By James Jimenez and Erik Schlenker-Goodrich, Santa Fe New Mexican
May 26, 2021
Part of the social contract for companies operating in New Mexico is the straightforward notion that they should clean up after themselves. That’s especially true for industries like oil and natural gas whose messes contain deadly pollutants.
Properly plugging wells, decommissioning pipelines, addressing spills, leaks and more are all critical to ensure the safety of neighboring communities and protect the health of our environment. These should also be the norm. Unfortunately, too many struggling and bankrupt oil and gas companies have idled and abandoned thousands of wells that are a pollution threat to our air, land and water, with the very real prospect of many more to come.
Before they can drill for oil or natural gas, companies must post money – called a bond – for cleanup. Unfortunately, the bonding amounts set by the state and federal governments are far too low to cover the cleanup costs of abandoned wells, so taxpayers are at risk of being forced to pick up the rest of the bill. In New Mexico, it’s a shocking bill, according to a new report from the Center for Applied Research. The state is bonded for just 2.4% of actual cleanup costs, an absurdly low amount.
Put differently, the state holds just $201 million in bonds from oil and gas companies versus a whopping $8.3 billion total price tag for the closure and cleanup of roughly 25,000 wells on state and private lands. And this estimate does not include the costs to clean up the 33,000 wells on federal public land plagued by an equally anemic bonding system. As oil and gas declines in the years ahead, as it is projected to do, additional bankruptcies and abandoned equipment could become more frequent, with grave results.
Taxpayers and publicly funded services like education, as well the state’s ability to cleanup wells and other oil and gas infrastructure, are at immense risk. When not properly plugged, oil and gas wells can emit methane and other toxic pollutants, contaminate ground water, and pose public safety risks. In the event operators fail to do so on their own, bonding must provide the funds needed to properly plug wells, remove equipment, remediate contaminated soils, and restore land to a healthy state.
Plugging and retirement costs for oil and gas wells vary, but the report estimates the average for conventional wells at $86,100. The costs for the growing set of fracked horizontal wells are many times greater. In addition, oil and gas companies pay $51 per mile in bonding for pipelines on state trust lands, yet the report estimates the average cost for decommissioning and reclamation at $211,000 per mile – yet another astounding gap.
New Mexico taxpayers could be on the hook for a massive portion of this $8 billion for the wells alone – more than our entire annual state budget. State Land Commissioner Stephanie Garcia Richard rightly called the gap “staggering” and decried inadequate bonding levels for oil and natural gas extraction on state trust lands. We applaud her leadership and commitment that we not leave our children with a terrible legacy of environmental degradation, the health problems created by pollution, and the extraordinary cost to clean it all up. That’s not the kind of future New Mexico’s children should inherit.
We call on state lawmakers to act quickly to increase the bonding rates for oil and gas extraction on state and private fee lands to hold the oil and gas industry accountable for its own messes.
Erik Schlenker-Goodrich is executive director of the Western Environmental Law Center. James Jimenez is executive director of New Mexico Voices for Children. Both live in New Mexico.