Many news articles have addressed the fact that low oil demand has led to above ground storage tanks becoming full, both in the US and abroad. While this is an issue in and of itself, it isn’t the full story. There are other repercussions of the oil glut, including the fact that more than 60 oil producers have declared bankruptcy since 2014. This in turn leads to the problem of abandoned wells, with the number of orphan wells across Texas, Wyoming, Louisiana, and Oklahoma running into the tens of thousands. Tools, steel storage tanks, and miscellaneous pieces of equipment are often left behind alongside the well. This is bad news for a number of reasons.
Abandoned wells, equipment, and steel storage tanks are undoubtedly a rusty eyesore that no one wants blighting the landscape. However, the bigger issue is the environmental hazards these create. In the past, orphan wells have been linked to multiple cases of groundwater contamination in Texas. Additionally, pictures have surfaced of foliage and insects around the well sites that are stained with crude oil. Some of the above ground storage tanks that are left behind are covered in rust and in danger of leaking. All of this is bad news for the environment so you may well ask why the state regulators are not plugging these wells.
Plugging a well is a surprising costly process, estimated to be approximately $17,000 per well. When you understand that Texas alone has over 10,000 abandoned wells and the industry regulator has a budget of around $80 million, you can see that the numbers don’t stack up. Removal of the above ground storage tanks should arguably be easier and less costly, however authorities will prioritize the biggest hazards and steel storage tanks may not fall into this category. States are dealing with the financial shortfall in a variety of ways; Texas is asking the taxpayer to stump up for the cleaning operation while Wyoming and Louisiana are passing costs onto the drillers via fees. Of course there is no easy answer in states where much of their prosperity is dependent on an oil industry that is currently in a slump.
A Vicious Cycle
It’s difficult to see an easy solution to the problem. Drillers have warned that passing on costs to them would likely put more of them out of business, which in turn creates more abandoned wells and equipment. However, the fees currently being collected are not enough to deal with the issue. This is not a new issue, and it likely won’t be the last time we have such a bust in an industry where the price of a barrel can have such wide-reaching implications.
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