Cleaning Up Kentucky's Abandoned Oil and Gas Wells—Finally, Maybe

New federal funds could be maximized to repair a centuries-old environmental issue and create new jobs...if state officials are willing.

When we talk about the extraction economy in Appalachian Kentucky, we’re mostly pointing the finger at coal: the modern-day behemoth industry that continues to wreak environmental harm and, in many ways, define the past and present of the region. What often flies under the radar, though, is that Kentucky was once a hotbed for oil and gas drilling, resulting in thousands of abandoned (or “orphan”) wells that remain unplugged across the state with wide-spread environmental and public health consequences.

In October 2021, the Environmental Defense Fund released a report outlining the impact of the 14,367 (currently documented) orphan wells—one-fifth of the nation’s estimated total—in Kentucky. “When a well is left unplugged, it can leak oil and other toxic chemicals, endanger water wells and other sources, contribute to air pollution and emit methane, a powerful greenhouse gas. Orphan wells also dramatically impact local communities and economies by threatening the health and well-being of residents and decreasing property values, which lowers funding for local schools, police departments and other public services,” the report explains, noting that many counties across Appalachian Kentucky—including Lee, Cumberland, Estill, Powell and Magoffin—are each home to hundreds of these orphan wells.

Months later, the U.S. Department of the Interior announced that $1.15 billion would be allotted for states and tribal lands to clean up orphan oil and gas wells, but it quickly became clear that the amount of money Kentucky is expected to receive, around $78.9 million, would only successfully plug one-thirds of known abandoned wells—at most.

When starting from a position of half-measures, how can state officials maximize the impact of these federal funds to help plug as many orphan oil and gas wells as possible? Do local community members even know that these threats to the local environment exist? We spoke with Ted Boettner, Senior Researcher at the Ohio River Valley Institute, about how the orphaned oil and gas well crisis reached this point, and where Kentucky can go from here to safely put this part of its extraction past to bed.

(Map via the Environmental Defense Fund)

Sarah Baird: Let’s start off with the basics: What is an “orphan” oil or gas well, and why does Kentucky have so many?

Ted Boettner: Generally speaking, an “orphan” well is an abandoned oil or gas well that no longer has an owner who can be located. The oil boom in the United States began in the Ohio River Valley basin in the mid-to-late-1800s, and during that time, there were hundreds of oil and gas towns all across the Ohio River Valley. That boom ended in the early 1900s, and then everything moved out west.

But during that time, hundreds of thousands of wells were drilled, and since there were no modern regulations, most of these wells were not plugged, and if they were plugged, they were improperly plugged and restored. Fast-forward to today, and you have a lot of these wells, hundreds of thousands, where companies have gone bankrupt, or they've transferred their wells to insolvent companies—which they shouldn’t have—and states did a really poor job of ensuring that these companies paid for the proper closure of these wells. So, now they’ve become orphans, because the companies are out of business.

SB: There’s been quite a bit of fanfare about how the infrastructure bill has $1.15 billion for states and tribal lands to help mitigate the problem, but you discovered that this will only decommission or close about a third of the documented orphan wells in the region, right?

TB: Yes, that’s exactly right. We did that by looking at each of the states in a notice of intent letter regarding the formula grants. And one of the things the Department of Interior asked is, “How many documented orphan wells do you have in your state, and how much is it going to cost to plug them?” And when we look at how many [orphan wells] states have, and the allocation that they're going to get, which is close to about $1 billion total, that is only going to take us partway there to actually plugging just these documented orphan wells. Kentucky could have thousands of more wells that are undocumented and we don't know about that are sitting behind someone’s farm or by a creek that the state oil and gas regulators don't have in their database.

SB: In terms of local communities, how aware are county governments and citizens that this is a major issue? I know Lee County has far-and-away the most orphaned wells here in Kentucky, for example.

TB: Not very aware, generally speaking. I think farmers are aware, or people who own large plots of land, because if you try to sell your property, whoever’s considering buying it might ask, “Hey, do you have oil and gas wells on your property, and do you own the lease rights to them?” And if the wells are old, they might ask, “Is that well plugged?” And if it's not, you could be talking $10,000 to upwards of $100,000 to plug the well on the property you’re trying to buy or sell. That can make this pretty hard.

