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Fossil Fuels

Lying, Cheating Oil & Gas Companies Stick Taxpayers With Cleanup Bill

US taxpayers get to pay twice for oil and gas.

In our minds, we envision an oil well faithfully pumping oil for decades after it is drilled. In reality, the wells created by fracking often play out within a few years or even months. The same goes for unnatural gas wells. What to do? Drill more wells and when they stop producing, pack up your equipment and go drill down the road, around the corner, or somewhere over the rainbow.

Today, there are millions of abandoned wells all across America, many of them left behind during the fracking boom of the past 20 years. While many states require oil and gas companies to put up a bond to cover the cost of closing them down, in practice, that bond is often a small percentage of the actual cost. The Guardian reports the state of Colorado — one of the larger oil and gas producing states, requires a bond of as little a $10,000 when the actual cost is often $140,000 or more. The cost of cleaning up millions of abandoned wells in Texas is estimated at $1 billion.

Here’s how the game is played. GigantaOil drills a well and posts a bond. It carries that bond as a liability on its books but after a few years of maximum production, it sells the well to Acme Oil Corp. Acme assumes the liabilities but guess what? Acme in turn sells to Bottom Of The Barrel, LLC, a shell company that drains the last few drops out of the well, then folds its tent and disappears into the night, leaving nothing but worthless assets behind.

Now there is no money to pay to decommission the well so who gets stuck with the cleanup? Yup, you guessed it. The taxpayers who already shelled our millions in tax breaks to GigantaOil in the first place. Is this a great country or what?

Getting Paid On Both Ends

The myth in America is that oil and gas are what make the US such a great nation. Oil production and oil reserves are a matter of national security and let’s face it — without them the entire economy would grind to a halt, throwing millions of people out of work and shutting down public services like drinking water and sewer systems. Civilization as we know it would come to an abrupt halt.

Oil well on public land in New Mexico. Image courtesy of Bureau of Land Management.

But the fly in the ointment is that the oil and gas industry have used their economic power to suspend the laws of economics. They get to avoid taxes on most of their income through a convoluted web of special provisions in the tax code. Mr. and Mrs. America don’t need an IRS code that is thousands of pages long with a welter of rules and regulations to interpret all those provisions, but the fossil fuel industry certainly does. It’s an integral part of how it does business.

The free market types out there take great pleasure in telling us how efficient the market is but that is only true if it is run fairly. The fossil fuel hordes have gamed the system to the point where it is a “heads we win, tails you lose” proposition that takes no account of the pollution that results from basing the economy on oil and gas (and, to a lesser extent, coal). So, yeah, we get it. Markets are efficient and Adam Smith’s “unseen hand” has magical powers, but when free marketeers refuse to include all the costs of doing business in their grand economic calculus, they are committing a monstrous fraud on society.

The Infrastructure Bill

The US Congress at the present time is considering new legislation that would pump trillions of dollars into the economy to improve America’s infrastructure. That is a good thing, arguably. But it will also provide lots of tax dollars to clean up abandoned wells that are leaking toxins into the environment all across America.

The legislation includes a plan to inventory, measure, and track methane emissions and groundwater contamination associated with orphan wells — abandoned wells with no identifiable owner. “People on the surface think that this is a good environmental thing … but the devil is in the details,” Megan Milliken Biven, a consultant and former program analyst with the Bureau of Ocean Energy Management, tells The Guardian. She says in reality it is anything but. “This is a bill for the bosses,” she says.

$2 million is earmarked for the Interstate Oil and Gas Compact Commission, an organization closely linked to the fossil fuel industry. The draft bill empowers the group to consult with the federal government as it issues billions of dollars in grants for states to plug, remediate, and restore those orphan wells. The infrastructure bill treats the commission innocuously, granting it duties and access to federal research and development funds as if it were a formal government entity.

