Plugging Marginal Wells for Carbon Credits

The goal of ZeroSix (https://www.zerosix.co) is to incentivize operators to plug and clean up the most polluting of their marginal wells by making it possible to earn carbon credits that can then be sold in the market for carbon offsets, namely into the voluntary carbon market (VCM).

ZeroSix’s methodology (https://zerosix.co/media/lapjzsok/production-reserves-carbon-offset-protocol-v1.pdf) is rigorous, accurate, and requires follow-on reporting and monitoring. Because it requires a full suite of geological, engineering, production, and legal reports, the way it calculates metric tons of carbon dioxide from reserves left unproduced and carbon footprints avoided (by avoiding production, transportation, processing, and more), the numbers are much more complete and justifiable than other methodologies.

Further, ZeroSix takes into consideration the way that royalty and surface owners can be negatively impacted by plugging a producing well, and it requires compensating them. It also incorporates credit for site restoration, and requires periodic monitoring to make sure that the work continues.?The fact that the surface is likely to change hands in 20 years is not directly addressed, which means that there may need to be a legal requirement for inform future owners of the obligation.

Plugging marginal wells can take one into murky waters quite quickly, despite the thorough manner in which ZeroSix has developed its methodology.?ZeroSix starts with an admirable assertion, “We start with the most-polluting wells.” In point of fact, the Environmental Protection Agency (EPA) and individual states’ departments of environmental quality do so as well. There are stringent regulations in place, so that wells that are polluting would be out of compliance and subject to shut-down and fines.?By definition, such wells would not qualify for carbon credits because the system does not reward violating regulations or being a tort-feasor.

It might be more accurate to say that when selecting marginal wells to plug, the ones to select would be those that would have the largest carbon footprint over the 20 years the well is projected to be capable of staying in production. What might such wells look like??Here are potential candidates:

·?????A well making ? a barrel of water a day, and 100 barrels of produced water that has to be transported to a salt water disposal well (SWD).

·?????A well making a low volume of oil but that also makes low-volume stranded gas that is currently being flared.

·?????A well making 1 barrel of oil, 100 barrels of water, which also has hydrogen sulfide that must be scrubbed.

·?????A well making water, oil, and requires a heater-treater.

·?????A heavy oil well that requires fire-flooding.

In each case, the wells can continue to produce and when the price of oil is high, they will generate revenues that more than cover operating expenses and replacement of pumps, tanks, lines, etc. that will corrode, wear out, or simply break over time.

If the individual producing well is a single well or unit within a large field, it is important to keep in mind potential impacts on adjacent leases producing in the same zone.

In terms of the surface, planting native grasses and plants can restore land that has potentially eroded or has become unsightly. Surface owners are likely to want to keep cattle guards, fences, gates, gravel roads, and pads because they can be repurposed in many positive ways.?

When it comes to registering projects and tracking progress, ZeroSix, like many companies, uses smart contracts which reside in a blockchain to file the required initial reports and also the periodic monitoring.

The actual buying and selling of the credits after they are issued takes place with commodities exchanges that have been specially qualified to work carbon credits, and they make sure that all the credits that they accept onto their platform have been validated to be high quality. They rely on the Integrity Council for the Voluntary Carbon Market (ICVCM) which issued an assessment framework on July 27, 2023, and clarified its Core Carbon Principles (CCP). Further, the work adheres to the standards set by the International Carbon Reduction and Offset Alliance (ICROA).

To provide another level of trust and confidence that ZeroSix’s carbon credits are of the highest possible quality, the carbon credit ratings and risk assessment organization, BeZero (https://bezerocarbon.com/) has partnered to independently rank and assess the credits. Another carbon credit rating and analytics company, Sylvera, has years of experience in forestry and agricultural carbon credits ratings, and they are moving into oil and gas credits as well.?

The scrupulous attention to detail and the requirement to provide a verifiable and auditable array of geological, engineering, production, and legal documents is of utmost importance when marketing to companies who need to purchase offsets in their journey to net-zero.?