The Rising Cost of the Oil Industry’s Slow Death

by Mark Olalde, ProPublica, and Nick Bowlin, Capital & Main

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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 gasses, 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.

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.

But 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.

Are you a journalist, academic or someone else interested in localizing, analyzing or otherwise working with the bonding and cleanup cost data referenced in this story? Reach out directly at mark.olalde@propublica.org to discuss the data or to request access to it.

The estimated cost to plug and remediate those wells if cleanup is left to the government is $151.3 billion, according to the states’ own 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.

“We have allowed companies intentionally to do this,” said Megan Milliken Biven, who reviewed the data and is a former program analyst for the Bureau of Ocean Energy Management, a federal regulator of offshore oil rigs, and founder of True Transition, a nonprofit that advocates for oil field workers. “It is the inevitable consequence of an entire regulatory program that is more red carpet than red tape.”

Regulatory agencies in several states maintain that they have adequate tools to protect taxpayers, such as the authority to require companies to post larger bonds as their wells stop producing. Other states are working to reform their bonding systems. Industry representatives, meanwhile, say they have done their part by paying fees on oil production that help fund states’ well-plugging efforts.

“Our industry is taking action every day to address the permanent closure of historic oil and natural gas wells and the remediation of historic well sites in accordance with applicable federal and state laws,” Holly Hopkins, a vice president of the American Petroleum Institute, the industry’s major trade group, said in a statement.

A graveyard of rusting wells rising from once-picturesque sand dunes near Artesia, New Mexico, tells a more complicated story.

Around the corroding skeletons of pump jacks, the ground is stained black from spills. Leaking hydrogen sulfide, which reeks of rotten eggs, has turned the air toxic, making each breath burn. At the base of one salt-caked well, a sign indicates who is responsible for the mess. Barely legible beneath splattered oil, it reads “Remnant Oil Operating.”

The story of Remnant is the story of the American oil industry.

The industry’s household names — Chevron, ExxonMobil and others — often reap the biggest profits from any given oil field. As the booms fade and production falls, wells are sold to a string of ever-smaller companies, many of which let the infrastructure fall into disrepair while violations and leaks skyrocket. The number of idled wells soars too, as companies warehouse them to avoid costly cleanup. By this point, regulators’ hands are tied because the bonds states demand to use as leverage are so small. Seeing little incentive to plug wells and get their tiny bonds back, companies slip into bankruptcy court, where executives are protected from their environmental liabilities. When the dust settles, the government is on the hook for the now-orphaned wells.

The practice is so tried-and-true that researchers and activists call it “the playbook.”

As the company’s name implies, Remnant gathered the industry’s dregs into a portfolio of several hundred wells. Drilled decades ago by larger companies, their most productive days were behind them. When Remnant arrived in 2015, it briefly boosted production, but regulatory violations, bad bets and the oil fields’ age caught up with the company. Within four years, Remnant filed for bankruptcy protection, and its leadership shuffled assets and liabilities between companies the executives managed.

What’s left of Remnant is 401 wells scattered across the New Mexico countryside. While a few are still pumping, more are idle and potentially already orphaned, joining thousands of other wells that are sitting unplugged and in need of cleanup across the wider region. Regulators here in the Permian Basin, the world’s most productive oil field, must contend with Remnant and other undercapitalized companies like it that could add even more wells to the list of orphans.

Remnant representatives did not respond to ProPublica and Capital & Main’s requests for comment.

Over their lifespans, the wells that remain in the hands of Remnant and a related company generated roughly $2 billion in revenue, when adjusted for inflation, enough to cover the cost of their cleanup many times over. This is according to estimates produced from state production data by ProPublica, Capital & Main and Texas-based petroleum reservoir engineer Dwayne Purvis.

The New Mexico State Land Office sent letters in 2023 demanding that cleanup begin. Remnant’s executives have yet to comply.

As wildcatters scoured Texas for oil in the 1920s, one hopeful investor christened their well in honor of Saint Rita of Cascia — the patron saint of impossible causes — asking for a miracle. The gusher that followed ignited a drilling frenzy in the Permian Basin, from West Texas to southeastern New Mexico.

By the late 1940s, the Square Lake Pool had come alive among New Mexico’s sand dunes. Anadarko Production Company — now part of the $50 billion Oxy Petroleum — took over the oil field in the 1960s and increased production. To keep the oil and gas flowing, Anadarko turned to unconventional methods: fracturing underground rock, injecting wells with gelled water and frac sand and waterflooding. The chemical treatments continued into the 1980s, but production steadily declined as the wells aged and underground oil reservoirs were depleted.

In 1995, Xeric Oil & Gas Corp. acquired much of the field. Two years later, Xeric transferred the wells to GP II Energy Inc. In the two decades that followed, the wells........

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