Plugging the 2.6 million documented onshore oil and gas wells in the U.S. will cost $280 billion. Without intervention, state governments are at high risk of taking on this orphaned well liability.
Carbon Tracker finds that it will cost $280 billion to plug the 2.6 million documented onshore wells in the U.S. alone. This estimate excludes costs to plug an additional estimated 1.2 million undocumented onshore wells. By not requiring oil and gas operators to save enough money to plug these wells once operations are closed, state governments are increasingly liable for these costs.
On average, states have secured less than 1% of these estimated costs in surety bonds from operators and insurers, giving operators every incentive to spend on drilling more wells or pay investors first while pushing closure costs down the road.
The recent slew of oil bankruptcies, spurred by the coronavirus pandemic, demonstrate the snowballing risk to state governments. The report breaks down costs by state, and outlines steps that states can take now to protect their citizens and taxpayers and shift financial responsibility for plugging wells to the oil and gas industry.
This is the second in a series of reports from Carbon Tracker about unplugged wells. You can read the first, It's Closing Time, here.
Carbon Tracker is an independent financial think tank that carries out in-depth analysis on the impact of the energy transition on capital markets and the potential investment in high-cost, carbon-intensive fossil fuels. Carbon Tracker is funded by many philanthropies, a list of which can be found here.