Green stimulus for oil and gas workers: Considering a major federal effort to plug orphaned and abandoned oil and gas wells

Abstract:

This paper examines the potential to boost US employment in the oil and gas workforce while also reducing pollution through a federal program to plug orphaned and abandoned oil and gas wells. These wells can leak methane and other pollutants that contribute to climate change, poor air quality, and other health and environmental risks. Estimates for the total number of orphaned and abandoned wells range from several hundred thousand to 3 million, depending on the definition of such wells needing attention.

The paper finds:

• A significant federal program to plug orphan wells could create tens of thousands of jobs, potentially as many as 120,000 if 500,000 wells were plugged. Addressing 500,000 wells would require state, tribal, and federal agencies to identify and prioritize hundreds of thousands of additional wells.
• Plugging wells would reduce local air pollution, safety risks, and greenhouse gas emissions at a cost of roughly $67 to $170 per ton of CO₂-equivalent, well within the range of other policy options.
• A significant pool of labor from the oil and gas industry could be deployed toward and benefit from such a program. More than 76,000 direct industry jobs were lost from February to June of 2020, a number that is likely to rise in the months to come.
• The costs of plugging and restoring well sites vary widely, and the total outlay of a well plugging program to address the known inventory of 56,600 orphaned wells could plausibly range from $1.4 billion to $2.7 billion. Expanding the program to identify and plug 500,000 wells could plausibly cost between $12 and $24 billion.
• One potential challenge of a very large program (i.e., addressing hundreds of thousands of wells) is that state regulatory offices would likely need to scale up administrative capacity to oversee such programs.
• While states and the federal government require oil and gas companies to post bonds or other forms of financial assurance to pay for well plugging in case firms go bankrupt before plugging wells, these bonds often do not cover the full costs. Federal funding could exacerbate this problem if states and companies see it as alleviating their responsibility to plan for future remediation costs adequately. To avoid this, a federal program could prioritize plugging wells abandoned decades ago that were not subject to modern regulatory frameworks.