‘Orphaned’ oil and gas wells are on the rise — @HighCountryNews

Oil and gas development on the Roan via Airphotona

From The High Country News (Josh Zaffos):

IIn March 2015, Joe MacLaren, a state oil and gas inspector in Colorado, drove out to the Taylor 3 oil well near the tiny town of Hesperus, in the southwestern corner of the state. He found an entire checklist of violations. Atom Petroleum, a Texas-based company, had bought out more than 50 oil and gas wells after the company that drilled them went bankrupt. Now, Atom was pumping oil from those wells, but Taylor 3 was leaking crude, and it was missing required signage as well as screens on infrastructure to keep birds away from toxic gunk. Worse, the company had not performed safety tests to ensure the well wasn’t leaking fluids underground.

Over the following months, the state slapped Atom with fines, performed follow-up inspections, and demanded a $360,000 bond to cover the cost of shutting down the wells, just in case Atom — hardly proving itself to operate in a trustworthy manner — didn’t clean up its act.

Indeed, the list of violations MacLaren and others discovered kept growing, yet Atom kept on pumping oil and gas, and did not pay fines or put up the $360,000 bond. So in 2016, the state took a rare step: It revoked the company’s drilling permit. Atom’s business, it said, was no longer welcome in Colorado.

Atom didn’t bother to follow through on one last important obligation either. When companies cease production, they are supposed to plug wells with cement to reduce the risk of leaks, and to restore vegetation and wildlife habitat aboveground. They recoup their bonds if they do so, whereas if they don’t, the state cashes them. In this case, Atom flouted its responsibility to plug and reclaim its wells, leaving the state to clean up its mess. Colorado did claim a $60,000 bond Atom posted when it first started operating, but the cleanup could cost taxpayers 10 times that.

The 50 or so wells Atom left behind comprise Colorado’s largest-ever “orphaned well” case, according to the Colorado Oil and Gas Conservation Commission. But it’s not an isolated problem. Companies that go out of business, become bankrupt, or, like Atom, simply ignore the rules, tend to skip out on cleanup and land restoration. And since bond amounts set by states and the federal government rarely if ever cover real-world cleanup costs, it can be cheaper for a company to forfeit a bond than to follow reclamation rules.

Orphaned wells are more likely than properly plugged “abandoned” wells to leak pollutants, including methane gas, which can contaminate groundwater and even trigger explosions. So it’s troubling that the number of such wells in the West has soared. A downturn in energy prices starting back in 2008 has led energy companies to orphan thousands of wells across Colorado, New Mexico and Wyoming. States are struggling even to tally them, let alone remediate them. Officially, Colorado has 244 orphaned wells on its books, but state officials estimate another 400 have yet to be located. And with a new drilling boom tapping deep shale formations along Colorado’s urban Front Range, some worry that the next bust will saddle the public with thousands more.

On state and private land, major energy corporations typically explore and drill for oil and gas across large fields and then sell parcels to smaller operators when production dips. The little guys can still turn profits, just not at the margins big corporations need to satisfy shareholders.

But small companies tend to have shakier financing and are therefore more vulnerable to market swings. When gas prices plunged starting in 2008, it bankrupted many small companies producing marginal amounts of methane from coal seams, and thousands of coalbed methane wells were orphaned.

In Wyoming, the problem reached epidemic proportions. In 2014, under Republican Gov. Matt Mead, the state implemented an aggressive strategy to identify and plug orphan wells. To hedge against future busts, the state also significantly hiked the bonds companies must put up before drilling. It based those increases partly on well depth, since the deeper shale oil and gas wells now being targeted are much more expensive to reclaim than conventional shallow wells. Wyoming has since reclaimed 1,700 sites on state and private lands, using taxes and royalties paid by industry to chip away at the backlog caused by the spike in orphaned wells and insufficient bond funds. But it has also identified nearly 4,600 more orphaned wells — and that’s just on state and private lands.

