Colorado’s initial funding of $25 million in federal money to clean up orphaned oil and gas sites will bulk up a new state fund intended to cover the costs associated with hundreds of wells across the state.
The $25 million is part of the federal infrastructure bill and is targeting high-priority oil and gas wells on state and private land that weren’t properly closed and cleaned up. Wells are considered orphaned when an owner can’t be found or the owner can’t or won’t take care of the wells.
Altogether, Colorado is expected to receive at least $79 million in grants and formula funding through a $4.7 billion program to close orphaned wells and restore well sites.
The work will help cut leaks of methane, a powerful greenhouse gas, restore wildlife habitat, protect watersheds and create good-paying jobs, Colorado’s Democratic U.S. Sens. John Hickenlooper and Michael Bennet said in a statement Friday.
“The arrival of this funding comes at a critical time, especially as climate change continues to tighten its grip on our land, our water, wildlife and communities here in Colorado,” said Beau Kiklis, public lands campaign manager for Conservation Colorado.
The latest data from the Colorado Oil and Gas Conservation Commission, which regulates the industry, show there are 528 orphaned wells and 981 associated sites. The federal government, which used different criteria, said Colorado has 710 orphaned wells.
As governor of Colorado, Hickenlooper directed a working group in 2018 to recommend regulations for orphaned oil and gas wells and issued an executive order allocating $5 million annually to speed up the closure and cleanup of the sites. The action followed a warning from a former director of the oil and gas commission that the state would need at least six times more money than companies had provided in bonds.
As part of the overhaul of state oil and gas rules mandated by a 2019 law, the commission earlier this year approved new requirements for the bonds that companies must provide to ensure wells will be taken care of.
In June, the commission imposed a per-well fee on companies to generate roughly $10 million annually for a new fund. Including the $25 million in federal dollars, the agency expects the fund to total $100 million to $115 million over the next five years.
In the past, money for clean-up and restoration of orphaned wells came from severance taxes, penalties and a mill levy on the industry.
The state estimates it costs on average $82,500 to plug and reclaim an orphan well, although environmental organizations contend it can cost well above $100,000. Community and environmental activists have also raised concerns about “zombie” wells, wells that produce little or now oil and gas and whose owners might not have the money to plug, or close, them.
In July, the oil and gas commission agreed to take over a total of 106 wells from two oil and gas companies facing several alleged violations and a combined fine of $2.2 million. Most of the wells are in Rio Blanco County and will be put on the state’s list of orphaned wells.
Colorado has nearly 50,000 active oil and gas wells.
