Carbon Tracker Fantasy: “Cleanup of abandoned oil and gas wells could cost Texans $117 billion”

Guest “this is horst schist” by David Middleton

BUSINESS // ENERGY
Cleanup of abandoned oil and gas wells could cost Texans $117 billion

Paul Takahashi Oct. 1, 2020

Plugging and cleaning up the open oil and gas wells in Texas could cost companies and taxpayers as much as $117 billion, according to a new report.

Carbon Tracker, a nonprofit financial think tank that studies the effects of climate change on financial markets, estimates there are some 3.8 million unplugged oil and gas wells nationally, including more than 783,000 across Texas. As the coronavirus pandemic forces more oil and gas companies into bankruptcy, Carbon Tracker fears more of these unplugged wells could be abandoned, leaving taxpayers on the hook for plugging and cleaning up so-called “orphan wells.”

“Texas by far has the highest number of wells of any state in the U.S. and orphan wells are going way up,” said Greg Rogers, a special advisor and co-author of the Carbon Tracker report. “We’re seeing a lot of operators go bankrupt and they can’t afford to fulfill their legal obligations to plug in abandoned wells.”

[…]

There are more than 6,200 abandoned oil and gas wells in Texas, according to the Texas Railroad Commission, which oversees oil and gas companies operating in the state.

[…]

The number of orphan wells could rise even higher as society shifts from fossil fuels to more sustainable energy sources. If the world has hit or is approaching peak oil demand, oil and gas companies could be less motivated to plug in wells, Rogers said.

“If you see the industry as fundamentally healthy with a bright outlook through the end of this century, then this is not really a problem,” Rogers said. “On the other hand, if peak oil demand occurred in 2019, then we have a big problem.”

Houston Chronicle

One would think that the “journalists” with the Houston Chronicle would have some knowledge of the oil & gas industry… Particularly since he mentioned the Texas Railroad Commission’s estimate of 6,200 orphaned wells. Otherwise there appears to have been no effort to verify crap fed to them by “Carbon Tracker”…

Our mission

We recognise that there is a limited global ‘carbon budget’ of cumulative emissions that must be respected to avoid overshooting 2˚C and destabilising the global climate. Our view is that capital markets are failing to align the capital allocation process, exposing the owners of fossil fuel companies – their shareholders – to potential lost value, as has already been witnessed in the EU utilities and US coal mining sectors. We further believe that companies have not sufficiently factored in the possibility that future demand could be significantly reduced by technological advances and changing policy.

Our role is to help markets understand and quantify these implied risks.

Carbon Tracker

European (misspellings of recognize and destabilizing) enviro-zealots on a mission from Gaia to destroy fossil fuel companies aren’t exactly reliable sources for information about the oil & gas industry. At the very least, Mr. Takahashi (2010 MA interactive storytelling) should have checked with oil industry sources or the Texas Railroad Commission, the responsible regulatory agency in Texas.

Carbon Tracker claims that Texas taxpayers are potentially on the hook for $117 billion for the plugging and abandonment (P&A) of 783,000 wells.

Total P&A LiabilityNumber of WellsP&A/Well
Carbon Tracker $  117,000,000,000                   783,000 $  149,425

$149,425 per well?

What is the basis for this claim? An average P&A cost of nearly $150,000/well sounds even more ridiculously high than the 783,000 potentially orphaned wells. The Houston Chronicle article links to a Carbon Tracker “report”, which links to another Carbon Tracker “report”, neither of which provide any useful information unless you log in to download the full reports. I already get enough SPAM email, so I didn’t register with Carbon Tracker… yet.

However, being a petroleum geologist, I kind of know where to look for useful information without subjecting myself to a barrage of SPAM.

Abandoned Wells
What happens to oil and gas wells when they are no longer productive?

Petroleum and the Environment, Part 7/24
Written by E. Allison and B. Mandler for AGI, 2018

Introduction

In 2017, there were one million active oil and gas wells in the United States.1 When a well reaches the end of its productive life, or if it fails to find economic quantities of oil or gas, the well operator is required by regulators to remove all equipment and plug the well to prevent leaks.2 Usually, cement is pumped into the well to fill at least the top and bottom portions of the well and any parts where oil, gas, or water may leak into or out of the well. This generally prevents contamination of groundwater and leaks at the surface. State or federal regulators define specific plugging procedures depending on the local conditions and risks, and may monitor the plugging operation.

However, there are many cases in which wells are not properly plugged before being abandoned, especially if the well operator goes bankrupt, leaving its wells “orphaned”.3 This is more common when oil prices fall rapidly, making many wells uneconomical, as in the 1980s oil glut, the 2008 financial crisis, and the 2014 downturn.

In the late 1980s, the U.S. Environmental Protection Agency estimated that 200,000 of 1.2 million abandoned wells may not have been properly plugged.4 Since then, tens of thousands of orphaned wells have been plugged by state and federal regulators, as well as some voluntary industry programs. These efforts are ongoing, and many orphaned wells have yet to be properly plugged. The exact number is not known: some 3.7 million wells have been drilled in the U.S. since 1859,6 and their history is not always well documented. Older wells, especially those drilled before the 1950s, are particularly likely to have been improperly abandoned and poorly documented.

