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Profits from the Oil Industry are Not Allocated for Cleanup Efforts

Credits: Ej Atlas

In the 165 years since the first American oil well struck black gold, the industry has punched millions of holes in the earth, seeking profits gushing from the ground. Now, those wells are running dry, and a generational bill is coming due.

Until wells are properly plugged, many leak oil and brine onto farmland and into waterways and emit toxic and explosive gases, rendering redevelopment impossible.

A noxious lake inundates West Texas ranchland, oil bubbles into a downtown Los Angeles apartment building, and gas seeps into the yards of suburban Ohio homes. But the impact is felt everywhere, as many belch methane, the second-largest contributor to climate change, into the atmosphere.

Oil Industry Cleanup (Credits: Ej Atlas)

There are more than 2 million unplugged oil and gas wells that will need to be cleaned up, and the current production boom and windfall profits for industry giants have obscured the bill’s imminent arrival. More than 90% of the country’s unplugged wells either produce little oil and gas or are already dormant.

By law, companies are responsible for plugging and cleaning up wells. Oil drillers set aside funds called bonds, similar to the security deposit on a rental property, that are refunded once they decommission their wells or, if they walk away without doing that work, are taken by the government to cover the cost.

However, an analysis by ProPublica and Capital & Main has found that the money set aside for this cleanup work in the 15 states accounting for nearly all the nation’s oil and gas production covers less than 2% of the projected cost.

That shortfall puts taxpayers at risk of picking up the rest of the massive tab to avoid the environmental, economic, and public health consequences of aging oil fields.

The estimated cost to plug and remediate those wells if cleanup is left to the government is $151.3 billion, according to the state’s data. But the actual price tag will almost certainly be higher, perhaps tens of billions of dollars more, because some states don’t fully account for the cost of cleaning up pollution.

In addition, regulators have yet to locate many wells whose owners have already walked away without plugging them, known as orphan wells, which states predict will number at least in the hundreds of thousands.

“The data presents an urgent call to action for state regulators and the Department of the Interior to swiftly and effectively update bond amounts,” said Shannon Anderson, who tracks the oil industry’s cleanup as organizing director of the Powder River Basin Resource Council, a nonprofit that advocates for Wyoming communities.

Anderson and nine other experts, including petroleum engineers and financial analysts, reviewed ProPublica and Capital & Main’s findings, which were built using records from 30 state and federal agencies.

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