What does it actually take to get an oil or gas company shut down?
Welcome back to The Planet You Save May Be Your Own, your weekly newsletter about local and state climate action. I'm Taylor Kate Brown and I get very worried when I see ERCOT in the news.
(Oil well in front of the Rockies by Jason on Flickr)
Here’s a headline that got my attention this week:
Colorado takes over 106 oil, gas wells after crackdown on companies
In the rhetorical world of What Should We Do About Fossil Fuel Production Assets, one of the easier ways to anger people is to imply that governments are coming for existing products and businesses right now — your gas stove, your car, a gas plant that powers half of a city’s energy demand, etc, even when that’s very far from the truth, instead of the very real and contested questions about what governments and businesses should build and buy going forward.
So I was curious as to why Colorado — a state somewhere in the mushy middle of fossil policy — was taking over oil and gas assets and revoking the operators' licenses.
The answer: Years of safety violations and a growing sense that the companies that own the wells are well… maybe not particularly interested in them as going concerns:
From the Greeley Tribune:
Lasso, which was accused of violating 12 state rules, including failing to clean up a spill, allowing the venting or flaring of emissions and failing to maintain a wellhead….
The COGCC [Colorado Oil and Gas Conservation Commission] staff said 31 Operating violated seven rules, including not having adequate secondary containment tanks and not submitting required records. The company transferred about 100 wells to a third operator, but relinquished 62 of its wells and $95,000 in bonds.
Lasso and 31 Operating are separate companies, but are listed at the same Texas address and have the same official representative in Colorado.
One regulator was not particularly pleased by the outcome:
Commission member John Messner questioned why the fine was suspended, but voted for the package anyway:
“I’m trying to understand what other remedies may be available here,” Messner said. “We are suspending a $2 million penalty and taking on an operator’s entire portfolio of assets that they are clearly walking away from because they are unable to operate in the state of Colorado in a manner that’s protective.”
There’s not a ton more detail in this particular story, but if you want a bigger idea of what’s going on here, I highly suggest an early 2022 Colorado Sun story about Colorado’s orphan well problem and the companies that own them on paper.
Orphans are oil and gas producing wells that rarely produce or have been abandoned entirely. The major issue: these wells need to be cleaned up and capped after they no longer produce oil and gas to prevent polluting leaks — including planet-warming methane. Colorado has recently approved the details for an orphan-well fund required by law. Funded through fees and fines paid by oil and gas operators, it would provide the funds to clean up the wells if the companies that own them aren’t solvent. It’s expected to bring in $10 million a year, about five times the penalty considered in this case.
But perhaps I shouldn’t have been surprised that 31 Operating is one of the case studies inside the Sun’s story. A set of their wells used to be own by Koch Exploration, a giant conglomerate. 31 Operating bought the wells from Koch in 2017, a year after incorporating. And earlier this year, 31 Operating was considering selling these wells to yet another company associated with oil and gas marketing. Here’s how the Sun describes the status of these wells as late as just last year:
In November 2021, state oil and gas inspector Scott Ramsey made his way to a 31 Operating well named Wildlife 3-1. The well, drilled in 1992, sat at the edge of the Piceance State Wildlife Area, high priority wildlife habitat, home to black bears and northern spotted owls. Ramsey found it littered with weeds and debris and the soil was eroding.
Although the well was listed as “temporarily abandoned,” it hasn’t produced any gas in more than 20 years, according to COGCC records.
In December 2020, Ramsey met a former 31 Operating worker who said wells on the site being inspected were shut, but that flow lines of fluid had not been drained.
“He also stated that all of their phone numbers had been disconnected. I called the emergency phone number at approx. 1300 hours and got NO answer,” Ramsey wrote of the worker, identified as Leven.
But wait, there’s more:
Since June 2020, North Dakota has confiscated at least 39 of 31 Operating’s wells, and plugged and reclaimed them using $3.1 million in federal CARES Act funding and $1.3 million from a state orphan-well fund.
It has also received $3.6 million from 31 Operating’s insurer, the Argonaut Insurance Company. Argonaut sued 31 Operating for its losses in a Texas court. The case is pending on appeal.
So why does this company seem to own a bunch of wells that can make them no money and leads to lawsuits and government seizures? Both environmentalist and state regulators have come to the conclusion its probably about getting them off the books of larger companies before they are required to cap them:
“It starts to look less like a legitimate transfer and it looks more like an attempt to insulate the wealthier company from future environmental liability,” said Kate Merlin, an attorney with the environmental group WildEarth Guardians.
A 2018 Colorado Oil and Gas Conservation Commission task force, for example, looked into two companies — Benchmark Energy and Red Mesa Holdings – whose wells ended up in the state’s orphaned-well program…
The group found that the performance of the companies “illustrated a pattern of transfers from larger, well-capitalized operators to those with fewer financial resources as production from the wells tapered off.”
In the case from this month, the wells eventually ended in the hands of the state of Colorado. It may mean that they will get cleaned and capped faster than if they had stayed with these companies — but it’s also another example of externalities of oil and gas production (pollution and yes, greenhouse gas emissions) being transferred away from the original companies who made money off of them.
The only fossil fuel assets that Colorado seized here? Near-abandoned ones.
Curious about orphan wells in your state? EDF attempted to map them across the U.S. and the Los Angeles Times mapped them across California.
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