New report warns that taxpayers could end up paying $3 billion for state’s energy disaster — here’s why
Low-producing oil and gas wells across Colorado could cost taxpayers at least $3 billion to decommission, according to The Guardian.
What’s happening?
A recent report from Carbon Tracker found that 27,000 oil and gas wells in Colorado generate $1 billion in revenue at most. With production volumes decreasing, these wells could be decommissioned. According to the state Energy and Carbon Management Commission, closing a single site could cost $110,000 or more. That means closing all 27,000 sites safely could cost between an estimated $4 billion and $5 billion.
Because of the difference in revenue and costs to decommission, the state needs to pay at least $3 billion, which could come at the expense of taxpayers.
Why is this report important?
Colorado is the fourth-largest oil producing state in the United States, according to the Energy Information Administration. However, gas and oil produce air pollution, contaminate water, and can harm wildlife. With renewable sources of energy, such as solar energy, states can produce energy without these effects and help create jobs in new sectors. While the benefits are enormous and worth the investment, the cost to transition away from gas and oil wells can still be high.
“The biggest problem here is just the nature of this activity: You make a lot of cash at the beginning, and then you have a big cost at the end,” Carbon Tracker Executive Director Rob Schuwerk said. “The way you cover a cost like that is you make people save along the way, and this is not done now.”
While Colorado outlined regulations that would require gas and oil companies to pay for the cleanup of decommissioned sites in 2022, the companies do not have the required amount of money it takes to close sites. According to an analysis from ProPublica, these companies only have about 2% of the funds needed to clean up and decommission their sites.
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“They’ll never generate enough money to pay to close their own wells,” Environmental Defense Fund lawyer Adam Peltz said.
The report’s analysis found that the state must decide between developing alternatives to pay for the closures of these sites and having taxpayers pay. A former colleague of Kelly Mitchell, an analyst at Documented who used to work at the Department of the Interior, told her, “The best time to collect is on payday.” That means now, as companies such as Exxon Mobil and Chevron are reaping record profits.
However the cleanup of these sites is paid for, it’s vital it happens. If gas and oil sites are not properly decommissioned, they can pollute groundwater and cause more air pollution, bringing risks to wildlife and us, according to Bloomberg Law. An old site in Montana is one example where gas is still leaking.
What’s being done about oil and gas well decommissioning?
While Colorado policymakers face the reality of how to get the funds for the safe decommissioning of these sites, other states and companies are leading by example.
ClimateWells, an Austin, Texas, company, is plugging old oil and gas wells across the state, focusing on Latino and Indigenous communities, who disproportionately are located within a one-mile radius of oil and gas wells, according to the Environmental Defense Fund. The state itself also acquired $80 million in federal funding to properly plug old oil wells.
In Los Angeles, a ban prohibits the construction of new oil wells, which will prevent future problems. In Illinois, researchers have developed a way to transform abandoned wells into geothermal energy storage.
Even in Colorado, property owners have sued a Denver-based oil company for abandoning a site and not properly cleaning it up.
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