Bennet’s Oil and Gas Bonding Reform and Orphaned Well Remediation Act Would Modernize Federal Bonding Rates to Reflect True Costs of Well Clean-Up
Washington, D.C.— Colorado U.S. Senator Michael Bennet urged U.S. Department of the Interior (DOI) Secretary Deb Haaland to address outdated and insufficient federal oil and gas bonding rates to ensure companies, not taxpayers, are the ones on the hook for the costs of cleaning up wells drilled on federal lands. These rates have not been updated since they were set more than fifty years ago, and as a result, are insufficient to cover the true costs of cleaning up drilling sites.
“[T]he challenge that dangerous orphaned wells pose on our federal lands in Colorado and across the West demands immediate action across the government,” said Bennet in the letter. “These wells release harmful pollution affecting our water and air, pose a hazard to fish and wildlife, and can impair other uses of public lands such as recreation.”
Abandoned wells are a major source of climate-harming methane emissions and pose a number of environmental and health risks for nearby communities. Bennet’s Oil and Gas Bonding Reform and Orphaned Well Remediation Act would strengthen and increase minimum bonding requirements for oil and gas development on federal lands to ensure adequate financial resources are available for future cleanup and remediation. Bennet welcomes DOI’s distribution of funding from the Bipartisan Infrastructure Law (BIL) as a critical step forward in his letter, but points to bonding rates as the root of the issue that needs to be updated and reformed.
“[I]n order to prevent this crisis from persisting and growing, we must address the underlying problem of outdated federal bonding rates to ensure that taxpayers do not continue to bear the costs of cleaning up wells drilled on federal lands,” continues Bennet in the letter. “By taking steps to fix this broken system, we will help ensure that companies – not taxpayers – bear the costs for cleaning up drilling sites, while ensuring responsible stewardship of our federal lands.”
“Senator Bennet is to be commended for his work as a tireless advocate for our public lands. Orphaned oil and gas wells pose a threat to wildlife, public lands, and safe drinking water. Outdated bonding rates must be increased so that oil and gas companies – not U.S. taxpayers – are responsible for cleaning up the messes left behind after development,” said David Willms, associate vice president for public lands at the National Wildlife Federation. “It’s time for both the White House and Congress to ensure that oil and gas companies restore the areas they use so that people and wildlife alike can continue to enjoy these lands for generations to come.”
“It is past time for the federal government to modernize how we do oil and gas extraction on public lands. Reforming long outdated and insufficient bonding rates is a critical element of that, and necessary to ensure responsible stewardship of our federal lands while ensuring companies are held accountable for the costs of cleaning up their wells. This is common sense, reasonable reform that would allow the industry to continue operating on public lands, while protecting public health, the environment and our local western slope economies that rely on multiple uses of our public lands,” said Hilary Cooper, San Miguel County Commissioner.
“Outdated Federal bonding rules mean that oil and gas companies haven’t been required to put down enough money in advance to fund clean-up efforts, and the responsibility for closing the well and cleaning up the site falls on the rest of us to pay the costs through our tax dollars. The Department of Interior must increase bonding requirements to hold oil and gas companies responsible for the full cost of plugging and reclaiming their wells on public lands,” said Pegah Jalali, Research Manager, Colorado Fiscal Institute.
“We are thankful for Senator Bennet’s attention to the growing orphaned well crisis and his steadfast leadership on updating woefully outdated and inadequate federal bonding rates, and want to reinforce his calls for the Department of the Interior to increase minimum bond amounts. Doing so through a federal rulemaking would ensure that taxpayers are no longer forced to pay to clean up wells drilled on public lands,” said Autumn Hanna, Vice President of Taxpayers for Common Sense.
“We applaud Senator Bennet for pushing the Biden Administration on the orphan well issue. It is fiscally irresponsible to continue allowing oil and gas companies to skip out on their promise to plug and clean up well sites once they are done drilling. Way too many of these companies routinely find creative ways to dump their cleanup costs, which now run in the billions, onto the American taxpayer. While Senator Bennet continues to push for legislative action, Interior Secretary Haaland has the authority to increase bonding amounts enough to cover orphan well cleanup costs, failing to do so favors the cheats and leaves honest taxpayers holding the bag.” said David Jenkins, President of Conservatives for Responsible Stewardship.
“For decades, orphaned oil and gas wells have left communities responsible to pay for a mess they didn’t create and deal with the hazards of chemicals leaking into the air and drinking water. Through its rulemaking authority, the Biden Administration has an opportunity to update bonding rates that oil and gas companies are required to put down to fund the clean-up costs of their projects, putting polluters on the hook – not communities. We applaud Senator Bennet for pushing the Administration to take steps within their authority, and we look forward to working with him on a legislative solution in the 118th Congress,” said The Wilderness Society’s Colorado State Director, Jim Ramey.
"Trout Unlimited appreciates Senator Bennet’s leadership efforts to improve the management of energy development on public lands. With the health of rural economies becoming increasingly dependent upon wildlife-related recreation, hunting, and fishing, rulemaking to update the Department of the Interior’s oil and gas leasing system and bonding and reclamation requirements are important steps forward. Increasing the minimum bonding and reclamation requirements will establish a level playing field for the different activities occurring on our public lands and ensure that all public land users are leaving these lands healthier for future generations," said Corey Fisher, Public Lands Policy Director.
