Plugging Orphan Wells and Carbon Credits: How Does It Work?

Recently established methologies for calculating carbon credits for plugging orphan and abandoned wells by both the American Carbon Registry and CarbonPath will help clear up ambiguity about the steps to generate carbon credits by plugging an orphan well leaking methane.?

Step 1:?Identify wells currently emitting methane into the atmosphere.?

If they are idle or wells that have been temporarily abandoned, the operator can make the decision to plug them.?The operator may also make the decision to plug wells that have not yet been abandoned, but that are uneconomic.

Orphan wells, which have no identifiable owner, but have reverted back to the state or the Federal government (as in the case of National Park lands) or tribal governments, can be plugged by qualified companies who win contracts to plug the wells.?In many cases, the wells contained in the contracts out for bid are ones that have the worst problems and present a clear and present danger to local communities. The State or Federal government will pay the winning companies to plug the wells, often from funds that are a part of the $4.7 billion Bipartisan Infrastructure Act of 2021. In addition, orphan well plugging can be funded by the individual states’ funds, or through private sources.

Step 2:?Measure the emissions before plugging takes place.?

There are several ways to determine the amount of methane leaking into the atmosphere. The first and most popular approach is to use an optical gas imaging (OGI), which uses a thermal infrared camera to detect and measure the gases. One widely used camera manufacturer is FLIR, and their G-series is specially designed and developed for detecting and measuring a wide array of volatile organic chemicals (including methane) and other gases. The location of the leak can be detected using drones or even internal leak detection, but the measurement used to develop a baseline for calculating how much methane will be saved from emission over a period of time is generally a stationary monitoring device.?Earthview IO and VentMeter are two companies that specialize in developing onsite monitoring equipment.

Step 3:?Calculate, validate, and certify the greenhouse gas emissions and removal.?

This is a critical step and one that is often filled with ambiguity. The critical point here is to choose an independent company that will take the measurements and follow a legitimate and agreed-upon methodology. Then, the calculations can be made and validated.?It is important to keep in mind that the calculations are based on the calculations made by the sensors, so it is important that they are reliable. The carbon credits are certificates and each one represents the reduction, avoidance or removal of one ton of carbon.

CarbonPath: Their methodology follows the ICROA (International Carbon Reduction & Offset Alliance) standards for carbon offsets, which means that carbon credits are only issued upon project completion when plug and abandonment certifications are received from the applicable governmental regulatory bodies. The plugging is permanent (unless prices approach $1,000 per bbl). The methodology requires the emissions to have been measured and quantified using a validated technology. Third-party reserves estimators and also chemical laboratories must also be included. https://carbon-path-production.s3.us-east-2.amazonaws.com/CarbonPath+Lite+Paper+v0.pdf

American Carbon Registry: ??In addition to adhering to ICROA standards, the ACR publishes a detailed set of criteria used for designing a compliant plan for monitoring and measuring emissions. In June 2023, Rebellion Energy Solutions’s Heartland methane abatement and land restoration project became the first of its kind to be listed by the ACR.??https://americancarbonregistry.org/carbon-accounting/standards-methodologies/plugging-orphaned-oil-and-gas-wells

Project Canary:?Aggregates emissions information from all sources (continuous monitoring on site, flyovers, satellite measurements, and internal sensors)

It is important to keep in mind that all methods will require pre-plugging measurements and then post-plugging monitoring and measurement in order to maintain validation. For example, Rebellion’s Heartland abatement and land restoration project has been validated using the ACR framework and has been listed as abating 74,000 metric tones of carbon dioxide emissions (https://www.rigzone.com/news/rebellion_energy_claims_acr_milestone_with_orphan_well_plugging_project-21-jun-2023-173137-article/ ).

Step 4:?Convert the validated emissions savings into Non-Fungible Tokens (NFTs).

These NFTs are built on the blockchain and can be bought and sold. These NFTs are built on the blockchain and can be bought and sold.?CarbonPath uses the cryptocurrency, Celo because it is considered carbon-neutral. Toucan (https://www.toucan.earth ) ?is another widely used platform for tokenizing carbon credits, and then for buying and selling them. ?

It is also possible to take the validations / certificates from CarbonPath or ACR and to create one’s own NFTs using, for example, Appy Pie (https://www.appypie.com). Appy Pie NFT Maker provides templates for NFT-building and then allows them to sell the NFTs on different NFT marketplaces such as OpenSea (https://www.opensea.io ). ?

Step 5:?Market your validated carbon credits.?

Make your carbon credits stand out. Tell the story of the environmental improvement that occurs when orphan wells are properly plugged, and how both safety and health are improved, often in communities that are underserved due to socio-economic factors.

It has been estimated that 36% of Fortune 500 companies buy carbon credits, often from companies with carbon sinks such as tree farms. Let them know their choices have expanded as companies decarbonize oil and gas operations by plugging orphan, idle, and abandoned wells. You may investigate to see if your company complies with S&P Carbon Global Standard. If so, that is another positive attribute of your company, and by extension, your company’s carbon credits.

Document the wells with photos, statistics, and a story.

Each well that is plugged has its own compelling story, and each touches communities and landowners in different ways.

For example, Rebellion Energy in Tulsa, Oklahoma, focuses on Washington County, Oklahoma, the home of the Cherokee, Osage, and Delaware Tribes as well other rural community members who have lived for more than 100 years in the presence of shallow, often leaking wells. In contrast, the Well Done Foundation plugs wells in several different states in the U.S., including challenging ones in urban settings.??Based in Oklahoma City, Red Dirt Energy focuses on plugging orphan wells on Federal and Tribal lands in several states.

Final Thoughts and Questions

While there are many thousands of both documented and undocumented orphan wells, not all of them present a serious danger to human health or the environment. However, there are some that are in very bad shape, and so it is important to identify, assess, measure and prioritize the targets.

The demand for carbon credits and for orphan well plugging services is influenced by the availability of government contracts and tax credits. There is a risk that when the price of oil and gas are low, but government incentives high, that wells may be plugged too soon in their lives, rather than investing in them to re-enter them and improving the production.?Plugging a low-volume under-performing well too soon hurts the small mineral owner and the small companies.

That said, to clean up orphan wells and also to generate new options for those wishing to purchase carbon credits represents an new opportunity.

?