‘Orphaned’ oil, gas wells and threat to the climate
By Stacy Gittleman
Starting as early as 1859, long-gone prospectors drilled wells for oil and gas in Michigan, looking to cash in to fuel the American Industrial Revolution. When wells dried up and their drillers went bust, wells were left, uncapped, their decaying pipes plunging deep and left behind in forests, fields, or farms which as time moved on became developed as towns, cities and suburbia. Some operators left the pipes wide open while others plugged them with rudimentary methods with materials like scrap lumber or leftover construction material.
These are called orphaned wells. If not properly remediated, they can leak greenhouse gasses into the atmosphere for years to come. It is becoming increasingly understood that orphaned wells are a contributor to global warming.
In 2019, the Interstate Oil and Gas Compact Commission estimated that there are 56,000 documented – and as many as 2.1 million undocumented – orphaned wells in the United States. In 2018, the Environmental Protection Agency (EPA) reported that many of these abandoned oil and gas wells emitted 280 kilotons of methane per year, but because of poor documentation of these wells, the rate may actually be three times as high. Methane’s warming impact is over 30 times that of carbon dioxide over 100 years.
Responsibility for orphaned wells falls to the cash-strapped state governments to resolve and orphaned well numbers are accelerating as the COVID-19 pandemic cools demand for oil and gas. But as the incoming Biden administration gets to work in 2021, there is hope that Congress will pass the Moving Forward Act, which will help plug the nation’s orphaned oil wells at a faster rate by putting oil workers back on the job while at the same time bolstering the U.S. with greener, renewable energy.
Until a decade ago, there was little quantification of methane emissions from oil and gas wells. In addition to orphaned wells contributing to global warming, leaked underground methane migration can cause the potential for underground explosions, according to Pew Research Center. Examples of methane hazards include explosions at a Colorado construction site in 2007 and a Pennsylvania home in 2011. That’s when Dr. Mary Kang, assistant professor in the Department of Civil Engineering at McGill University, began studying the topic, becoming the foremost expert on the topic in North America, according to environmentalists. She studied methane emissions in the U.S.’s orphaned wells at ground zero – Pennsylvania – home to 15 percent of the nation’s orphaned wells. The state may have as many as half a million of them. Even when they are plugged, some must still be vented to let the methane escape into the atmosphere rather than potentially causing an explosion in a nearby coal mine.
“Generally, plugged wells emit less methane than unplugged wells,” said Kang. “However, there is a special category of plugged wells in Pennsylvania’s coal regions that are vented and emit as much as the highest emitting unplugged wells. Even so, many plugged wells do emit methane to the atmosphere, but often at lower rates than unplugged ones.”
When Kang began her research, she said methane from wells were not accounted for in the EPA’s greenhouse gas inventory.
“It is good that emissions from these wells are now included in the EPA’s quantifying of greenhouse gasses. I think this is a great start,” she said.
According to the U.S. Energy Information Administration, crude oil was first produced in Michigan in the 1920s. Production peaked in 1979, and the state ranks 18th nationally as a producer in oil and 14th in gas. To date, approximately 60,000 oil and gas-related wells have been drilled within the state of Michigan.
DrillingEdge reported that oil and gas production in Oakland County and neighboring environs has been dropping steadily and today is nearly at zero after a few spikes in 1995 and 2008. The database listed an inventory of 417 total wells countywide. Though the majority listed currently have a “plugging approved,” “permit terminated,” or “unknown” status, there are at least a dozen producing wells, as of July 2020, in southeastern Michigan in places like Island Lake Recreation Area in Brighton, Dearborn, Lyon Township, Northville, Novi, White Lake Township and Wixom.
As the pandemic wears on and oil and gas producers are at the edge of going belly up due to plunging demand, public policymakers, academics and retired oil executives believe there is an opportunity to put unemployed oil drillers back to work by plugging the wells and restoring the land around them with the right combination of private, state and federal funding.
Adam Peltz, a lawyer with the Environmental Defense Fund, said he hopes the new Congress will pay more attention and put more funding into a federal program to enable the states to accelerate remediation efforts. “The problem of methane leaking out of orphaned wells has been with us for about 170 years,” he said. “Operators drill and make money from the wells. And by the time it comes around to plugging and remediating the wells, the money's gone.”
