Us taxpayers could be left footing a bill of tens or even hundreds of billions of dollars to clean up oil and gas wells across the country as a growing number of producers collapse into bankruptcy, according to a new report.
A tiny proportion of the costs of plugging americas active wells are currently covered by insurance mechanisms, the report from the carbon tracker think-tank estimates. that means when companies go bust, the bill for doing so will often be left to the state authorities.
If companies are in dire straits plugging these wells is probably one of the very last things on the list of management ideas for how to use cash, said robert schuwerk, one of the authors of the report. if they happen to go bankrupt, and nobody wants to pick up the well out of the bankruptcy, then the states going to end up picking up the tab.
The findings come as a growing number of us oil and gas producers are being forced to seek protection from their creditors in the wake of this years price crash prompting concern over what becomes of their liabilities. oasis petroleum on wednesday became the latest big name to succumb.
A total of 36 oil and gas producers filed for bankruptcy in north america in the first eight months of the year, according to houston law firm haynes & boone. they had combined debt loads of around $51bn more than half of which was unsecured.
In order to drill a well, companies usually need a bond, which ensures that they either cover the clean-up costs at the end of its life, or forfeit a certain sum. however, the amount paid in many states is significantly less than the ultimate cost of plugging the well.
According to carbon tracker, current bonds would cover just 1 per cent of the $280bn costs of plugging the uss 2.6m active documented wells.
While only some companies will renege on their obligations to plug these wells, the bill to taxpayers could nonetheless be substantial as the shift away from fossil fuels means an increasing number of wells will need to be retired in the coming years.
Why hasnt this been a problem before? the answer really is because we didnt have an energy transition where we were moving away en masse from oil and gas. and were in that situation right now, said mr schuwerk.
As the transition increases the rate at which wells are removed from service, joe biden, the democratic contender for the us presidency, has suggested the work involved in cleaning them up could create hundreds of thousands of jobs.
Launching his energy platform in july, mr biden said the country could add more than a quarter million jobs right away to do things like plug the millions of abandoned oil and gas wells that exist all across this country, posing a daily threat to the health and safety of our communities.