Cleanup of orphaned oil wells could cost California $500 million, new report says
California is staring at a massive bill to clean up the deserted oil and gas wells left behind by businesses that have gone defunct as the industry has diminished, according to a report released Thursday by a state research agency.
The California Council on Science and Technology estimated that the state already is liable for more than $500 million in cleanup costs for more than 5,500 orphaned wells up and down the state.
The potential liability far outpaces the funds the state has on hand to combat the issue. The companies holding wells identified as orphaned in the 67-page report made just $26 million available to the state for their cleanup.
The state’s responsibility could quickly grow, the report says: Another 69,000 wells have little to no production and little hope of restarting, or are held by financially weak businesses.
Judson Boomhower, an energy expert and assistant professor of economics at UC San Diego who was lead author of the report, said in a statement that the state has recently taken steps to require a greater financial commitment from oil and gas companies to avoid being saddled with the responsibility of cleanup in the future.
“However, our initial analysis implies that the potential cost to the state still substantially exceeds the value of these assurances,” Boomhower said.
The report says orphaned wells are concentrated in Los Angeles and Long Beach, where costs associated with cleanup are “systematically high.” Two orphaned wells that started emitting odors in Echo Park in 2016 cost the state more than $1 million to seal.
Mothballed wells off California’s coast, such as Platform Holly, have attracted the attention of state regulators for their potential to spill into the ocean and the large costs associated with their decommissioning. But, the report points out, issues with sealing wells are not limited to offshore wells, which represent just 2% of the state total.
“The vast majority of orphan wells in the state are located onshore,” the report states. “These wells represent potentially large liabilities for the state.”
The California Council on Science and Technology describes itself as a nonpartisan, nonprofit organization that has operated since 1988, after it was created by the state Legislature. The report was prepared after being requested by the Division of Oil, Gas and Geothermal Resources under the California Department of Conservation.
The report highlights the need for stronger state oversight, one environmental group said Friday.
“This study shows it’ll ultimately cost billions to plug these dangerous wells, yet the companies profiting from the oil have set aside a tiny fraction of that money for cleanup,” said Hollin Kretzmann, an attorney at the Center for Biological Diversity. “If state officials don’t impose stronger rules, California taxpayers will end up paying big bucks to fix this toxic problem.”
There was no immediate comment from the California Independent Petroleum Assn. In the past, the CIPA has opposed more stringent state drilling regulations, arguing they will result in California becoming more dependent on imported oil.
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