[…]

Abandoned Well Plugging Campaigns

For several decades, states have increased enforcement of plugging and cleanup requirements. States generally require a performance bond or other financial assurance from the operator that a well will be plugged and the well site restored. However, bond amounts may not meet the plugging and cleanup expenses if an operator goes bankrupt.11 Most states therefore collect fees or a production surcharge from operators specifically for remediation of orphaned wells and associated surface equipment.12 For example, Pennsylvania adds an orphaned well surcharge to drilling permit application fees,14 while Texas adds a 5/8-cent Oil Field Cleanup surcharge to the state’s 4.6% oil production tax.15 The Oklahoma Energy Resources Board remediates abandoned well sites using voluntary industry contributions amounting to 0.1% of oil and gas sales.16

[…]

American Geosciences Institute

Orphaned wells are a problem. It is mostly associated with very old, poorly documented wells. Wells can also be orphaned when the operators go bankrupt. States currently require some level of bonding and levy taxes and surcharges specifically to fund P&A work on orphaned wells. States also carry out ongoing P&A programs for orphaned wells. AGI sites specific numbers for state and federal P&A programs. Let’s compare Carbon Tracker’s fantasy to the real world.

 Total P&A Liability  Wells  P&A/Well 
Carbon Tracker $      117,000,000,000   783,000 $     149,425
TX 1984-2008 $              163,000,000     35,000 $         4,657
TX 2017 $                11,600,000           918 $       12,636
OK since 1994 $              100,000,000     15,000 $         6,667
CA since 1977 $                27,000,000        1,350 $       20,000
BLM 1988-2009 $                   3,800,000           295 $       12,881
Real World $              305,400,000     52,563 $         5,810

A presentation at the 13th Annual Ryder Scott Reserves Conference cited Texas Railroad Commission numbers for 2013-2017:

 Wells   Cost (millions)  P&A/Well 
2013            778 $                 20.9 $       26,900
2014            563 $                 15.0 $       26,600
2015            692 $                 10.7 $       15,500
2016            544 $                   8.5 $       15,700
Jan-June 2017            223 $                   2.4 $       10,800
Real World        2,800 $                 57.5 $       20,536

$5,800 to $20,500 per well is just a bit less than $150k/well. But, P&A costs for individual wells can vary widely. A 2015 Wyoming Public Radio report on orphaned wells in Wyoming featured the following graphs:

The Rising Cost Of Cleaning Up After Oil And Gas

The vast majority of the wells cost less than $10,000 each to P&A. A few wells did get into Carbon Tracker territory, mostly deeper wells. But there’s clearly no robust relationship between depth and P&A cost.

The Rising Cost Of Cleaning Up After Oil And Gas

Any bets on what the R2 is? There should be at least some statistical relationship between depth and cost, but the sample size is way too small for meaningful statistics. Only five wells exceeded $100k, the most expensive being a shallow (~3,000′) well.

What happens to orphaned wells? At least four things can happen, only one of which involves taxpayer money.

Things that can happen to Orphaned Wells
• Plugged or brought back to production by
current operator
• Brought back to production by a new operator
• Surface owner can plug well
• Railroad Commission plugs well

Ryder Scott

Where do states get the money to P&A orphaned wells?

Texas

Sources of Money used by RRC to fund
orphan well plugging

• Recovered from responsible party
• Recovered from salvaged equipment
• Recovered from performance bonds, letters of
credit, and cash deposits
• Taxes and fees paid by industry and public

13th Annual Ryder Scott Reserves Conference

Wyoming

Between 1997 and 2014, it cost the State of Wyoming $11 million in total to plug orphaned wells, and only $3 million was covered by bonds. The other $8 million came from the conservation tax fund—a state tax levied on oil and gas production that funds the regulatory agency that oversees the industry and pays for things like well plugging.

The Rising Cost Of Cleaning Up After Oil And Gas

State governments recover the money from:

  • The responsible party.
  • Sale of salvaged equipment.
  • Performance bonds.
  • Taxes paid mostly by the oil & gas industry,

In the case of the federal government, they can actually go after the previous owners of a well if the current operator goes bankrupt and can’t cover the P&A costs.

In 2013, Apache sold its Gulf of Mexico Shelf operations and properties
(Transferred Assets) to Fieldwood Energy LLC (Fieldwood). Under the terms of the purchase agreement (Agreement), Apache received cash consideration of $3.75billion and Fieldwood assumed $1.5 billion of discounted asset abandonment liabilities. In respect of such abandonment liabilities, Fieldwood posted letters of credit in favor of Apache (Letters of Credit) and established a trust account (Trust A), which is funded by a 10 percent net profits interest depending on future oil prices and of which Apache is the beneficiary. On February 14, 2018, Fieldwood filed for protection under Chapter 11 of the U.S. Bankruptcy Code. In connection with the 2018 bankruptcy, Fieldwood confirmed a
sferred plan under which Apache agreed, inter alia, to accept bonds in exchange for certain of the Letters of Credit. Currently, Apache holds two bonds (Bonds) and the remaining Letters of Credit to secure Fieldwood’s asset retirement obligations (AROs) on the Transferred Assets as and when such abandonment and decommissioning obligations are required to be performed over the remaining life of the Transferred Assets.

Given the current commodity price environment, decreased demand for oil and gas, and recent media reports, Fieldwood may be experiencing financial distress. If Fieldwood is in financial distress, then Apache does not know if, or to what extent, Fieldwood will be able to continue to perform its AROs with respect to the Transferred Assets. If Fieldwood fails to perform any of its AROs with respect to the Transferred Assets, then Apache’s remedy would be a claim for damages against Fieldwood for breach of its contractual obligations under the Agreement.