The Michigan Department of Environment, Great Lakes and Energy (EGLE) defines an orphaned well as an abandoned or improperly closed well for which no owner or operator is known, or for which all owners or operators have gone out of business.
Under a different classification, temporarily abandoned wells are owned by an existing permit holder which has decided that economic conditions make it unfeasible to continue to operate the well. By staying in constant communication with EGLE, these operators may idle the well without approval for 12 months or with approval for from one to five years, provided that the permit holder can prove the well will not risk the environment or public health or cause waste. No more than 10 percent of the permittee’s wells may be temporarily abandoned. In 2019, Michigan counted 1,288 approved idled or “temporarily abandoned” wells.
In 1994, EGLE’s oil, gas, and minerals division established the orphan well fund as regulated by parts 615 and 616 of the 1994 Natural Resources and Environmental Protection Act. Revenue for the program comes from two percent of a severance tax collected from the oil and gas industry. With allocations from the state capped at about $1 million per year, EGLE has plugged almost 400 wells in 27 years.
If this appears to be a slow rate of progress, it is. Plugging a well requires highly skilled workers and it's slow, oftentimes dangerous and methodical work. It is also expensive. The average in-state cost to plug a well is at $100,000 – way higher than the national Interstate Oil and Gas Compact Commission average of $15,000. The money does not go far, so the backlog grows.
According to Mark Snow, EGLE’s permits and technical services manager, many of Michigan’s oil and gas wells are dry – meaning that they were drilled but are unfruitful. Those that do leak liquids to the surface or groundwater levels, such as methane and brine. are the ones that garner prioritization to be plugged.
Each year, the oil, gas, and minerals division inventories and prioritizes an inventory of orphaned wells that pose the most imminent danger to the environment or public health because of visible seepage of brine or methane. Most of these problematic wells are outside Oakland County. In its 2017-2018 Orphaned Well inventory report, Michigan plugged six wells at a total of $1,000,358. As of May 2020, Michigan documented and prioritized 116 wells as orphaned.
“In 2020, we plugged two orphaned oil wells that cost $300,00 apiece,” said Adam Wygant, oil, gas, and minerals division director. “We may have the dubious distinction of having the most expensive wells to treat. This is because, unlike other states where wells may be located in remote deserts or fields, in Michigan, we may find wells in places that were once remote but are now located in developed suburbs, towns and cities.”
One of these wells was located in the central part of the state that endured extreme flooding this spring. The other was located beneath the construction site of the $20 million Muskegon Convention Center. The Muskegon area, including suburban neighborhoods, is littered with underground orphaned wells leftover from a boom in the 1920s. Geological experts say in that area there may be up to 1,000 orphaned oil wells lurking below the surface.
In January 2020, the city of Muskegon had broken ground on the Lakeshore Convention Center when construction workers unearthed a pipe leading to Mason Lumber Well #1. Dating back to 1872, it was plugged to the standards of its day – with a wooden, hand-carved mechanism fastened with rope and stuffed with materials like old rope and construction scraps. Disturbed from the construction, it began to belch crude oil. Not only was it holding up the construction project, but the well was located just three feet from the outer wall of a Marriott Hotel.
Muskegon officials quickly contacted EGLE to plug the well so construction could continue. EGLE's remediation and redevelopment division directed $200,000 in cleanup and redevelopment funding to the project to offset the costs of cleaning up and plugging the old well. The orphan well fund contributed another $82,546 toward the plugging.
“Normally we do not go out and plug wells in the dead of winter because contracting prices are higher and equipment can freeze up,” said Wygant. “But we worked quickly with the Muskegon first responder community and all the construction contractors on that project. The project was complete in a month. Because of the risky nature of the project, we were in constant contact with Muskegon emergency responders and kept the hotel constantly updated.”
These are two examples of wells that required immediate attention that caught the state by surprise. As a whole, Wygant said, compared to other states like Pennsylvania, Michigan has oil drilling records that stretch back to the early 1900’s, so they know the location of the bulk of its orphaned wells.
“Our well-inventoried database puts us in a unique position,” said Wygant. “It gives us a high level of confidence in well location and how the wells were drilled, constructed, and if they were plugged. We also have a highly-skilled and dedicated team that oversees oil and gas operations with field staff representing each county, responding to any complaints and concerns, and most importantly, ensuring that the oil and gas industry is conforming to Michigan’s laws and rules.”
