The Bigger Picture: Orphan & Marginal Wells

Producing Marginal Profit, Requiring Material Plugging

Colorado has over 47,000 active wells. Based on production levels, pricing data, and operating costs, one study estimates that nearly 27,000 of these wells are not generating enough revenue to fund future plugging and site remediation. These marginal assets are owned and operated by a range of companies, from mom-and-pop operations to multinational corporations.

Colorado oil and gas production is geographically divided, with scattered older marginal wells and concentrated modern horizontal wells in separate basins.

Regulations and Financial Assurance

The Colorado Energy and Carbon Management Commission (ECMC), formerly known as the Colorado Oil and Gas Conservation Commission (COGCC),is charged with regulating the state’s oil and gas industry among other things. ECMC has programs for surety contributions (Colorado Orphaned Wells Mitigation Fee Enterprise Fund) and orphan well plugging (Colorado Orphaned Well Program).

In 2022, ECMC adopted financial assurance regulations?requiring Colorado operators to submit plans and provide financial reserves for decommissioning wells. The goal of the increased financial requirements was to ensure Colorado taxpayers would not become responsible for funding well plugging and remediation. In May 2024, Colorado's governor signed legislation to collect per-barrel fees on oil and gas production along with changes in permitting, enforcement, and pollution laws. Many other states are also tightening regulations.

Competing Priorities

In the early days of oil and gas production, well plugging regulations focused on protecting oil and gas resources, with little concern about impact to the environment. Regulations have since evolved to lessen the impact of production on the environment, but with increased requirements comes significant cost increases for decommissioning.

With these changes, operators are recalculating cost/benefit analysis and adjusting operations to comply with new requirements, as many wells are not owned by the original driller.

The challenge for Colorado – and all other US energy-producing states – is to balance marginal well production with the cost of decommissioning to minimize environmental impact without tipping the scale too far and exacerbating the problem (~half of Colorado’s wells are not profitable enough to cover the cost of plugging).

Federal orphan well funding can augment some of this pain in states like Colorado that don’t have as large of a backlog of orphan, but for states like Pennsylvania and Ohio, each home to over 20K documented orphan wells with more being discovered, the solution to this problem continues to prove elusive.

Shifting Requirements

As companies seek to comply with ever-evolving environmental and financial requirements, decommissioning and remediation costs take center stage. While many wells can be abandoned for a relatively low price, integrity issues like vent flow and gas migration can quickly add 3-10x to the total cost.

The US is home to some of the cleanest energy production in the world. Finding a solution to ensure wells are properly decommissioned at the end of their useful life without jeopardizing production is paramount to ensuring continued access to clean, affordable, and reliable energy.

BioSqueeze leverages industry leading expertise and innovative technology to provide well integrity solutions to overcome a variety of challenges, saving our partners time and money while expediting plugging campaigns.