“Wyoming is more ahead of the game than other states,” says Jill Morrison, director of the Sheridan-based Powder River Basin Resource Council. Even so, the state “can’t keep up,” she says, and the higher bond rates still don’t fully cover reclamation costs when a company orphans its wells. Reclamation on federal lands in Wyoming, where there are thousands of additional orphaned wells, has been even slower.

In Colorado, the state currently uses bonds and revenue from fines to cover cleanup costs for orphans. But that generates less than $850,000 a year, so the state has only plugged and reclaimed 52 orphaned wells since 2013, at an average cost of $82,500 each. According to a recent state analysis, dealing with all 244 of its known orphans will cost an estimated $5.3 million annually over the next five years.

This August, Colorado Gov. John Hickenlooper proposed several tougher rules for monitoring and reclaiming both orphaned and properly plugged wells. The announcement followed a deadly house explosion in a north Denver suburb last April, which elevated concern about abandoned wells of all kinds since it was caused by a severed methane gas flow line from a properly plugged and sealed well. Hickenlooper’s reforms included creating a fund that would be used to eliminate the state’s orphaned-well backlog within a decade. It would be bankrolled by energy companies, possibly through a property-tax increase, and could also pay for services like in-home methane monitors for neighborhoods that are next to or even on top of old wells.

Tracee Bentley, executive director of the Colorado Petroleum Council, acknowledges the need to “get ahead of a potential problem,” but questions whether new taxes are the solution. Instead, she says, the state could direct existing tax revenues to the issue, or create a voluntary program for companies to help plug and reclaim wells. In Oklahoma, for instance, companies can choose to divert 1 cent for every $100 of oil and gas they produce to a program that restores orphaned wells. The state claims that 95 percent of operators participate and the program has restored 16,000 well sites since 1994.

State Rep. Mike Foote, a Boulder County Democrat, says he would like to see higher bond rates in Colorado, but he doesn’t expect much cooperation from state Republicans. In a letter to the Colorado Oil and Gas Conservation Commission, two state GOP leaders expressed concern over Hickenlooper’s proposal for an orphan-well fund and disagreed with his portrayal of the issue as a “vast” problem. But without more money and regulatory muscle, Foote says, the state is not just ducking the current problem; it’s inviting future calamity.

Since the deadly Denver house explosion last spring, watchdogs have documented an alarming number of poorly monitored abandoned wells and flow lines beneath Front Range communities. Some of this potentially perilous infrastructure lies directly beneath neighborhoods. With several small companies, some already cited for violations, currently drilling and applying to drill for oil and gas in Boulder and neighboring counties, Foote and others fear the next price crash could create a hazardous landscape rife with orphaned wells. And dealing with those wells could be even more complicated than before, because industry is now tapping deep shale formations, where wells are much more difficult and expensive to plug, reclaim, and inspect.

According to the Colorado Oil and Gas Conservation Commission, there are currently 63 financially “distressed” operators in the state, who collectively own almost 4,000 wells. These companies have either missed required safety tests or aren’t producing much, signs that they may be running out of money and therefore more likely to abandon their sites. If even a fraction of those companies become deadbeats, the state’s problems will quickly multiply. Without broad action, says Foote, “It’s a disaster waiting to happen.”

@ColoradoClimate: Weekly Climate, Water and #Drought Assessment of the Intermountain West

Colorado River Basin December 2017 precipitation as a percent of normal.

Click here to read the current assessment. Click here to go to the NIDIS website hosted by the Colorado Climate Center.

Tamarisk Coalition: Riparian Restoration Conference, February 6 and 7, 2018

Colorado National Monument from the Colorado River Trail near Fruita September 2014

Click here to for the Inside skinny and to register:

Join Tamarisk Coalition and the Water Center at Colorado Mesa University for the 16th annual Riparian Restoration Conference in Grand Junction, Colorado, a premier destination on Colorado’s Western Slope.

#Texas v. #NewMexico and #Colorado update

Map of the Rio Grande watershed, showing the Rio Chama joining the Rio Grande near Santa Fe. Graphic credit WikiMedia.