On EGLE's orphaned oil list for 2019, four out of 93 non-leaking wells were plugged and of 23 of the lowest-priority wells, three were plugged and seven were being monitored for methane emissions.
When existing oil developers deem that a boring hole is dry or no longer lucrative, state regulations require them to notify EGLE and pay to plug the well themselves at a rate of about 300 wells per year.
Michigan requires conformance bonding for all active oil and gas permittees to cover the costs associated with final well plugging.
In Michigan, blanket bonds range from $100,000 to $250,000. This is higher than the federal level, as the Bureau of Land Management regulations sets minimum bond values at $10,000 for an operator’s wells on an individual lease, $25,000 for all of an operator’s wells in a state, and $150,000 for all of an operator’s wells nationwide. According to the Congressional Natural Resources Committee, these bond rates have not increased since 1960.
According to guidelines set by the EPA, modern plugging methods can prevent a well from emitting methane by 97 percent for the next 100 years.
That is why state officials argue that when a well is properly sealed, it is truly at the end of its life and there is no obligation to further monitor it for emissions.
EGLE officials say orphaned wells in Michigan are decommissioned through a series of cement plugs that are set at different zones along the well bore, including a minimum of 25 feet cement plug in the surface pipe. A steel plate is then welded across the top of the wellhead four feet below grade.
EGLE's Oil, Gas, and Minerals Division administers specific plugging instructions for each well that is plugged, inspects sites during plugging operations and requires operators to provide a final record of the well plugging 60 days after plugging operations have been completed. Afterward, no state or federal regulations are called to monitor these plugged wells for potential future methane leaks.
Michigan has created a somewhat ironic symbiosis between the oil and gas industry and its environmental and natural resources. According to the Michigan Oil and Gas Association, the Michigan Natural Resources Trust Fund (MNRTF), established under the Kammer Recreational Land Trust Fund Act of 1976, has contributed over $1.1 billion for the public acquisition of land for resource protection and public outdoor recreation. This money comes from royalties on the sale and lease of state-owned oil, gas, and mineral rights.
This November, voters in Michigan approved and passed Proposition 1, a Constitutional amendment to the Michigan National Resources Trust Fund that will change how revenue in the state's park-related funds can be spent. Changes include making projects to renovate recreational facilities eligible for grants and require that at least 20 percent of the parks endowment fund spending be spent on park capital improvements. The proposition also removes the cap on the size of the natural resources trust fund.
Conan Smith, president and CEO of the Michigan Environmental Council, said natural resource funds Proposal 1 amends in the Michigan Constitution do not in any way regulate the sale, leasing or extraction of state-owned minerals or policies.
"What Proposal 1 does do is expand the way funds generated by those minerals can be used to better protect our natural resources and connect people to them. That's why 84 percent of voters supported it."
Scott Huber of the Michigan Oil and Gas Association said he, his children, and grandchildren are hunters who have long enjoyed Michigan’s natural resources and wish to safeguard it for future generations. He said that enhanced, less invasive exploration and drilling techniques and stricter regulations mean that oil and mineral holders will continue to explore and pump oil in Michigan as long as there is a demand for this fuel.
Retired from the oil production industry, Huber sees a better working relationship between Michigan’s oil producers and EGLE’s Wygant in better managing the state’s current inventory of orphaned wells and believes there are greater incentives to assure they do not fall into an orphan status.
“Sometimes, when I look at drilling activities in the 1930's and 40's, I ask myself, ‘What were they thinking?’” Huber said. “Now, we are not like John Wayne coming through on horseback, acting recklessly to be able to get oil and gas from the ground. While many things are driven by the bottom line, we must do things safely and securely and under the guidance of the state. When a well has lived out its productivity, oil producers must leave the well behind and meet that with the conditions and rules and regulations of the state. And the way EGLE’s regulations are now, operators are not free to walk away from wells they drill.”
While some in the oil industry believe they are acting responsibly and balancing the right to drill for minerals within regulations set by the state, other politicians see the industry’s actions in the state as “out of control.”
Five years ago, there was a flurry of permit requests from oil and gas companies wishing to explore in densely populated southeast Michigan. Newer seismic imaging technology and relatively shallow depths of oil reserves in metro Detroit at first enticed drillers. But less than fruitful gains and a drop in demand for fuel because of the pandemic has caused a slump in new permit requests.
