Markey: Oil Companies' Bucks Insufficient for "Orphaned" Wells

WASHINGTON (February 25, 2011) – A report released today on “orphaned” and “idle” oil and gas wells raises serious questions as to whether the proper policies exist to protect the environment and American taxpayers from oil companies simply abandoning oil wells without proper cleanup. In response to the report from the Government Accountability Office (GAO), Rep. Edward J. Markey (D-Mass.), the top Democrat on the Natural Resources Committee, sent an oversight letter to the Bureau of Land Management (BLM), the agency tasked with overseeing the wells.

“As President Obama and the Congress work to reduce our national deficit, we must ensure that taxpayers are not left responsible for the costs of remediating oil and gas wells on public lands,” said Rep. Markey. “Oil companies should have the bucks to help these ‘orphan’ wells, but the policies in place give them virtually no incentive to act responsibly, raising concerns as to whether these companies will live up to their end of the bargain to drill on public land.”

According to the GAO, while the BLM believed that there were approximately 2,300 oil and gas wells on public lands that had been inactive for 7 years or more, referred to as “idle wells,” the GAO analysis found about 4,600 idle wells – nearly twice as many as reported by the BLM. GAO reports that, according to BLM officials, “idle wells have the potential to create environmental, safety, and public health hazards if they fall into disrepair.” The GAO’s findings mean that the potential liability to the federal government from oil and gas operations on public land may be considerably larger than anticipated by the BLM.

One major flaw that exists in current BLM policy is that the bond amounts oil companies must hold on a well have not been updated in 50 years. The lower bond amount may not be sufficient to encourage companies to comply with the statutory requirements. The GAO’s findings mean that the potential liability to the federal government from oil and gas operations on public land may be considerably larger than anticipated by the BLM.

In fact, according to the GAO, BLM has paid $3.8 million over the last 20 years to reclaim 295 wells for which there is no responsible company, referred to as “orphaned wells.” BLM has identified 144 orphaned wells that have not yet been reclaimed.

“Oil and gas companies must put down a security deposit on these wells, the same way people do when they rent an apartment or rent a car,” said Rep. Markey. “Since the bond amounts haven’t been increased in 50 years, this is like oil companies renting an apartment in 2011 and paying the same security deposit as did Ralph and Alice Kramden.”

Rep. Markey’s letter to the head of BLM, Robert Abbey, asks for several answers regarding these wells and the policies governing their oversight, cleanup and safety.