“We applaud Senator Bennet for his commitment to securing federal bonding reform in order to address the orphaned well crisis in America, including by urging the Department of the Interior (DOI) to raise federal bonding rates that remain untouched for decades. A recent report issued by Public Land Solutions and the National Wildlife Federation shows how inactive oil and gas wells on federal lands in five Western states pose serious threats to wildlife, outdoor recreation, and rural economies. We believe that DOI should finally increase the minimum bond amounts through a federal rulemaking to provide more certainty to taxpayers and local communities. Outdoor recreation businesses, local economies, and our communities are counting on this critical reform,” said Jason Keith, Managing Director of Public Land Solutions.
“Oil and gas operators are abandoning hundreds of oil and gas wells here in Colorado, and thousands more across the country, when the wells are no longer profitable. The federal bond levels haven't been updated for over 60 years, making it financially painless for these companies to forfeit their tiny bonds, leaving taxpayers to clean up their mess. Policy reform is long overdue to ensure the industry is held accountable. We are thankful that Senator Bennet is taking action to update federal bond requirements and calling on the Interior Department to do the same. DOI can and must increase bonding requirements through rulemaking to ensure that companies who drill on our public lands post - upfront - all of the money that is forecast for eventual clean-up," said Dr. Barbara Vasquez, member of the Oil/Gas Campaign Team of Western Colorado Alliance
In August, Bennet welcomed an initial $25 million in funding from the BIL to cap orphaned oil and gas wells across Colorado. Bennet also successfully advocated for $4.7 billion in the BIL to plug and remediate orphan oil wells, which aligned with his Oil and Gas Bonding Reform and Orphaned Well Remediation Act. Last year, he introduced the Public Engagement Opportunity on Public Land Exploration (PEOPLE) Act to restore the public’s vital role in shaping oil and gas leasing decisions on public lands. Bennet continues to work in Congress to advance bonding reform, provide communities across Colorado with resources to protect their air and water, and ensure responsible energy production on our public lands.
The full text of the letter is available HERE and below.
Dear Secretary Haaland –
I write to request that the Department of Interior (DOI) move swiftly to address inadequate and outdated federal oil and gas bonding rates. I continue to work with my colleagues to urgently advance bonding reform through Congress to increase minimum financial assurance rates, but the challenge that dangerous orphaned wells pose on our federal lands in Colorado and across the West demands immediate action across the government.
I appreciate DOI’s efforts to address the growing orphaned and abandoned well issue. These wells release harmful pollution affecting our water and air, pose a hazard to fish and wildlife, and can impair other uses of public lands such as recreation. Research has found that climate-harming methane pollution from abandoned oil and gas wells is currently the 10th and 11th largest sources of anthropogenic methane emissions in the United States and Canada, respectively. DOI’s distribution of funding from the Bipartisan Infrastructure Law (BIL) to states, including Colorado, to clean up these wells is a critical step forward.
However, in order to prevent this crisis from persisting and growing, we must address the underlying problem of outdated federal bonding rates to ensure that taxpayers do not continue to bear the costs of cleaning up wells drilled on federal lands. The Government Accountability Office (GAO) has reviewed the federal oil and gas leasing system numerous times, and has included the oil and gas program on its “High Risk List” every year since 2011, noting the risks of waste, abuse, fraud, and mismanagement and the pressing need for reform. Their 2019 report found that “weaknesses with bonds for coal mining and for oil and gas development pose a financial risk to the federal government as laws, regulations, or agency practices have not been adjusted to reflect current economic circumstances.”
Federal oil and gas bonds serve as an insurance policy for taxpayers in case companies will not or cannot clean up their wells and drilling sites themselves. However, the current minimum bond amounts – which GAO has found to be used 82% of the time – were set in the 1950s and 60s and have not since been updated, even to account for inflation. As a result, the Bureau of Land Management (BLM) now holds bonds that are worth just over $2,000 per well, even though the costs to plug and reclaim modern oil and gas wells can exceed $300,000 on average.
In DOI’s November 2021 report on the federal oil and gas leasing program, the outdated bonding system for onshore oil and gas leases is identified as one of the key areas in need of reform. Citing GAO reviews, the report recommends that “[t]he BLM should increase minimum bond amounts and set the appropriate levels taking into consideration changes in technology, the complexity and depth of modern wells, inflation, and the risk of abandonment.”
My bill – the Oil and Gas Bonding Reform and Orphaned Well Remediation Act – would strengthen and increase minimum bonding requirements for oil and gas development on federal lands to ensure adequate financial resources are available to remediate and reclaim the land and water if wells are abandoned. Codifying bonding reform into law to increase minimum financial assurance rates is absolutely critical – and I will continue working to pursue passage of these measures. In the meantime, I urge DOI to swiftly move forward on its rulemaking to address inadequacies in the federal oil and gas system as was included in the Office of Information and Regulatory Affairs’ Spring 2022 unified agenda.
By taking steps to fix this broken system, we will help ensure that companies – not taxpayers – bear the costs for cleaning up drilling sites, while ensuring responsible stewardship of our federal lands.
Thank you for considering this request. I look forward to your reply.