Without Reform to Federal Oil and Gas Drilling Requirements, U.S. Taxpayers Could Face a Nearly $18B Clean-Up Bill

U.S. taxpayers could be expected to pay up to $18 billion to clean up oil and gas wells on federal lands if woefully inadequate federal requirements requiring fossil fuel companies to cover the cost of cleaning up drilling sites around the country are not strengthened, according to a new report from Public Citizen.

The report comes as oil and gas and their allies on Capitol Hill are working feverishly to halt a sensible and long overdue Biden administration rule to charge fossil fuel companies more to ensure that taxpayers do not cover oil and gas cleanup costs, which range between $35,000 and $200,000 per well, according to the Bureau of Land Management.

The report found that cleaning up more than 89,000 wells on federal lands could cost between $2.9 billion and $17.7 billion, with a midrange estimate of $6.2 billion. Nearly 90% of the potential high-end cleanup bill is in just five states: New Mexico, Wyoming, Utah, Colorado and California, with almost 65% of the potential tab in New Mexico and Wyoming alone, according to the report.

“The boom and bust nature of the oil and gas industry puts taxpayers at higher risk for well cleanup because, when prices fall for oil and gas, bad actors have an economic incentive to just walk away from their wells, leaving taxpayers in the lurch,” said Alan Zibel, a research director with Public Citizen. “Industry lobbyists are downplaying the risks of another oil and gas bust as the industry rakes in record profits. But the current boom won’t last forever, and the U.S. government needs to be prepared for the next bust. Despite oil industry and Republican pushback, strong public protections for oil and gas drilling on public lands are sorely needed.”

In the summer 2023, the Bureau of Land Management began a rulemaking process to ensure drilling companies start paying higher royalty costs to cover the costs of orphaned wells. The Biden administration’s proposed rule builds on legislation passed in 2022 hiking royalties charged to fossil fuel companies for drilling on public lands.

Corporations awarded a lease to drill on federal land must post a bond. If the leasing corporation abandons an exploration site, goes bankrupt, or fails to plug a well securely, the posted bond covers the cost of doing so. Because current the bonding requirements are decades old, the bonds are often insufficient to cover the expenses today, handing taxpayers a bill for the difference.

On Wednesday, the U.S. House Natural Resources Committee will consider the “Restoring American Energy Dominance Act” introduced by Rep. Lauren Boebert (R-Colo.), which, if enacted, would require the Bureau of Land Management to withdraw the Biden administration rule proposal before it is finalized.