Christian: Texas Taxpayers Not on the Hook to Pay for Old Oil and Gas Wells
Claims about plugging of wells off base, inaccurateOctober 16, 2020
Imagine if your line of work was only talked about in a negative way. Accountants are all money launderers, teachers are all lazy, and bankers are all greedy. This is how the oil and gas industry is often written about. It seems that every week there is yet another “study” by some unknown nonprofit group or “think” tank that presents sensationalized information with the intent of painting an inaccurate and unflattering image of the oil and gas industry for the public.
On Oct. 1, a report by Carbon Tracker claimed that Texas taxpayers could be on the hook to pay $117 billion to fix old oil and gas wells. What an incredible number! This reminds me when environmentalists famously predicted millions would die from starvation in the 1980s or entire nations could be “wiped out” by 2000 because of global warming. Let us get to the truth.
When a well no longer produces oil or gas, the operator of that well is required by law to plug it with concrete to prevent the well from polluting land or groundwater. Most oil and gas wells are plugged by their operators in accordance with the law. For example, in Fiscal Year 2020 (from Sept. 1, 2019 to Aug. 31, 2020), the oil and gas industry plugged 7,375 wells without the use of any state funds.
However, some operators do not follow the law. When this happens, the well becomes orphaned. An orphaned well is eventually plugged by the Railroad Commission of Texas (RRC), but this does not mean that taxpayers pay for that well to be plugged. When an operator applies for a drilling permit from the RRC, they must provide financial security – a bond or letter of credit – that the RRC will use to plug wells that an operator abandons. The oil and gas industry also pays millions of dollars in fees to the RRC every year, some of which are used to plug orphaned wells.
The Commission takes our responsibility to protect public safety and the environment very seriously, including our job to plug orphaned wells. The RRC’s State Managed Plugging Program plugged 1,477 in FY 2020. For the last four years, the program has exceeded targets set by the Texas Legislature.
Also, let’s not pretend that the oil and gas industry is the only source of energy with clean-up costs. An oil or gas well produces for around 50 years and costs between $15,000 to $20,000 to plug. It costs around $200,000 to decommission a wind turbine that could operate for as little as 20 years. That is ten times the cost for 30 years less production! In fact, it could cost $2.3 billion to decommission the 12,000 wind turbines in Texas. And taxpayers could be on the hook for that cost because wind power companies aren’t required to provide financial assurance to cover cleanup costs.
Like any industry, the oil and gas industry has some bad apples, but the truth is most operators are responsible and fulfill their legal obligations and plug their wells. If that does not occur, the RRC plugs the wells using operator funds. And that’s the truth.
A lifelong conservative businessman, Wayne Christian was elected as our 50th Texas Railroad Commissioner in November 2016. In June 2019, Christian was elected by his fellow commissioners to lead the agency as Chairman, a position he held until September 2020. Prior to his time at the Commission, Christian served seven Sessions in the Texas House of Representatives, accumulating a strong record of standing for free markets and against burdensome regulations. In addition to his duties as Commissioner, Christian was appointed by Governor Greg Abbott to serve as the Official Representative of Texas on the Interstate Oil and Gas Compact Commission. Christian is married to his wife, Lisa, and together they have three daughters, Liza, Lindsey and Lauren.
About the Railroad Commission:
Our mission is to serve Texas by our stewardship of natural resources and the environment, our concern for personal and community safety, and our support of enhanced development and economic vitality for the benefit of Texans. The Commission has a long and proud history of service to both Texas and to the nation, including almost 100 years regulating the oil and gas industry. The Commission also has jurisdiction over alternative fuels safety, natural gas utilities, surface mining and intrastate pipelines. Established in 1891, the Railroad Commission of Texas is the oldest regulatory agency in the state. To learn more, please visit http://www.rrc.texas.gov/about-us/.