The trouble, The Guardian says, is it is not. It was originally sanctioned by the government. But according to an InsideClimate investigation, in 1978 the Department of Justice recommended that Congress break it up on the grounds the group had evolved into an advocacy organization. Its influence, through a membership network similar to the right wing American Legislative Exchange Council, has reached its tentacles into state legislatures across the country to promote copy and paste legislation that benefits oil and gas interests.

Uncle Sugar To The Rescue

Recently, IOGCC vice chairman Wayne Christian was recorded telling supporters, “If the bill passes, and we’re pretty close to it passing, $25 million will be coming to Texas to clean up abandoned wells and larger amounts than that in the future. So, we will be helping the energy industry to some of these trillions of dollars.”

Christian is an avowed climate denier and head of the Railroad Commission of Texas which is notorious for its close ties to the oil industry. The current chair of IOGCC is Oklahoma governor Kevin Stitt, who received more than $240,000 in campaign donations from the oil and gas sector in 2018. He is known for urging the Environmental Protection Agency to strip Indigenous tribes of regulatory authority over their land and for co-signing a letter urging the Biden administration to resume oil and gas leasing on public lands.

What is it about Oklahoma that causes it to embrace idiots like Stitt and the despicable Scott Pruitt who would rather see humans disappear from the face of the Earth than lose a dime of oil soaked profits? Do its citizens not understand that dead people make extremely poor customers?

On its website, the IOGCC calls itself a “multi-state government agency,” yet it also claims exemption from public information laws. Although the group says it does not lobby, according to ProPublica, it has spent an estimated $100,000 on Capitol Hill since March 2019 lobbying for favorable well plugging programs.

Jesse Coleman, senior researcher at the watchdog group Documented, has been investigating the IOGCC for years and says he was surprised to see a pseudo-agency identified as an arbiter of the orphan well program. He calls it an even “more powerful, more direct role” than the group usually gets, which he says is problematic because no government entity oversees the IOGCC.

“Any real amount of power going to this organization, which is funded by the oil and gas industry, [strips] power away from actual government agencies that do have oversight and accountability,” Coleman says. Not to worry says senator Ben Ray Luján of New Mexico, who co-sponsored the legislation. He explained that according to the proposal, the IOGCC’s role is to provide technical assistance and consultation. “Consultation is distinct from control,” Luján’s office said, defending the necessity of the IOGCC’s position in orphan well cleanup.

That may be true, but why are the taxpayers giving any money to an avowed climate denier who is little more than a spear carrier for the oil and gas industry? When do we stop letting the lunatics run the asylum?

Going Along To Get Along

The National Wildlife Federation and Environmental Defense Fund have endorsed the current bill. John Goldstein, senior director of regulatory and legislative affairs for the EDF, tells The Guardian his group was not worried about IOGCC influence. “We didn’t want to see this opportunity pass us by to get this funding out the door,” he said.

Rob Schuwerk, executive director of Carbon Tracker’s North America office, says, “The question is, does it then incentivize people to hold off plugging wells because they think federal money is going to be there for it?” He adds that plugging orphan wells won’t eliminate methane emissions across the oil and gas sector at anywhere near the scale needed to avert the worst effects of the climate emergency, scientists have pointed out, as long as drilling continues.

“I think [lawmakers] really need to be scrutinizing that issue and ensuring that they address the incentives and moral hazard problem, not just money to plug wells,” Schuwerk says. “There should be a good quid pro quo.

Leveling The Playing Field

In other words, let’s not just give the fossil fuel industry everything on its wish list. Those who pray at the altar of free market theory claim all they want is a level playing but that is a lie. They want the playing field tilted as much as possible in their favor. At some point, the best interests of the the larger community have to be given priority. “There’s no time like the present,” as my old Irish grandmother liked to say.

 

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Written By

Steve writes about the interface between technology and sustainability from his homes in Florida and Connecticut or anywhere else the Singularity may lead him. You can follow him on Twitter but not on any social media platforms run by evil overlords like Facebook.

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