What Are Orphan Wells?
WHAT IS AN ORPHAN WELL?
Although sometimes used interchangeably, “abandoned” and “orphan” wells are fundamentally different.
“Abandoned” wells usually refer to wells that are no longer productive or economically viable, and have been properly “plugged” by an operator.
“Orphan” wells are wells that have not gone through the plugging process, or have no identifiable owner. According to the Texas Railroad Commission (RRC), the regulatory body that oversees Texas oil and natural gas development, an orphan well is an inactive and unplugged well that has not produced oil or natural gas for a minimum of 12 months.
It is estimated that most orphan wells across the country originate from the early days of American oil and natural gas development. Older wells – especially those drilled before the 1950s – are more likely to have been improperly abandoned and poorly documented. However, thanks to innovation and regulation, orphan wells are an incredibly rare occurrence today.
PLUGGING A WELL
Considered an essential step in managing the lifecycle of a well, responsible operators plug a well by removing the well’s piping and replacing it with a cement mixture at key intervals. Plugging a well prevents the oil and natural gas reservoir fluids from migrating up the well, protecting both groundwater and the surrounding area. The well pad may also be reclaimed and reseeded to blend with the nearby ecology.
Texas regulation requires well operators to strategically place cement plugs throughout the wellbore at each productive horizon and usable quality water strata to prevent fluid or gas migration into the air and groundwater. The process requires each well meet the state’s requirements and any additional requirements identified in a notice of intent to plug.
RULES AND REGULATIONS
As with other operations related to oil and natural gas development, the Railroad Commission of Texas (RRC) regulates orphan wells in the Lone Star State, including enforcement and clean up. Texas state law requires all oil and natural gas well operators to pay – in the form of a bond, letter of credit or cash deposit – to plug orphan wells.
The RRC received a $25 million initial grant to plug abandoned oil and gas wells from the U.S. Department of the Interior in 2022. So far, the agency, which has the critical mission of protecting public safety and environment, has already plugged 128 orphaned wells with the federal funding and plans to plug about 800 abandoned wells by the end of the fiscal year.
In addition, wells plugged through RRC’s State Managed Plugging program (utilizing oil and gas industry revenue) is at 678 as of May 2023.
Texas first established a payment system for abandoned wells in 2005. This authorized the RRC to “reimburse surface estate owners up to 50% of the documented cost or the average Commission cost” to plug the well. In 2011, Texas created the Oil and Gas Regulation and Cleanup (OGRC) Fund, replacing previous well-plugging funds, in order to streamline the source of funds to continue to plug wells in a timely manner.
RESPONSIBILITY AND REMEDIATION
In Texas, oil and natural gas operators are financially responsible for plugging both abandoned and orphan wells. By setting aside money before operators begin to drill, the state is able to cover most of the costs of plugging wells in the unlikely event they become orphaned.
Companies are also able to reclaim, or restart operations from, orphan wells. The responsibility of closing and plugging the well is then shifted to the operator who took over the well.
Oil and natural gas operators in Texas are increasingly more involved in the plugging of wells, both directly or indirectly via the OGRC Fund.
|“Approximately 92% of the wells plugged in Texas on an annual basis are done so by the operator of record with no use of the Texas Railroad Commission’s Oil and Gas Regulation and Cleanup Fund.” - Texas Independent Producers and Royalty Owners Associations (TIPRO)
JOB CREATION OPPORTUNITIES
A Columbia University report estimates that over 120,000 jobs could be created via a federal program to plug as many as 500,000 orphaned wells in the United States.