From the Colorado Attorney General’s office via the Valley Courier:

[On Monday, January 8, 2018], Colorado Attorney General Cynthia H. Coffman’s office presented arguments in the U.S. Supreme Court in Texas v. New Mexico and Colorado, No. 141, Original, to protect the authority and jurisdiction of the Western States to manage water rights within their own borders and across state lines in cooperation with neighboring state officials.

The case reached the U.S. Supreme Court after Texas sued New Mexico over a dispute regarding water in the Rio Grande Basin. Colorado, Texas and New Mexico are all parties to the Rio Grande Compact, an agreement that since 1938 has regulated the interstate apportionment of the waters of the Rio Grande. Texas did not make any claims against Colorado, but because Colorado is a party to the Compact, Colorado was also included in the case.

While Texas’s claims against New Mexico were pending, the U.S. government attempted to independently sue the State of New Mexico under the Rio Grande Compact. The Supreme Court invited the State of Colorado to present arguments on whether the United States has a right to sue a State under an interstate water compact, despite not being a party to it.

“Arguments over water rights have been going on since the beginning of statehood, but the authority to manage this critically important natural resource has always belonged first and foremost to the States,” said Attorney General Coffman. “We cannot allow the federal government to encroach on our rights and interfere with our ability to manage water resources on equal footing with our Sister States.”

Colorado Solicitor General Fred Yarger argued on behalf of the State, explaining that the federal government does not have a right to sue New Mexico under the Rio Grande Compact. The United States is not a party to the Compact, he explained, and the authority, jurisdiction and responsibility to manage the water of the Rio Grande lies with the States. Solicitor General Yarger argued that allowing the federal government to sue under the Compact to which it is not a party would set a very concerning precedent, harming the ability of States to work together to solve water disputes cooperatively, without federal government intrusion.

Conversation with Brenda Burman the infrastructure secretary

Brenda Burman photo credit Wikimedia.

From Water Strategies:

Perhaps no other government entity has been more vital to the modernization and development of the western United States than the U.S. Department of the Interior’s Bureau of Reclamation. The dams, canals, and other water infrastructure projects built by Reclamation have allowed water to flow to arid areas in 17 western states, making agriculture and urban development possible. Reclamation projects have also provided vital hydroelectric power and flood protection to many communities. For Reclamation to continue to build on that legacy, it must have effective leadership, and that is what Commissioner Brenda Burman is providing. Commissioner Burman has a long career of working on water and energy issues and is committed to building and maintaining the water infrastructure that will help the West continue to grow. In her first interview since being sworn into office, Commissioner Burman sat down with Irrigation Leader’s editor-in-chief, Kris Polly, to discuss how she became involved in water issues, how Reclamation is striving to become a truly effective partner with western water users, and how she plans to refocus Reclamation on the task of building projects that can deliver the water that western communities depend on for the present and for the future.

Kris Polly: Please tell us about your background and how you became involved in irrigation, power, and water issues.

Commissioner Burman: When I was in school, I decided I wanted to do something related to natural resources, but I thought I wanted to work on maritime, ocean, and shipping issues. That changed when I worked in New Mexico one summer on a trail crew and then at the Grand Canyon. While working in those places, I started reading about the Southwest, the desert, and water issues. I later applied to law school, where I wrote my admittance essay on water law, and I have not looked back. After law school, I worked in Wyoming for the Supreme Court, and the first case I worked on involved the water supply for a small town. From there, I worked for several years in private practice at a water and energy firm, Salmon, Lewis & Weldon, in Phoenix, Arizona, until a job on the Hill came open as a water and energy lawyer for Senator Jon Kyl. I have also had the opportunity to work for state agencies, including the Metropolitan Water District of Southern California and the Salt River Project.

Kris Polly: You are the 21st commissioner of the Bureau of Reclamation, and the first woman to hold that position. What are your thoughts on the historical significance of being commissioner?

Commissioner Burman: Reclamation has an amazing history. We have been in operation for 115 years, since President Teddy Roosevelt signed us into existence, and I think we have come a long way. We have built many projects, from the large, iconic ones like Hoover Dam and Grand Coulee Dam, to smaller projects across all 17 western states. To me, being commissioner is about carrying on that legacy and making sure we are relevant, smart, useful, and able to provide a reliable water supply for the next 100 years.