If Fieldwood fails to perform any of its AROs on the Transferred Assets, then Apache would expect the relevant governmental authorities to require Apache to perform, and hold Apache financially responsible for, such AROs to the extent not performed by Fieldwood. Pending resolution of any claim by Apache for breach of the Agreement, Apache may be forced to use available cash to cover the costs it incurs for performing such AROs. While Apache anticipates that all, or a portion, of such costs would be reimbursable to Apache under the remaining Letters of Credit, the Bonds and Trust A, it is possible that such decommissioning security may not be sufficient to cover all of the costs and expenses incurred by Apache in performing such AROs.

Market Screener

States generally don’t have laws that allow them to go after previous owners of wells. Costs that can’t be recovered from the responsible parties are covered by tax revenue and other fees collected from oil & gas producers.

From 2007-2019, Texas oil & gas well operators paid the state over $149 billion in taxes and royalties on oil & gas production.

New Record: Texas Oil and Gas Industry Paid $16.3 Billion in Taxes and State Royalties in 2019, Most in Texas History

“Last year alone, the Texas oil and natural gas industry paid the equivalent of $38 million a day to fund our schools, roads, universities and first responders,” said Todd Staples, president of TXOGA. “More tax and royalty revenue from the oil and natural gas industry means our lawmakers have more to work with to meet the needs of our growing state.”

In fiscal year 2018, Texas school districts received $1.24 billion in property taxes from mineral properties producing oil and natural gas, pipelines, and gas utilities.  Counties received $366.5 million in oil and natural gas mineral property taxes.

“In addition to taxes and royalties, Texas oil and natural gas companies are investing billions in advanced technologies that are protecting and improving our environment – proof that we can grow our economy, protect the environment and enhance our energy security at the same time,” Staples said. U.S. CO2 emissions are near 20-year lows and methane emissions from oil and natural gas systems are down 14 percent since 1990 – all while production has skyrocketed.

State royalties paid by the oil and natural gas industry in fiscal year 2018 increased 18 percent to a total of $2 billion, money that is used to capitalize the Permanent School Fund (PSF), which benefits the public schools of Texas, and the Permanent University Fund (PUF), which benefits public higher education in Texas. Oil and natural gas royalties constitute the only substantive new money deposited annually to the PSF and PUF, according to Staples.

“What’s remarkable to me is that the Texas Permanent School Fund, seldom recognized outside of Texas, leads the pack among ALL educational endowments in the country,” he said. “With a balance of $44 billion at the end of fiscal year 2018, the PSF is the largest educational endowment in the nation – bigger than Harvard University’s endowment worth $39.2 billion.”

Texas Oil and Natural Gas Industry Paid More than $14 Billion in Taxes and Royalties in 2018, Up 27% from 2017

What’s even more remarkable than the fossil fueled Texas Permanent School Fund being the largest educational endowment in the country? Over-educated idiots at the University of Texas in the Peoples Republic of Travis County are actually demanding that the UT System divest from fossil fuels. I schist you not.

In 2019, Texas oil & gas producers paid over $16 billion in taxes and royalties. This is how the state spent 25% of the revenue:

FY2019 Billions 
Taxes & Royalties Paid $    16.28
Spent%
School Districts $       1.549%
Counties $       0.402%
Permanent University Fund $       1.026%
Permanent School Fund $       1.117%
TX RRC P&A $       0.030.21%
TX RRC Pollution Clean Up $       0.000.01%

In FY2019, the Texas Railroad Commission spent about $35 million on P&A work for orphaned wells and about $2 million on oil & gas related pollution abatement. This amounts to less than 0.3% of the taxes and royalty revenue the state generated from oil & gas production.

 Total   Wells  P&A/Well 
FY2019 $  34,942,911         1,710 $       20,434

The average P&A cost over recent years has been around $20,000 per well. Taxes and fees already paid by oil & gas producers comfortably cover these costs.

Now that we have thoroughly destroyed Carbon Tracker’s assertion of an average P&A cost of nearly $150k per well, let’s move on to the actual number of wells for which taxpayers might be on the hook.

783,000 orphaned wells in Texas?

Carbon Tracker claims that there could be as many as 783,000 orphaned or potentially orphaned wells in Texas.

Carbon Tracker, a nonprofit financial think tank that studies the effects of climate change on financial markets, estimates there are some 3.8 million unplugged oil and gas wells nationally, including more than 783,000 across Texas.

We’ll have to assume that Carbon Tracker’s 783,000 figure is based on the belief that every well in Texas will become a ward of the state. Even then, we can’t get to 783,000.

Wells
Shut-in and/or Inactive         146,428
Producing         294,271
TX RRC Total         440,699
Carbon Tracker         783,000
Texas Railroad Commission

Maybe they’re simply tabulating the total number of wells that have ever been drilled in Texas. From 1960-2018, a total of 696,406 wells were drilled in Texas. 431,257 of those wells have been properly P&A’ed.

At this time, the Texas Railroad Commission can only identify 6,208 orphaned wells that are not in compliance with the Commission’s Plugging Rule out of a total of 146,428 shut-in and/or inactive wells in the state.

Wells Monitored by the Railroad Commission
August 2020

Let’s break the inactive wells down.

Only 13% (19,267) inactive wells are currently not compliant with plugging rules.

