Wyoming passes up federal funds to voluntarily close oil and gas wells

Gov. Mark Gordon announced this week the state will decline an invitation to apply for millions in federal Inflation Reduction Act funds aimed at shuttering low-producing oil and gas wells.

The Mitigating Emissions from Marginal Conventional Wells program would pay the costs of voluntarily closing and remediating wells that produce less than the equivalent of 15 barrels of oil per day - aka "stripper" wells.

Wyoming is eligible for up to $5 million of the $350 million program, according to federal documents. The funds could mostly only be used to pay for plugging non-federal wells - wells that don't tap into federal minerals or sit on federal land. The program does not help compensate operators for lost production revenue and requires monitoring for errant methane emissions from the facilities pre- and post-closure - an expense that the federal program might not cover, according to Petroleum Association of Wyoming President Pete Obermueller.

Notably, Obermueller said, the program also doesn't make funds available to install leak detection and controls to prevent errant greenhouse gas emissions - a significant expense for low-yielding production facilities. 

"We spent many hours with operators and regulators trying to understand the requirements of this grant - the first sign it's not a well-written program," Obermueller said. Ultimately, he added, his organization concluded the grant was not worth pursuing.

Though stripper wells are not particularly lucrative, they do support a lot of small oil and gas operators around the state, according to the petroleum association. They also account for about 10% of the state's oil production and about $265 million in annual revenue to the state, according to Gordon's office.

"This approach - concocted by DC bureaucrats - shows a complete disregard for the importance of this industry to Wyoming's economy," Gordon said in a prepared statement.

Despite its shortcomings to incentivize the industry in Wyoming, the aim to permanently close low-producing and idle wells is a practical step in curbing errant emissions of methane - a potent greenhouse gas - according to the U.S. Environmental Protection Agency.

The agency is in the process of modifying its rules to impose stricter emissions measures on the industry, noting, "Oil and natural gas operations are the nation's largest industrial source of methane, a highly potent climate pollutant that is responsible for approximately one-third of current warming resulting from human activities."

For its part, Wyoming monitors oil and gas facility emissions and administers an industry-funded program to close idle and abandoned wells. 

The Wyoming Department of Environmental Quality oversees a "leak detection and repair" program that monitors facilities and encourages operators to install leak control technologies. The agency uses infrared cameras to monitor facilities for methane leaks, and requires operators to fix them.

"The governor rejecting these dollars will not affect our program," DEQ spokeswoman Kimberly Mazza said. "We'll just continue doing what we do."

The Wyoming Oil and Gas Conservation Commission requires "idle well" bonding so that individual operators cover the expense of closing their own wells. If individual bonds don't cover the cost, the state dips into an orphan-well account funded via a "conservation tax" paid by oil and gas operators.

Wyoming increased bonding requirements after documenting some 6,020 orphaned wells in the wake of the coal-bed methane gas boom in the 2000s. Since, conservation groups have urged the federal government to follow suit. 

"Even we brag about the state doing a good job of taking care of abandoned wells," said Bob LeResche, who serves on the board of directors for the Sheridan-based landowner advocacy group Powder River Basin Resource Council. "We want the feds to do better at it, too, and that's what they propose to do."

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