OKLAHOMA CITY — After an interlude of about three months, the state Corporation Commission has begun plugging abandoned oil and gas wells throughout the state using federal funds issued by the Biden administration.
The launch of the administration’s program to seal hundreds of abandoned wells – part of the Infrastructure Investment and Jobs Act – was delayed while the commission awaited clarification from the Interior Department on the project details.
“About a month ago we got all the details narrowed down, and then we moved forward,” Matt Skinner, the commission’s public information manager, told Southwest Ledger on May 31.
The commission had negotiated contracts for plugging 106 abandoned wells in Fiscal Year 2023 under the IIJA, at a cost of $2.1 million, Skinner said.
Those included 11 wells in Kingfisher County and 11 in Nowata County; 10 each in Cotton, Cleveland, Garfield and Okmulgee counties; nine in Wagoner County; seven each in Tillman, Grant and Canadian counties; four in Creek County, three in Washington County, two each in McClain and Payne counties, and one each in Rogers, Pottawatomie and Garvin counties.
The IIJA program started in April and four wells were plugged by May 18 at a cost of $80,495, or an average of about $20,125 each, Skinner said.
The commission attracted 29 private contractors to seal abandoned wells in the state well-plugging program, and 17 contractors have signed on for the IIJA federal program, Skinner said. “We recently put out the word that we’re soliciting for other pluggers, because we have enough work to go around,” he said.
Oklahoma received an initial payment of $25 million last August from the U.S. Department of Interior to begin plugging and remediating abandoned wells.
However, the Corporation Commission opted to hold the funds in reserve until receiving “a clearer picture of what the expectations are,” Brandy Wreath, the agency’s director of administration, told state legislators in January.
The federal program rules were “changing constantly – weekly at times, but at least monthly.” If the federal government changed the rules after the state started plugging wells, every one of those wells would be noncompliant, Wreath said.
Also, if the Corporation Commission spent the federal funds in accordance with existing rules and those subsequently changed, the agency would have to institute “clawbacks” – repay the money – Wreath said during a joint meeting of House and Senate state budget writers. “The concern across the industry is clawback provisions,” he said.
Consequently, the Corporation Commission sent a letter to the Interior Department. “We asked them to put in writing a few things we were told is OK,” Wreath said, “because as you know, if you don’t have it in writing it didn’t happen.”
One of Oklahoma’s queries was a timetable for spending the initial $25 million. The Interior Department informed the Corporation Commission that the deadline for encumbering the $25 million is Sept. 30, Skinner said.
“There are a lot of strings attached to this program,” Wreath told the legislators.
For example, every well plugged with federal funds must be tested for methane emissions, he said. “We’ll test for methane, wait a couple of days and test again, plug the well, then go back and test again so the feds can get some metrics” on the volume of methane eliminated by plugging.
In addition, the federal program will require the commission to comply with the Davis-Bacon Act on well-plugging contracts, which is not a requirement under state well-plugging contracts. The Davis–Bacon Act is a federal law that mandates payment of local prevailing wages on public works projects for laborers and mechanics.
Three IIJA grants available
At least three grants will be available under the federal legislation, Brad Ice, field operations manager in the Oil and Gas Conservation Division, told the Corporation Commission last year.
• The first was $25 million per state. The U.S. Department of Interior awarded an initial $560 million to 24 states last August to begin plugging and remediating more than 10,000 orphaned wells. Oklahoma and 21 other states received $25 million each, while Arkansas and Mississippi got $5 million each to measure methane emissions from abandoned wells and begin plugging them.
• A formula was being developed for $2 billion that will be divided among the states, Ice said. Factors will include a state’s number of orphaned wells, he said. Dec. 30 was the deadline for submission of applications, and the OGCD applied.
• Another grant program will divide $1.5 billion among the states, Ice said. The application period is open-ended, and states that received the initial $25 million grant qualify for the supplemental funding, he said.
The U.S. Department of Interior has estimated that Oklahoma could receive $281 million, in total, Robyn Strickland, director of the OGCD, told the commission last year.
‘Let’s get moving’
“We have some legislators who want things to happen,” former Corporation Commission Chairwoman Dana Murphy told her commission colleagues during a Dec. 6 meeting.
Her assessment was confirmed during a Jan. 10 legislative appropriations meeting when state Rep. Kenton Patzkowsky (R-Balko) told Wreath, “I have constituents who are anxious about getting some work done on this well cleanup. Let’s get moving on that.”
“I get a lot of calls about wells that need to be plugged,” echoed Sen. Darcy Jech (R-Kingfisher), chairman of the Senate Appropriations Subcommittee on Natural Resources and Regulatory Services.
While awaiting clarification from the Interior Department, the Corporation Commission continued to plug abandoned wells with state funds, Wreath related. (Wells are classified as abandoned when no individual or company responsible for them can be found, Skinner said.)
When the Interior Department announced the initial federal grant last August, it said the funding would be used to plug 1,196 documented orphaned wells in Oklahoma. Ice told corporation commissioners that the effort will target 1,500 wells. “We plan to use state funds along with the federal funds” to plug abandoned wells, he said.
The commission’s fund for plugging abandoned wells is underwritten with a fee paid by current oil and gas operators in the state: .095 of 1% of the gross value of all natural gas and/or casinghead gas produced in the state that’s subject to the gross production tax.
In Fiscal Year 2023, which concludes on June 30, the Corporation Commission plugged 376 abandoned oil/gas wells at a cost of $6.7 million – an average of $17,861 each. “That was the biggest plugging number in our history, and the most state funds ever spent in one year on the well plugging program,” Skinner said.
In comparison, the Corporation Commission spent $6.15 million in five years (Fiscal Years 2017-21) to plug 462 abandoned oil/gas wells – an average of $13,320 per site – agency records show. The cost of plugging a well varies throughout the state, depending on various factors such as depth of the hole and the type of formation into which the well was sunk.
The commission’s Oil and Gas Conservation Division documented 17,895 abandoned wells in Oklahoma as of Nov. 15, 2021, Ice reported.
It would cost the Corporation Commission an estimated $250,794,865 to plug all of those wells, and the Oklahoma Energy Resources Board calculated it would cost them $250,110,000 to restore those sites to their original condition, Ice said.
OERB will perform site remediation
The OERB “will not use federal funds” for their remediation work, Ice said. “They will continue to use funds from their regular budget,” which is financed from voluntary contributions paid by producers and royalty owners. Consequently, funds that otherwise would be devoted to remediation will instead be used to plug additional wells and for methane testing, Ice said.
The average remediation cost is approximately $7,000 per site, the agency said.
Abandoned oil/gas well sites can be dangerous to the public and the environment. Those sites typically contain dilapidated equipment such as pump jacks and rusted tanks. In addition, they can leak toxic substances such as arsenic, formaldehyde and benzene, polluting the air and groundwater, The Washington Post pointed out.