Inactive Wells% of Inactive
Compliant with Bond/LOC           78,31653%
Compliant Shut-in <1 yr           48,84533%
Non-Compliant           19,26713%
Total         146,428100%

Operators of almost half of the non-compliant wells are in the process of bringing them into compliance (active P-5).

Non-Compliant% of Inactive
Active P-5              8,8666%
Delq P-5           10,4017%
Total           19,26713%

About 40% of the non-compliant wells have been out of compliance for less than 12 moths and not considered orphans.

Delq P-5% of Inactive
<12 Months              4,1933%
>12 Months (Orphans)              6,2084%

About 75% of the currently orphaned wells have been prioritized for P&A.

Orphaned Wells% of Inactive
Prioritization Complete              4,5133%
Prioritization In Progress              1,6951%
              6,208

Of the 4,513 prioritized orphaned wells, only 1,818 are considered “high priority.” The rest are considered “low risk” (not urgent).

Prioritization Complete% of Inactive
High Priority 1                      30.002%
High Priority 2H              1,0450.7%
High Priority 2                  7700.5%
High Priority Subtotal              1,8181.2%
Low Risk Priority 3              1,3410.9%
Low Risk Priority 4              1,3540.9%
Low Risk Subtotal              2,6951.8%
Total              4,5133.1%

Just over 1% of the inactive wells are orphaned and considered a high priority for plugging.

Conclusion

Unless Joe Biden wins the election and is actually serious about the bat schist crazy things he promised to do, before promising not to do, Texas taxpayers aren’t potentially on the hook for $116 billion to cover the cost of plugging and abandoning 783,000 wells. The only way that Carbon Tracker’s fantasy could come to fruition is if the world suddenly stopped consuming oil & gas, in which case we’d all be dead in a few months… Of if the US government did something really fracking moronic, like banning frac’ing. If the federal government forced the oil & gas industry out of business, the taxpayers would be on the hook for hundreds of billions of dollars in P&A liabilities… And rightfully so because they elected the idiots who would have forced the industry out of business. They would also be potentially liable for trillions of dollars in damages awarded in lawsuits filed by oil & gas companies for violations of the “takings clause” of the US Constitution.

The vast majority of oil & gas wells in Texas are properly P&A’ed at the end of their productive lives. A tiny fraction of the taxes and fees paid by oil & gas producers covers the costs of P&A work that can’t be paid by the operators of the wells.

67 thoughts on “Carbon Tracker Fantasy: “Cleanup of abandoned oil and gas wells could cost Texans $117 billion”

  1. I knew when I saw that article that “David is going to have fun with this one” LOL.

    Thanks.

    PS. I know little about it but isn’t plugging just pumping concrete down past the water line a ways? How that could cost the amount in their estimate is the question. Were they planning on filling it with something other than concrete?

    • ” I know little about it but isn’t plugging just pumping concrete down past the water line a ways? ”

      No. Casing is often recovered for technical reasons. Multiple plugs and plug tests are required. Plug mud between the intervals. And “orphan” wells are a tiny fraction of the problem. Most future P&A’s will be for wells that are currently producing or are shut in. And many of those wells are high angle multilaterals that will be exponentially harder to plug. High angles, well construction ending in small hole sizes, leaky, hard to find entry points, not to mention tractor requirements, all make these wells plugging nightmares. The quoted per well costs are undoubtedly low for these, if done properly. And many of those will NEVER achieve proper hydraulic competence.

      David also fails to mention that the quoted per well P&A costs are, by definition for the easiest to plug wells. As I’ve said before, since we make twice what the regulators make, we successfully bully the regulators into delaying problem P&A’s.

      The blather about royalties and “fees” is irrelevant. Asset retirements were obligations freely entered into by the producers, and royalties were NOT for that.

      As for the well count, go ahead and go with the ~440K value, and prorate down. Then, make the producers either put back or properly bond for that cost. I’ll guarantee you that whatever outfit David works for has weasel words in their quarterly report stating that if they had to actually prep to fund their obligations, they would be effectively out of business.

      As I’ve said before, no matter how much David and his ilk wish to deny and prevaricate, they actually want to communize a 12-13 figure, freely entered into, obligation onto the rest of us, just for on and offshore CONUS…

      David once again confuses the actual operational expertise he lacks, with exploration dream merchandizing. I’ve plugged dozens of wells in multiple campaigns, over 4 decades. Exactly that many more than David has….

        • “David also fails to mention that the quoted per well P&A costs are, by definition for the easiest to plug wells. As I’ve said before, since we make twice what the regulators make, we successfully bully the regulators into delaying problem P&A’s.”

          Since those quoted costs vary all over, how do you know they only refer to the easiest to plug Wells? So you bully the regulators how? Do you bribe them? If not then your salary means little. In fact it may piss them off if you hold it over them.

          • The thing about Bob’s horst schist are the phrase by phrase inconsistencies in his arm waving rants.

            “David also fails to mention that the quoted per well P&A costs are, by definition for the easiest to plug wells.

            The numbers I quoted were for wells P&A’ed by regulatory agencies… Which Gas Bag Bob says “are, by definition for the easiest to plug wells.”

            According to Bob the per well P&A costs are low because we only stick the regulators with the easiest wells to plug… Then he follows that up with…

            As I’ve said before, since we make twice what the regulators make, we successfully bully the regulators into delaying problem P&A’s.”

            The wells P&A’ed by the regulators are generally the ones that were delayed by the operator until after the operator went out of business, or very old wells that were drilled 50-100 years ago, poorly documented or undocumented, and recently stumbled upon.

