Orphan Well Update – October 2024

Federal Grants: More Money More Plugging

Over the past two years, state well plugging programs around the country have plugged more wells than in previous decades, thanks largely to federal grants made possible through 2022’s Bipartisan Infrastructure Law. With more than $1 billion funds issued to plugging programs in 25 states, the overarching trend in the orphan well arena has been plugging wells at a rapid pace. However, this quick plugging trend may be on the way out, with new trends driven by technical issues, increased regulation on federal funds, and tighter targeting of grants beginning to emerge.

Since 2021, state well plugging programs have plugged over 15,000 orphan wells. So far in 2024, several states have reached their yearly goals, with many plugging more wells than ever before. For instance, Texas passed its 1,000 well goal with months to spare and Oklahoma sealed a record 376 wells as of the end of August. Other states, such as North Dakota, have allocated most or all of their initial grant funding and have starting moving from well plugging to site remediation.

New Opportunities & Greater Requirements

Through the Bipartisan Infrastructure Law, the Department of the Interior (DOI) made three types of grants available to state well plugging programs: initial grants, formula grants, and performance grants. The initial grants gave states a fair bit of latitude in how they could spend the funds to plug orphan wells. However, the formula grants that are now being issued and performance grants that states are applying for come with more rigorous requirements.

To spend formula grant funds, state plugging projects need to meet requirements set by the Endangered Species Act and National Historic Preservation Act. This means state well plugging programs need to hire or contract out biologists and archaeologists as these agencies have typically not dealt with these laws before. This is already leading to delays, such as in Michigan where the state has plugged 13 wells in 2024 but 73 in August 2023 alone.

Performance grants have similar requirements, with DOI recently announcing new draft standards for Regulatory Improvement Grants. These grants include Plugging Standards Grants meant to get states to devise standards and procedures to ensure wells are plugged effectively and Program Improvement Grants that would provide incentives to reduce future orphan well burdens.

The trend toward states having to meet more requirements to secure and allocate grant funding will likely change well plugging efforts in the next several years. At the same time, additional funding programs are giving Tribal nations the resources they need to plug wells on Tribal land. The first round of funding for Tribal nations has led to the plugging of more than 400 wells on the lands of the Osage, Navajo, Kiowa, Otoe, and Assiniboine/Sioux nations. Additionally, the first round of funds has enabled the assessment of more than 550 wells on Tribal lands.

Bipartisan Infrastructure Law funds are also being used to plug wells on federal land managed by the National Park Service (NPS), U.S. Forest Service, Bureau of Land Management (BLM), and U.S. Fish and Wildlife Service. The National Park Service’s Energy Community Revitalization Program (ECRP) is one group focusing on orphan wells on national park territory. The first round of funding to address wells on federal land has enabled the plugging of nearly 280 wells.

Making the Money Last

Indiana’s Department of Natural Resources recently reported that the cost to plug all of Indiana’s documented orphan wells would be approximately $77 million, with an average cost of $53,000 per well. In Pennsylvania and other states costs have risen as plugging activities ramp up, with the average cost to plug and orphan well now coming in at ~ $105,000. Costs to plug a well vary depending on the depth, condition, location, and other factors, with the IOGCC reporting plugging costs ranging from over $3,500 to nearly $350,000 per well, with a national average of just over $41,759 in 2023.

Another emerging trend related to orphan wells is a greater focus on finding and characterizing wells and on the sustainability of plugging programs. Grant funding has enabled significant progress, but the number of documented orphan wells is uncertain and growing in some states as more wells are discovered and previously plugged wells have started leaking. A supplemental report by the Interstate Oil & Gas Compact Commission (IOGCC) noted that the number of documented orphan wells across 29 states increased by 54 percent from 2020 to 2023 despite more orphan wells being plugged over that time period than ever before. The sum of all undocumented orphan wells across the U.S. is estimated at anywhere from 250,000 to 740,000 wells.

The large and growing number of documented orphan wells coupled with rising plugging costs make it apparent that remediating all orphan wells will require a tremendous amount of time and money. While many wells can be plugged relatively affordably with cement, a subset of wells with difficult to remediate annular flow and/or gas migration often require multiple cement treatments – resulting in significantly higher plugging costs (in some cases in excess of $1M/well). Incremental rig time, manpower, and funds are routinely wasted drilling out failed cement plugs and starting from scratch when innovative alternatives exist that can save time and money to expedite abandonment.

BioSqueeze delivers a proven solution to eliminating this unnecessary rework. Our innovative technology utilizes non-pathogenic microbes injected into compromised cement where it forms limestone to restore integrity and eliminate gas flow, allowing the well to be permanently decommissioned. BioSqueeze has sealed over 150 wells across the US and Canada and looks forward to working with more orphan well programs to increase the number of wells plugged per year by eliminating time spent drilling out failed cement.