There were permit requests in Scio Township, a 2015 lawsuit started by a Rochester Hills citizen’s group called “Don’t Drill in the Hills,” against proposed drilling in that community, and most notoriously, the start-stop venture of Jordan Development, when in 2016 it successfully won a bid to drill on the property of One World Faith Church in Southfield.
“Ever since Jordan Development explored for oil on the property of the World Faith Church, we may as well all be at the corner of Nine Mile and Evergreen,” said state Senator Jeremy Moss (D-Southfield). “There has been a disconnect between state policies and the needs in local communities. That’s why my colleagues from both sides of the aisle and I have continually introduced legislation that allows for local municipalities to have more control of what kind of drilling happens in their neighborhoods. Right now, it’s anything goes. We are still cleaning up and dealing with wells drilled 70 years ago (such as brine leaching from a well found in a Southfield residential area). We do not need to create future drilling that will be abandoned only to pollute the Rogue River and emit methane into the atmosphere.”
However, EGLE maintains that to issue a permit, the supervisor of wells, a regulatory agency around since the 1930s, mandates that drilling must happen on a prescribed size of land. A drilling unit is considered the maximum area that may be efficiently and economically drained by one well. Drilling unit sizes range from 10 to 640 acres. A typical drilling unit size is a 40-acre unit.
In recent years, state lawmakers passed legislation that puts more restrictions on drilling in southeast Michigan – but also made it clear that municipalities cannot pass local zoning restrictions to limit mineral rights owners. Before it was renamed EGLE in 2019 by Gov. Gretchen Whitmer, Michigan Department of Environmental Quality (MDEQ) in 2015 passed more stringent drilling regulations in counties with populations of 750,000 or more. In residential zones where 40 or more homes or public occupancy buildings exist, a proposed well location must be more than 1,320 feet away. A township supervisor or city manager and residents within 1,320 feet of a proposed well location must be notified before work starts. Permit applications must include an analysis showing why alternative drilling locations farther from homes aren't feasible. Lastly, actions must be taken to reduce overnight noise.
Moss and state Senator Peter Lucido (R-Shelby Township) do not think these laws go far enough and want to see easements between wells and properties be increased to over 2,000 feet. Both senators have been vocal proponents against drilling in both their communities. They also feel like Michigan should walk back zoning laws which prohibit municipalities from creating their own regulations on oil and gas drilling.
Amendments to the Michigan Zoning Enabling Act of 2006, passed in 2019, prohibit municipalities from creating exclusionary zoning to prevent drilling and extraction of natural resources unless “very serious consequences would result from the extraction of those natural resources.”
As far as encountering any brine leaks from orphaned wells, outside one in Southfield which leached brine into the Rogue River in 2016, there have been few local incidents, according to Oakland County Water Resources Commissioner Jim Nash.
“We have not seen much in the way of new drilling in Oakland County in the past few years, mostly because the low cost of fuel means it’s not as economically justified to start new wells,” Nash said. “The drilling in Southfield failed and they didn’t find anything to justify a permanent well. Generally speaking, EGLE does all regulating of those facilities and we have no actual role. In fact, we often don't even know about new permits until they've been authorized and we are only notified as a formality.”
Though Wygant of EGLE said the state is not obligated to monitor a properly plugged well for emissions, as part of its fugitive emissions monitoring program, the oil, gas, and minerals division works with EGLE's air quality division and deploys a forward-looking infrared camera at active oil and gas sites to search for fugitive emissions during routine inspections. Emissions have been detected this way from wells in Ingham, Gratiot and St. Clair counties.
Other methods of creating techniques to monitor methane are being researched at Oakland University. Recognized for their work on studying methane emissions building from the warming permafrost in the Arctic Circle, the National Science Foundation awarded a two-year, “10 Big Ideas” Award of $294,536 to professor Xianqun Zeng and assistant professor Ziming Yang of Oakland University. The pair developed a low-cost, low-power multimodal sensor that will help researchers address the challenges of measuring carbon dioxide and methane emissions across the Arctic soil. From an industrial standpoint, Zeng said these same sensors can be used by the oil and gas industry to monitor methane emissions from orphaned and abandoned wells.
