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Why Oklahoma Gets a Bill When the Oil and Gas Industry Abandons a Well

Filed by KOSU News in State Impact.
November 27, 2012

Katsrcool / Flickr

To drill an oil, gas or disposal well in Oklahoma, operators have to post a bond with the Corporation Commission.

But the financial requirements to drill in Oklahoma are the lowest in the region — too low to cover the risk of abandoned wells, the Journal Record’s Sarah Terry-Cobo reports.

Currently, a single operator can cover all its wells by posting a $25,000 bond. The highest bond — for particularly risky wells — is $100,000.

Terry-Cobo writes:

If the [drilling] company goes out of business, the state is responsible for safely capping the wells with cement, and each can cost as much as $55,000.

Oklahoma has 559 abandoned wells. One cent of every $100 of oil and gas produced goes into a well-plugging fund. The Corporation Commission says it could cost tens of millions to seal them all. The problem: “There is only $1.3 million in the account,” the paper reports.

The agency and State Rep. Seneca Scott, D-Tulsa, want to raise the bond requirements to drill in Oklahoma. A representative of the oil and gas industry says increasing the bond amounts — which haven’t been changed since 1986 — isn’t necessary, the paper reports:

The Oklahoma Independent Petroleum Association represents thousands of producers, and spokesman Cody Bannister wrote in an email that the industry has a record of environmentally responsible production. Increasing the surety is unnecessary, he wrote.

The bond requirements for drilling are higher in other oil and gas states, the Journal reports:

Texas’ financial security requirements are calculated based on the depth of the well: $2 per foot. With wells as deep as 20,000 feet, surety requirements can run as high as $40,000. Pennsylvania has a tiered system that accounts both for the number of the wells and the depth, ranging from $35,000 to $600,000. In North Dakota the minimum is $50,000, and a blanket bond for multiple wells is a $100,000 surety.

But North Dakota can raise the bond to $50,000 per well if a company has more than three wells out of compliance, said Doug Goehring, the North Dakota agricultural commissioner and a member of the state’s Industrial Commission

The federal Bureau of Indian Affairs requires a $50,000 bond for drilling in Oklahoma’s Osage County — “double the state’s requirement,” the paper reports.

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