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Bankrupt Texas Oil Companies Abandon Toxic Wells, Cash Out CEOs

March 10, 2021
Reading time: 4 minutes

Hillebrand Steve/PIXNIO

Hillebrand Steve/PIXNIO

 

Texas oil and gas companies are pulling up stakes, pleading bankruptcy, and leaving the public on the hook for abandoned wells they insist they cannot afford to plug themselves. But the pay packages delivered to CEOs just prior to the declarations of bankruptcy seem to show that different decisions could have been made. 

“Last year alone, 31 companies worth more than US$50 billion filed for bankruptcy in Texas, bringing with them a wave of well abandonments,” writes the Texas Observer, in a story republished on Grist. Currently, the paper notes, there are “approximately 2.1 million unplugged abandoned wells across the country.”

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And the wells do need to be plugged. Typically, this is done by sealing every opening and crack with concrete to help prevent pollutants from leaking into the surrounding air and water. 

Unfortunately, oil and gas companies in Texas are increasingly taking a pass on this core responsibility. The Observer cites Weatherly Oil and Gas, which, after filing for bankruptcy in February 2019, was able to offload most of the costs of plugging the wells it was leaving behind. While the Texas Railroad Commission (RRC), which oversees the state’s oil and gas industry, tried to force Weatherly to pony up, the company ultimately struck a deal, paying $3.5 million to the commission to “cover” the costs of any abandoned wells “that it couldn’t find buyers for.”

Unfortunately for the RRC, that turned out to be 173 of 200 wells—amounting to a total cleanup cost of about $13.3 million.

But meanwhile, “though Weatherly insisted it couldn’t find the money to fulfill its plugging obligations, the company’s top executives were paid a combined $8.6 million in the year preceding bankruptcy.”

“It’s a stark example of the way that environmental liabilities are going unaddressed when companies go belly up,” the Observer says. A new report by Commission Shift reveals that the Lone Star State is currently on the hook for more than 6,000 of these orphan wells, with the RRC estimating a clean-up price tag in excess of $300 million. That, the news story adds, owes to a raft of weak policies, including environmental protection bond requirements that fall far short of what will actually be needed.  

“Companies like Weatherly that operate 100 or more wells are required to submit a $250,000 bond—approximately $2,500 per well,” the Observer notes, when a typical well plugging costs $20,000 to $40,000. 

And things are only going to get worse, much worse, as Big Oil drills ever deeper in search of its product. 

Citing an analysis of Texas data by the corporate watchdog Documented, the Observer says that whereas the “average well plugged by the RRC between 2015 and 2020 was only 680 metres deep,” the monster fracking wells being drilled in the Permian Basin average 4,500 metres, with long horizontal bores that further complicate matters. According to a 2020 Carbon Tracker report, even a typical fracking well (averaging about 3,000 metres) could cost as much as $300,000 to remediate. 

In the other big fossil industry, Inside Climate News reports that a recent bankruptcy filing by the American coal giant Blackjewel is “a harbinger of trouble ahead for the plummeting coal industry.” It also bodes ill for people who were employed by the company, or who live anywhere near one of its mines—or, as is so commonly the case in coal mining regions, both. 

Currently holding almost 200 mining permits across “thousands of strip-mined acres” in Kentucky, Tennessee, Virginia, and West Virginia, Blackjewel now wants to walk away from them all, leaving others to clean up the ravaged ecosystems (and people) it will leave behind. 

The fate of large swaths of eastern Kentucky hangs particularly heavy in the balance of a federal bankruptcy court’s decision, expected sometime this year, with nearly 8,000 acres of strip-mined mountains in need of reclamation.  

Those communities aren’t likely to get much help from Blackjewel. “Both the state of Kentucky and the companies that issued bonds guaranteeing clean-up and reclamation of the dynamite-blasted landscape warned in court proceedings that there might not be enough money to do all the required work,” writes Inside Climate. 

Like oil and gas companies, coal mining interests “are required to post bonds to cover the costs of reclamation should they go bankrupt,” and to reclaim old sites at the same time as they mine new ones, writes Inside Climate. 

Often neglecting this duty while posting wildly insufficient bonds, the coal industry “continues its lurch towards the financial abyss.” 

Peter Morgan, a Sierra Club attorney and coal bankruptcy expert, told Inside Climate there “just is not the capital left in the coal industry to satisfy all the remaining outstanding reclamation obligations. These companies have been allowed to kick the can down the road time and time again, and now they are running out of road.”

Which means that “there will be a lot more Blackjewels,” he added.

This is devastating news for the people and ecosystems of eastern Kentucky, and its neighbours. Citing its own 2019 investigation, Inside Climate notes that “with climate change dumping heavier rains, Appalachia’s strip-mined mountains face a growing risk of landslides and flooding.” 



in Climate & Society, Coal, Community Climate Finance, Ending Emissions, Energy Politics, Fossil Fuels, Jurisdictions, Legal & Regulatory, Oil & Gas, Shale & Fracking, Sub-National Governments, United States

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