“Methane has been detected by techniques that are expensive and limited which prevents them from being widely deployed in mines, industrial factories pipelines … or wherever methane and natural gas are used,” said Zeng.
As Michigan grapples with cleaning up the wells of its past, it must also put regulatory mechanisms in place to prevent wells from becoming orphaned in the future.
The Interstate Oil and Gas Compact Commission reported that six states, excluding Michigan, are creating incentives for private landowners to plug orphaned wells. The incentives include offering states grant money for current landowners to remediate orphan wells they find on their own land to landowners getting reimbursements from the state and thereby reducing their state income taxes. In neighboring Ohio, the state directly pays a contractor who voluntarily plugs a well, as well as resulting in state income tax savings to the landowner.
However, Peltz of the Environmental Defense Fund said Michigan does have one of the nation’s most progressive preventative regulations because of its scrutiny of proposals to transfer well ownership, especially when an operator wishes to acquire a well at the end of its life.
"In many cases, at the end of an oil well’s life, the original operator of one – or hundreds of wells – may find a buyer that will try to eke out those final hydrocarbons to make money,” said Peltz. “Once the wells dry up, they can declare bankruptcy, and plugging and cleanup of those wells will become the responsibility of the state. And when that second company finds those wells are no longer lucrative, they will attempt to sell it to a bankruptcy-proof entity to slough off their liability.”
Peltz added that Michigan’s orphan well program gives the regulator more authority to analyze the transferee’s assets to see whether they have the liquidity and infrastructure to manage the wells they want to take on beyond the amount of that blanket bond.
“Alaska is the only other state I am aware of that puts a transfer of wells under such comprehensive analysis,” Peltz said. “So good on Michigan for having that policy. EDF would like to see other states consider policies of this sort.”
Out west, continuous downward trends in oil production are putting a spotlight on how quickly oil companies are going under. This leaves many wells at risk for becoming orphaned but also makes way for an opportunity to put out of work skilled oil drillers that are needed to remediate and plug the nation’s growing inventory of orphaned wells.
For example, in 2020, North Dakota saw a jump from zero to several dozen orphaned wells in just a few months. In a controversial move, the state used relief money from the CARES Covid Relief Act to put unemployed oil drillers back to work plugging wells.
This notion is getting attention from the federal government as well as private entities. This spring, the House of Representatives introduced House Resolution 2. Known as the Moving Forward Act, it is a more than $1.5 trillion plan to rebuild American infrastructure and includes allocations for cleaning up abandoned coal mines and orphaned oil and gas wells, putting drillers, miners and engineers to work clearing the way for new infrastructure and economic redevelopment. While it was received in the Senate July 1, it has not yet moved forward.
Out in Montana, former oil executive Curtis Shuck in 2019 created the Well Done Foundation. It is a non-profit organization that relies on donations and the sale of carbon offsets, called climate benefit units, to fund awareness, plugging and land-resurfacing work for orphaned oil wells. Shuck said he also works with Montana environmental officials, as well as researchers, to formulate advanced plugging techniques and even has a program for people to adopt an orphaned oil well in Montana for cleanup and is branching out to form partnerships in Texas, Kansas, Colorado, California and Wyoming.
“The vision of the Well Done Foundation is to become a national organization,” Shuck said. “We are super excited at the attention orphaned wells are receiving, including increased interest in the oil and gas industry. We are hoping that, through the development of a carbon finance strategy, it will allow others to enter into this endeavor to plug the overwhelming number of orphaned wells.”
Daniel Raimi, a lecturer at the University of Michigan Gerald Ford School of Public Policy and senior research associate for the non-profit environmental research organization Resources for the Future said it would be a “win-win” opportunity if Congress can get behind the Moving Forward Act and put thousands of oil drillers back on the job. Raimi said the program could be scaleable at the state level, but issues would need to be worked out concerning government contracts and beefing up state oversight of spending federal dollars.
Raimi said the Moving Forward Act has the potential to support workers while benefitting the environment. Each year, these wells unleash 280,000 metric tons of toxins per year. It would cost $1.4 billion to plug the nation’s documented 56,000 orphaned wells. That could equate to creating jobs for 13,000 workers who could make upwards of $100,000 per year.
“The legacy of the oil and gas industry has left behind plunging tax revenues, but putting federal dollars to use to plug orphaned wells has the potential to support workers, our communities while helping the environment,” Raimi said.