Tackling the scourge of orphaned oil and gas wells
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Spurred by the shale revolution, oil production in the United States has surged almost three-fold since 2010 to almost 14 thousand barrels of oil per day today. That boom has been punctuated by busts. The 2014 and 2020 oil price slumps resulted in a wave of bankruptcies across the energy sector.
One underappreciated casualty of the various downturns is that millions of oil and gas wells have been left abandoned, many of them unplugged so that methane and toxic chemicals can escape.
Upstream operators often abandon a well when operating it is no longer worth the money. That's ok if the site has been properly plugged or reclaimed as it will release little or no methane. It becomes a problem if the operator fails to decommission it to modern standards, or if it was abandoned some time ago, not reclaimed at all.
Oil and gas firms might decide to pass the liability for running a marginal well onto a smaller operator, who perhaps believe they can eke out a profit. However, if the sums don't add up and the minnow goes bankrupt, the well becomes orphaned with no responsible owner. When the chain of responsibility is unclear they can go on releasing plumes of methane for decades.
What happens when a polluter goes absent, leaving an orphaned well having failed to pay for its decommissioning? The state is usually required to step in, but funding is tight, and the financial gap set to widen.
Demands for a market mechanism to halt the practice are coming from an increasingly common bedfellow to the fossil fuel industry: the data centres.
While capturing fugitive methane emissions is getting the attention of the hyper-scalers as they eagerly devour every joule of energy, they are also at the forefront of demand for carbon credits linked to abating methane emissions from orphaned oil and gas wells (see Putting a price on superpollutants).
However, burgeoning interest from the tech sector in mitigating near-term emissions is colliding with carbon crediting methodologies that may fail to address all of the underlying risks: specifically the accuracy of methane monitoring data, and the credibility of the baseline.
Before we get to those issues, what is the scale of the problem?