            According to Bob, the wells P&A’ed by the regulators are simultaneously the “easiest wells to plug” and the “problem P&A’s.”

            I work the Gulf of Mexico, so I don’t deal with the Railroad Commission. We deal with the Bureau of Safety and Environmental Enforcement (BSEE). If there’s any bullying going on, it’s our compliance people bullying us to comply with the regulations.

          • “Since those quoted costs vary all over, how do you know they only refer to the easiest to plug Wells?”

            Because the wells now shut in, in currently “operating” fields” are, by definition, deeper, with more tortuous well paths, more deviated, than those antique “orphans”. They are also often still partially equipped (unlike most of the “orphans”), and before plugging can even be attempted, corroded, scaled up, collapsed tubulars and other downhole equipment must be dragged out. piece by rotten piece.

            ” So you bully the regulators how? Do you bribe them? If not then your salary means little. In fact it may piss them off if you hold it over them.”

            The bribery was above my pay grade. That’s left to the lobbyists and the dark $ we gave to the pol’s. In the field, we just BS’d the regulators about “new uses” being evaluated for these wells, requests to “monitor” them, instead of following the rules, etc.

            FYI, in my last post I linked to a TRRC cost table. I mistakenly said that it was for operator data. It is, in fact, for wells plugged BY THE COMMISSION. So, even it is low for the reasons I detailed earlier in this post.

          • Many of those antique orphans from early rotary days had unintentionally corkscrewed well bores, poor cement jobs to begin with, and what is now considered poor casing designs. You are assuming that every single multistage lateral is going to have these problems on abandonment? At the rate that they pull tubing to replace down hole submersible pumps suggests that is nonsense.

          • This is just fracking mental…

            The sharp pandemic-driven drop in US demand for gasoline, diesel and jet due to lack of human mobility, combined with the shift towards renewable fuels and carbon neutral fuels and the incentives that come with them, have refiners shifting their focus towards supplying that market by retooling their existing refineries.

            About 75% of the pandemic-driven drop in demand for gasoline and diesel has already recovered, and many of us are still working from home.

            There is no “shift towards renewable fuels and carbon neutral fuels.” The 10:1 ratio of gasoline to ethanol has been steady right through the pandemic.


            This is truly retarded…

            CVR is planning to convert the hydrocracker at its 74,500 b/d Wynnewood, Oklahoma, refinery to process soybean oil into renewable diesel to be railed to the California market.

            This plan is economically viable because of economic incentives from the $1/gal federal Blenders Tax Credit and California’s Low Carbon Fuel Standard (LCFS) credits as well mitigation of RINs expenses denied by tighter EPA regulations.

            Phillips 66 has already said it plans to create the world’s largest renewables fuel facility by reconfiguring and repurposing its 120,200 b/d Rodeo, California, plant from running crude to running used cooking oil, fats, greases, and soybean oil by 2024.

            The refiner’s announcement preceded that of California Governor Gavin Newsom, which stated that all cars sold in the state after 2035 be emissions-free, another nail in the coffin to gasoline producers in a state that currently accounts for about 11% of national demand.

            A state that is broke, already has the highest gasoline prices in the nation and can’t generate electricity will tack another $1/gal on fuel prices.

            Platts’ recently-launched US West Coast SAF assessment provides some clarity for the economic incentive for this inclusion. Since the Sept. 21 price assessment launch, California refiners like Valero, Phillips 66 and PBF Energy making SAF have realized on average $3.76/gal including environmental credits compared with the 9 cents/gal without any credits.

            This is almost as retarded as the Navy paying $42/gal for jet biofuel during the Obama maladministration,

      • Aren’t many abandonments nowadays done with CT units so they can get down to very small casing sizes. They can also easily cope with well deviations as the small bore tube bends to a tighter radius than casings. Abandonment are usually only done down to the top feed zone or where sidetracks and the like start, so multilaterals aren’t an issue

        • “Aren’t many abandonments nowadays done with CT units so they can get down to very small casing sizes. They can also easily cope with well deviations as the small bore tube bends to a tighter radius than casings. ”

          Yes, but (1) You are limited on how much you can push coiled tubing in high deviations, and (2) you have to be able to find the entry points into multilaterals. These are wells designed for lowest cost/barrel produced, not for plugging later. The low bid well construction methods make this very, very, difficult.

          “Abandonment are usually only done down to the top feed zone or where sidetracks and the like start, so multilaterals aren’t an issue.”

          No, modern multilaterals have literally dozens of different intervals exposed by perforation, within each lateral. Many (not all) need to be hydraulically isolated from each other for proper P&A. Bottom line, you MUST be in these laterals for lots of P&A operations. Yes, usually with coil, and often with tractored coil. Cubic $, and lots of failures.

          BTW, David conveniently left out the TRRC aggregation of actual P&A costs, from actual operators. The well depths, by TRRC district, are harder to find, but it’s obvious that, for even the easier to plug wells assayed so far, Davis’s “orphaned well” costs are a small fraction of what will be required in the future.

          Privatize the benefits, communize the costs. David talks while the industry drinks water….

          https://www.rrc.state.tx.us/oil-gas/compliance-enforcement/hb2259hb3134-inactive-well-requirements/cost-calculation/

          • Did you even look at that link? That’s the per foot cost for wells plugged by the regulators. That’s not the per foot costs from the operators.