Kris Polly: What are Reclamation’s top priorities for 2018?

Commissioner Burman: Our top priority is to deliver water reliably, not just for the present, but also for the future. There are a number of things we need to do in order to achieve that goal. First, we need to get back to building things, including projects to expand water storage across the West. The droughts in California, and those in many other places in the West, demonstrate that more storage is needed. Reclamation’s multipurpose water systems rely critically on storage in order to ensure that flows are delivered and hydropower is produced when needed.

Second, we need to work with all our customers and stakeholders to figure out the best way to finance those projects. We understand this is a different world in terms of federal money coming from Congress, so we need to examine creative ideas for bringing in funding, like public-private partnerships and loan guarantees. We are open to any other good ideas and are ready to work with those who can help us move projects forward. We are also not foregoing public-public partnerships that have made the West what it is today. We just need to look broadly for opportunities to fund essential infrastructure needs.

Third, we want to streamline projects, from how they are managed to the way we achieve environmental compliance. It takes much too long to get projects done, and that is not acceptable. Reclamation is looking at how to streamline the process, to actually get shovels in the ground and get things built. That applies to title transfer as well. We at Reclamation need to look at our relationship with our customers, and if we are not helping them, we need to get out of their way. We want our customers to tell us whether we are adding value to what they are doing, and if not, we need to work with them to step aside. Those who are operating the projects onsite are often the best equipped to manage them, and that is how it should be whenever possible.

Another major priority for us will be addressing the drought on the Colorado River, which has been going on for 18 years. A lot has been done by Reclamation, the seven basin states, Mexico, tribes, and nongovernmental organizations to keep that system reliable and stable, but there is still a lot more work to do, particularly in Arizona and California, over the next year to get to a viable drought contingency plan. The probabilities for shortage conditions are real, and we need to act now to implement a plan that minimizes those chances.

Finally, we are going to ensure that we have a culture of safety and respect at Reclamation. We cannot effectively serve our customers if we are not an upstanding organization on the inside. Safety is going to be one of my top priorities going forward. A workplace environment survey was done across the U.S. Department of the Interior last year, and it showed that we have a lot of issues to address. Secretary Zinke has been adamant about having a zero-tolerance policy for any type of harassment in the workplace. We have put together a task force with people across Reclamation, and by the end of January, we will report back to the secretary with ideas on how to make Reclamation a positive workplace for everyone.

Kris Polly: What is Reclamation’s role in western water, and what is the commissioner’s role?

Commissioner Burman: Reclamation is the premier water agency in the West, and we have a very significant role in western water. We have the ability to bring parties together, we have technical expertise that can help projects get done, and we have the ability to construct and complete projects. Reclamation can also harness other federal agencies to help get permitting done more efficiently. As for my role, I have been here 2 weeks and am just now getting to hear from my leadership team, customers, contractors, and stakeholders. I plan to do a lot of listening over the next couple months, and we will then start putting together our list of priorities based on what we hear from everyone.

Kris Polly: What are some of the goals you hope to achieve as commissioner?

Commissioner Burman: My overriding goals as commissioner are to deliver reliable water and power and to build projects. I think we have fallen behind on project development, and we cannot continue to deliver reliable water or power unless we are building new storage and new projects and rebuilding the projects we already have. Much of our infrastructure is over a century old and is aging rapidly, so we have to address that. I plan to be an infrastructure commissioner who gets projects built.

Kris Polly: What should every Reclamation contractor know about you?

Commissioner Burman: They should know that I am accessible and that Reclamation is going to be accessible to them. We are going to make ourselves more customer responsive and are going to look to the contractors and stakeholders to tell us how best to do that. My leadership team and I can provide direction internally, but we need to know what we can be doing better from the people who are on the ground. I am joining a great organization, but that organization needs to focus on our customers and contractors. We also need to focus on our main mission, which is not only to deliver water and generate power, but also to advocate for the delivery of water and power in the West. We want to add value to customers, and we want to know how we can best do that.