Private Equity-Backed Oil and Gas Drillers Saddle Taxpayers With Costly Cleanup Risk

Investments by private equity firms in nearly 2,700 oil and gas wells on federal and tribal lands across the western United States could leave taxpayers with a cleanup bill of up to $380 million, according to a new report released today by the Private Equity Stakeholder Project and Public Citizen.

Without significant changes in financial protections mandated by the U.S. government, the drillers backed by private equity buyout firms on federal lands will only set aside $5.7 million to clean up after the wells are depleted, the study found, a meager 1.5 percent of the potential cleanup costs. The study’s scope includes wells that either have been drilled or are projected to be drilled based on federal drilling permits approved since 2017. The $380 million cleanup bill represents a slice of the total cost of cleaning up from oil and gas drilling on public lands, which has been estimated to be at least $6 billion, and potentially much more.

The involvement of an industry infamous for borrowing money to buy up assets and stripping their value should be of major concern to government officials that oversee oil and gas drilling. The U.S. Bureau of Land Management in July released a long-overdue proposal to strengthen oil and gas cleanup requirements for federal lands. These regulations, once made final, will ensure that oil and gas drillers cannot evade the cost of cleanup. Further legislation is needed to ensure that fossil fuel companies cannot use bankruptcy to ditch their responsibility to clean up oil and gas wells.

“If these companies declare bankruptcy and abandon these oil and gas wells, the public faces major costs, and buyout firms escape with their profit and zero consequences,” said Alan Zibel, an oil and gas researcher with Public Citizen who co-authored the report. “Private equity buyout firms have a history of buying up businesses in declining industries, extracting profits and then filing for bankruptcy once the assets the company owns become worthless. That means federal and state officials must be on high alert as these firms pick up and consolidate oil and gas assets discarded by oil and gas giants.”

The report identified 19 private equity firms, including Blackstone, Carlyle Group, Apollo Global Management, KKR, and Warburg Pincus, that have invested billions of dollars into fossil fuel companies in recent years. These firms have invested in 35 different oil and gas companies that received permits to drill on federal lands since 2017.

Many private equity firms pitch themselves as environmentally responsible owners and release public net-zero pledges, while much of the industry claims to focus on reducing emissions and mitigating impacts on nearby communities, according to the report. The private equity industry is also playing a key role in efforts to certify and promote methane gas. This strategy would boost production of methane gas far into the future, undermining the transition away from fossil fuels.

“The public bears great costs associated with private equity firms' expansion of their fossil fuel holdings,” said report co-author Nichole Heil, research and campaign coordinator with the Private Equity Stakeholder Project. “Private equity firms have relied heavily on institutional investors like public employee pension funds to help fund this expansion. However, they have also now shifted the burden of clean up onto taxpayers. These large opaque financial actors are not only worsening the climate crisis, but also exacerbating the state’s fiscal status and harming local communities.”

Colorado currently has the largest potential cleanup bill from private equity-backed oil and gas companies, the study found. The state could see potentially a significant shortfall of $161 million when the time comes to deal with abandoned wells on federal and tribal lands alone. More than 75 percent of Colorado’s wells on federal lands are on lands leased by private equity backed drillers.