned or abandoned oil well, generally speaking, an oil well is considered abandoned when it has been permanently taken out of production. Similarly, orphaned wells may have different legal definitions across different jurisdictions, but can be thought of as wells whose legal owner it is not possible to determine.[34]

Once a well is abandoned, it can be a source of toxic emissions and pollution contaminating groundwater and releasing methane, making orphan wells a significant contributor to national greenhouse gas emissions.[35] For this reason, several state and federal programs have been initiated to plug wells; however, many of these programs are under capacity.[35] In states like Texas and New Mexico, these programs do not have enough funding or staff to fully evaluate and implement mitigation programs.[35]

North Dakota dedicated $66 million of its CARES Act pandemic relief funds for plugging and reclaiming abandoned and orphaned wells.[36]

According to the Government Accountability Office, the 2.1 million unplugged abandoned wells in the United States could cost as much as $300 billion.[35] A joint Grist and The Texas Observer investigation in 2021 highlighted how government estimates of abandoned wells in Texas and New Mexico were likely underestimated and that market forces might have reduced prices so much creating peak oil conditions that would lead to more abandonment.[35] Advocates of programs like the Green New Deal and broader climate change mitigation policy in the United States have advocated for funding plugging programs that would address stranded assets and provide a Just Transition for skilled oil and gas workers.[37]

The REGROW Act, which is part of the Infrastructure Investment and Jobs Act, includes $4.7 billion in funds for plugging and maintaining orphaned wells.[36] The Interior Department has documented the existence of 130,000 orphaned wells nationwide. An EPA study estimated that there are as many as two to three million wells across the nation. New York State is expecting to receive $70 million from the Act in 2022 which will be used to plug orphaned wells. The state has 6,809 orphaned wells, and the NYSDEC estimates it will cost $248 million to plug them all. The NYSDEC uses a fleet of drones carrying magnetometers to find orphaned wells.[38]

References
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