            The cost, calculated by the Commission or its delegate, for each foot of well depth plugged based on average actual plugging costs for wells plugged by the Commission for the preceding state fiscal year for the Commission Oil and Gas Division district in which the inactive well is located.

            The FY2020 column is based on what the TX RRC spent in FY2019, broken down by district.

            In FY2019, the TX RRC spent $35 million to plug 1,710 wells at an average cost of $8.26/ft.

            FY2019  Wells   $/well 
             $                34,942,911                   1,710  $       20,434
             FY2019   Aggregate Depth   $/ft 
             $                34,942,911           4,228,799  $            8.26

            https://www.rrc.state.tx.us/media/54162/aug-19-smp-report.pdf

      • Bigoilbob, I am personally offended by the term “…David and his ilk…”. Some of us live near the pointy end of the spear and life (professional success) is complicated there. I can only speak for myself, but here it goes: I have never thrown cyanide in the river. I am equally certain that David has never abandoned a contaminating oil/gas well and escaped in the darkness. Get a grip on yourself.

        • ” I have never thrown cyanide in the river. I am equally certain that David has never abandoned a contaminating oil/gas well and escaped in the darkness. ”

          I agree. David is a (probably talented) exploration geoscientist. That’s about as far away from oilfield operations as you can get. I.e., he doesn’t know **** about the well operations he posts about.

          • It takes somebody who has filled in a ditch to look up the actual, published costs of filling in ditches to have any credibility when posting such actual numbers. Riiight.

        • Over time Oilybob has changed the tone of his posts and has now gone full-on-anti. (I can’t bring myself to quote the Robert Downey character).

          He’s just oily.

          On another post he says we won’t have to change our standard of living to go all in on non-carbon energy & then goes on to use china (and other countries) as the example for how a good transportation standard should be applied; if he used the same logic for this post he would need to tell us how much it cost to abandon a well in China….

  2. Check out the cost of Shell shutting down their wells in the Bolsa Chica wetlands near Huntington Beach California. Billions wouldn’t surprise me. The environmental wackos will fight them every step of the way making only lawyers rich and adding DECADES to the process.

  3. Good production of actual data, David, instead of greenie hysteria. A geological engineer friend of mine worked with a small oil company that specialized in buying rights to a cluster of older wells with production declines. They did a work-over and utilized tertiary recovery to easily pay for the acquisition cost, and included accumulated abandonment costs in the deal. This Carbon Tracker nonsense is typical cheap shots at extractive natural resource companies. I know for mining exploration/development/production projects there is reclamation bonding every step of the way. Fracking Greenies!

    • Ron,
      Don’t know if you got my reply from David’s earlier post, but “Boy On A Dolphin” is a nineteen year old Sophia Loren in several soaking wet shirt scenes! It doesn’t get any better than that!

      • I was sure that was what it would be, Abolition Man, not due to a careful analysis of facts but by channeling your tendencies, something us exploration geologists get very good at. Now I will search for Boy on a Dolphin, you know, because of scientific curiosity. Thanks. Ron

        • Ron,
          I recommend a careful study of the topography and geological features displayed in the film! They are truly impressive!
          Just another stunning example of the beauty of God’s greatest creations!

  4. Compare the way oil and gas wells are handled at end of life to that of windmills and solar farms.

    • I’m wondering when wind and solar industries will have an abandonment fee imposed on them. Just kidding, I know it will be put on the public just like the subsidization of their production in the first place.

      • “I’m wondering when wind and solar industries will have an abandonment fee imposed on them.”

        I hope they do. a P90 fee, based on a P50 value of what we think the current equipment can produce. Of course then we would have to have such a fee for oil and gas proved reserves. base on both well plugs and lease clean ups. If you use any kind of reality based costs, the fossil fuelers would be “Hold your horses! Nobody explained it to me THAT way”.

        Bigger pic, solar and wind fields are fundamentally different than oil and gas fields. They are, by definition, NONDEPLETING SOURCES, sited in the best spots, and would therefore be ripe for continuous, sustainable modernization. Oil and gas fields, not…..

        • I hope they do. a P90 fee, based on a P50 value of what we think the current equipment can produce. Of course then we would have to have such a fee for oil and gas proved reserves. base on both well plugs and lease clean ups. If you use any kind of reality based costs, the fossil fuelers would be “Hold your horses! Nobody explained it to me THAT way”.

          Why would anyone with a functioning brain base an ARO fee, bond, letter of credit, escrow deposit, etc. on the estimated production from the asset, rather than the estimated ARO? Oil companies, whether they have to post bonds or escrow the ARO or not, have to list the ARO as a long term liability, like long term debt… Because both are liabilities. The PV10’s of the producing assets aren’t liabilities; they are assets.

          Bigger pic, solar and wind fields are fundamentally different than oil and gas fields. They are, by definition, NONDEPLETING SOURCES, sited in the best spots, and would therefore be ripe for continuous, sustainable modernization. Oil and gas fields, not…..

          They are fundamentally different.

          The Block Island Wind Farm generates much less energy than an average single Marcellus gas well.

          In it’s first year of operation the Block Island Wind Farm managed a 39% capacity factor.

