by Mark Olalde, ProPublica, and Nick Bowlin, Capital & Main
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For the first time in more than 60 years, the Bureau of Land Management will force oil and gas companies to set aside more money to guarantee they plug old wells, preventing them from leaking oil, brine and toxic or climate-warming gasses.
The rule, finalized this month, comes at a critical time. Money previously set aside to clean up wells on federal land would have covered the cost of fewer than 1 out of 100, according to the government’s own estimates, and the vast majority of the country’s wells sit inactive or barely producing, meaning they’ll soon need to be plugged.
But the federal agency’s work falls short of protecting taxpayers from the oil industry’s cleanup costs, according to a ProPublica and Capital & Main review of contracts or other cost estimates at tens of thousands of wells across the country. While the updated rule will shrink the gap between companies’ financial guarantees to plug wells, known as bonds, and the cost of the work, it still leaves a significant shortfall.
One math error alone leaves taxpayers on the hook for roughly $400 million more than they should be. A Bureau of Land Management employee’s arithmetic mistake yielded an incorrect average cleanup cost for wells that the agency has plugged, largely at taxpayer expense. That artificially low cost estimate became the foundation of the new bonding requirements.
When ProPublica and Capital & Main pointed out the error in December, and that it could potentially cost taxpayers — and save oil companies — hundreds of millions of dollars when multiplied across the many thousands of wells the new rule would touch, the agency downplayed the miscalculation.
A spokesperson said the bureau “recognized the issues,” but they weren’t “significant enough” to correct. The proposed bond amounts are minimums, which “may be adjusted” through a review every five years. Staff can then demand companies set aside more money, the spokesperson said.
But over the most recent five-year period, oil companies ignored the Bureau of Land Management’s demands to increase their bonds more than 40% of the time, a ProPublica and Capital & Main review of agency data found. The final rule did not change how these reviews are carried out or enforced.
Evidence abounds of regulators’ past failures to hold the industry to account for cleanup: hundreds of thousands — potentially millions — of so-called orphan wells that companies have walked away from and left to the government to plug. Environmentalists, researchers and some politicians worry the window is closing to fix the problem while the industry is still profitable and there’s political........