            MWh 100% Output Capacity Factor
          Dec-16                6,313                 21,799 29%
          Jan-17                8,898                 21,799 41%
          Feb-17                7,801                 19,690 40%
          Mar-17             10,514                 21,799 48%
          Apr-17                6,904                 21,096 33%
          May-17                9,162                 21,799 42%
          Jun-17                9,932                 21,096 47%
          Jul-17                6,724                 21,799 31%
          Aug-17                5,712                 21,799 26%
          Sep-17                5,698                 21,096 27%
          Oct-17             10,195                 21,799 47%
          Nov-17             10,985                 21,096 52%
          1-yr Total             98,838               256,668 39%

          That’s an average daily rate of 271 MWh/d… That’s 924 million British Thermal Units per day (mmBtu/d).

          In light of the journalistic malpractice of assuming that wind and fossil fuels are both interchangeable and mutually incompatible:

          1. A typical Marcellus natural gas well produces 5,000 mmBtu/d.
          2. A typical deepwater oil well in the Gulf of Mexico produces 5,000 bbl/d, nearly 30,000 mmBtu/d.
          3. The Block Island Wind Farm produces 924 mmBtu/d.

          Whats that?  It’s unfair to directly compare wellhead natural gas production to electricity output from a power plant… OK…

          Natural Gas Btu/kWh                     7,870
          Well Production Btu/d    5,000,000,000
          Electricity Ouput kWh/d                635,324
          Electricity Ouput MWh/d                        635
          Electricity Output Block Islands worth                         2.3

          A single typical Marcellus gas well yields 2.3 Block Islands worth of electricity-equivalent energy per day.

  5. Could you explain what happens to the environment if an oil well is permanently abandoned and not plugged?

    That was not obvious to me. You certainly provided enough numbers here — I am adding all of them up and should have a total in a few days.

    • P&A refers to plugged and abandoned… permanently abandoned. The hydrocarbon bearing zones have been isolated and cement has been pumped down to the shallowest hydrocarbon zone.

      T&A refers to temporarily abandoned. I’m fairly certain the double entendre was intentional. These wells have been temporarily plugged because they have future utility for uphole recompletion or as a sidetrack wellbore. New field discovery wells are often T&A’ed because production/pipeline facilities need to be installed.

  6. David,
    Apparently the new phrase should be; lies, damn lies and climate alarmists statistics!

      • Thanks, LdB!
        It scans much better that way! You maybe could have thrown some ‘horst schist’ in there; but there’s probably enough of that already!

  7. Game, set and match to you David. As usual a well researched and comprehensive article. Well done

  8. I did a lot of P&A work in my career. The usual cost was $5 to 10k per well. But if there were downhole problems encountered during the P&A work then the cost of the work really depended on the individual with government oversight. He/she could make or break you. If he/she was knowledgeable and understood what the issues were we could work out a proper solution that got the well plugged properly and saved some money. If the person with oversight responsibility was new to the position, it cost money because they were more interested in covering their butts because they lacked industry knowledge and were uncomfortable in altering the approved procedure.

    It also depended on who the operating company had approved for cement work in their list of approved vendors. Smaller operating companies had mom and pop cementers etc. approved and the larger operators made us use only Halliburton or Schlumberger. And the cost of doing business with those two was much higher.

  9. And this, Mr. Middleton, is the current situation in the ongoing information wars.
    A few weeks back, on another site, I spent several hours deconstructing an outrageous article from DeSmog blog.
    Naturally, the hydrocarbon haters were trumpeting the headlines (poor infrastructure buildout in the Bakken), and presenting a ludicrously false scenario just like these Carbon Tracker pukes have done.

    Formula …
    Present sketchy scenarios based upon inaccurate, exaggerated circumstances.
    Stoke Fear/Uncertainty/Doubt (FUD).
    Publish article.
    A few weeks later, publish another similar article with links to first article.
    Repeat over and over with each ‘story’ increasingly referring back to, and supposedly gaining legitimacy from, an unending series of lies.

    Pretty clever approach, I s’ppose, if one is broadcasting to a receptive, ignorant audience.

    • Joe B,
      Similar approach to what was used in the Russian Collusion Hoax or the ChiCom-19 Virus Hyper-ventilation; both targeting the low-info voter!
      Get a friendly “urinalist” to place your agitprop in their bird-cage liner or fish wrap; then refer back to it as evidence of further crimes or the need for more hand-waving and panic! The Dunning-Kruger Effect and Macrae-Kent Corollary explain it completely!
      For those unfamiliar with the M-K Corollary it states: “Intelligent people have no idea how stupid really stupid people actually are!” This is the rock that David, Jim Steele and other posters here at WUWT are dealing with far more maturely than I am able to! They don’t seem to mind giving the ignorant children a well deserved spanking when needed. I have a real problem in that I have a tendency to look for a bigger hammer and go medieval on the idiots! A sad shortcoming on my part. h/t Allan MacRae.

    • Exactly the same way that junk science propagates itself. A hockey stick one day turns into consensus junk-science the next.

  10. Perhaps someone could ask Carbon Tracker for their estimates of :
    – the number of windmills that will require decommissioning over the next twenty years,
    – their estimate of the costs to that point,
    – then the rolling year on year cost given that wind turbines have an expected lifespan of no more than twenty years (and less if they are offshore)

    Perhaps the act of asking the question might prompt some thought that the US needs an organisation similar to the Railroad Commission, for windmills and solar panel farms.

  11. European? Like you dot have enough eco-fascists on your side too? 🙂

    I am European, I am with you on the climate change crock, so dont use it as a pejorative!

  12. Careful with the “European (misspellings of recognize and destabilizing)”….we had English before you did.

    Otherwise – totally concur. Worked several long hitches in Kazakhstan where the local Govt. were tracking old sunken USSR wellheads. We estimated that there were hundreds of thousands, just in that former USSR country.

  13. Good post David
    and some good stuff in the thread lads,
    But no mention of all those ‘natural’ seeps both AGL and BSL? Who’s gonna hold Mother Nature’s feet to the fire and plug them? eh? (as they say in Canada) eh?
    Cheers
    Mike

    • “But no mention of all those ‘natural’ seeps both AGL and BSL? Who’s gonna hold Mother Nature’s feet to the fire and plug them? eh? (as they say in Canada) eh?”

      Yah, since almost everybody who has ever lived has died, why do we have all of these burdensome regulations on murder? eh?

    • The oil isn’t even the issue with onshore wells, it will simply biodegrade rather quickly in most climates. The focus of proper plugging of wells is to isolate salt water from usable water first and foremost.

    • That article has nothing to do with P&A work on orphaned wells. It’s about casing failures during frac’ing operations.

      • “That article has nothing to do with P&A work or orphaned wells. It’s about casing failures during frac’ing operations, a well completion procedure.”

        This is yet another tell on why you don’t know **** about operations. “Casing failures” are a Trumpian YUGE hitter for P&A operations. If you can’t get in, you can’t properly isolate.

        Folks, this is why the explorers have their own wings in oil and gas HQ buildings. To protect them from operational realities….

  14. What is wrong with just leaving all the old wells as they are?
    What possible bad events can follow?
    What is the best estimates of these bad event costs?
    Is the cost of plugging more than the benefit of leaving them as they are?
    What is the history of harm (if any) from abandoned, unplugged or poorly-plugged wells?

    My career was in minerals, not oil (apart from a brief look) and of course we did most things better than the oilies did. They used to cuss a lot in phony California accents and drink bourbon rather than a select light white wine of quality.
    I guess we drilled a few thousand drill holes. I have no knowledge of any single one of these causing any harm whatsoever in following years. Geoff S

    • Improperly P&A’ed wells can be hazardous. Oil, gas and/or brine can cause groundwater and surface pollution. This is why the TX RRC prioritizes orphaned wells for P&A. Most improperly P&A’ed wells don’t pose s serious threat, but some do.

    • “What is wrong with just leaving all the old wells as they are?”

      Breath taking.

      A trip to any of the many FSU hydrocarbon producing countries Superfund sites/old fields would disabuse you. Oh forgot, just go to the Marcellus gas fields. They both have populations which self medicate to help them live in their cesspools. Whichever is more convenient….

      • So Bigoilbob,,
        It is like the olden days before mankind got interested in hydrocarhons.
        Oil and gas and brine seeped naturally to the surface, creating dangers that demanded the invention of regulators like the EPA?
        Oh, the horrors!
        How did society ever survive without costly regulators? Geoff S

    • You miners drink white wine by choice? I thought it was for cooking, and only for drinking in emergencies. The biggest hazard these wells present, if they haven’t already contaminated usable water with brine due to corrosion of surface pipe, is with future drilling/completion operations near them and unknowingly increasing the formation pressure of salt water bearing zones which then push the water up unplugged boreholes into usable water.

  15. The Texas Railroad Commission started about 1890 from complaints about unfair practices in shutting down railroads. An employee about a decade ago told me that their biggest problem was dealing with the paperwork/bureaucracy of the EPA. I have a graduate degree from UT, at least two of us are getting numerous calls and letters soliciting money. Next time I will take the call and complain. They have been unnecessarily keeping their libraries, among other facilities, closed. The University of Texas Bulletin no. 3401 (1912) from their Bureau of Economic Geology was volume II of the Geology of Texas on Structural and Economic Geology. They used to do real geology, haven’t checked lately

  16. “depreciating” s/b “depleting”. Surprised no one Cliffie Clavin’d me on that….

    But bigoilbob still regrets the error….

  17. Having worked for the NPS in Texas and dealing with P&A of orphaned wells, I can tell you that TRRC are good to work with. We were able to get a bit of money from the Deep Water Horizon funds and set up an MOU with them to plug and abandon wells at the national seashore. Costs ran high but when you consider mobe and demobe down 10 to 20 miles of soft beach and the salt corroded equipment we got off cheap at 1.3 million for 11 wells that were in poor condition. That didn’t cover removing all the rusty surface equipment, tanks, water separators etc. Another cost to be aware of is reclamation of pads, roads and pipelines. There is a heck of a lot of caliche used to create pads on top of wetlands and sand. It should be restored to a functioning part of the environment which means hauling all that caliche up the beach and out of the park. Coastal South Texas doesn’t have much in the way of road be material so some of the cost might be offset by selling the material but it would probably be sold at a loss.

    • “I can tell you that TRRC are good to work with. ”

      Agree. More professional than the old CDOGGR, pre Gavin Newsom shake up, that’s for sure. But they remained quite malleable, at least into this decade. The field folks are still private sector wannabees (i.e. “High hopes, low SAT’s”).

  18. It seems like most of the articles that Dave posts and then helpfully deconstructs are written from the perspective of the author’s wishes and dreams of how the world works not how it actually works.
    Seems to be the prevailing reasoning with all alarmist studies/articles.
    So much hype in opposition to the real world it really does seem like a mental disability.

    Regardless of the question of CO2 and temperature, isn’t it more than just a little mentally retarded to wish for a return to the LIA, a cold world where survival was difficult?
    Why would anyone think that is optimal?

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