Until the past decade, unplugged oil and gas wells were just seen as sort of a nuisance, but we’ve learned a lot about the environmental impacts that leaky wells have, not just in the atmosphere with methane, which is a potent greenhouse gas, but also with other types of compounds that are entering into the soil and water. A lot of researchers and academics have started looking at how many of these oil wells actually exist, but there’s been very little research about the environmental impacts, like how much they are leaking and how much methane is entering the atmosphere. What is happening to the water supply? What is the damage at the well site? There’s just been little work done on that.

For companies, plugging an oil and gas well is the worst return on their investment in the world. They get no revenue from it anymore and it costs them money. For a lot of people in the industry, it’s an afterthought, so they try to do it as cheaply as possible. The interesting thing about Eastern Kentucky is that it has a little bit deeper wells than the rest of the state, so those wells cost more to plug. One thing that I noticed in the intent letter [sent earlier this year] was that Kentucky typically says that their plugging costs are the lowest in the country, like $4,000 or $5,000, but now they’re estimating $20,000 a well. So, that’s a big leap.

SB: Would establishing a federal definition for an “orphan” well help to find and plug them? I know each state currently has different definitions.

TB: Yes, because the last thing that anybody wants is to use this federal money to plug a well when an owner can be located. Whether it’s Chevron, Exxon, Diversified Energy, BP—whoever it is—the state, and taxpayers, want to ensure that they’re not paying to plug a well that has an owner who can be found. The only way to do that is to properly define that well and have a good process for ensuring that you’re trying to locate that owner, and if there's any bonding on the well, you’re getting the owner to do that.

The problem is that states have 30-plus definitions of an orphan well. I think before you spend federal money, you should make sure that a lot of these wells don't have owners. Kentucky’s a state in particular where there are a lot of wells who have owners. The problem is that the Kentucky Energy and Environment Cabinet is not usually in the business of being corporate researchers. So, it’s a lot when they’re already short-staffed. If you have roughly one inspector for every 11,000 wells, it’s hard to keep up with that.

SB: Why isn’t the funding there via oil and gas companies to plug these wells?

TB: It’s asinine that we are bonding wells at just a fraction of the cost that it takes to plug and abandon them. What we should’ve been doing is requiring companies to set aside funds at the very beginning of production, and making sure that they have enough money to properly plug and abandon these early wells. But it’s a little late to do that now.

The bonding system has completely failed because of blanket bonds. If you actually did a full-cost bonding for a lot of these companies, they might not be able to afford it, and the bonding company likely wouldn’t issue them a bond, because they don't think [the company] actually has the resources. That right there should stop us all in our tracks and say, “Wait a minute…oil and gas companies don't have the money to clean up their mess, but they have the money to produce the gas and oil?”

What’s interesting about Kentucky is it’s actually in an extremely vulnerable situation. Places like Ohio, Pennsylvania and West Virginia are very large producers of shale gas—trillions of cubic feet. Kentucky is only producing around 200 billion cubic feet of shale gas. So, there's more of a mechanism in other states to potentially put a fee on production to pay for cleaning up orphan wells, whereas in Kentucky, it’s a lot harder. It is very difficult to figure out how you would pay for it without residents picking up the tab. I don’t know how you would do it in Kentucky otherwise. I really don’t.

SB: How could a statewide “in-house” plugging program not only work to help get these wells closed, but also create jobs?

TB: It’s a very small industry when it comes to the gas and oil service companies that plug wells right now. It’s mostly local, and there are maybe a dozen companies in the Ohio River Valley states that do this work. Pretty soon, though, you’re going to have this vastly increased number of wells that are being plugged by the state—more wells than have ever been plugged in the state each year, period. So, there is a need for an apprenticeship-type program to help people who typically may not be going into this business to get into it.

The good news is—and the bad news is—this business is going to be around for a long time. There are hundreds of thousands of wells to plug in this space, so in order to do that, one of the things that should've been in a federal bill, I would argue, is finding additional money to help with the creation of an apprenticeship or training program, whether it's with a community college, maybe, or with a construction trades union. I think that could go a long way to ensure that we have the skilled workforce to carry out a lot of this work and also include people who typically not are in that workforce, especially women and people of color.

I don't see any reason why the Department of Interior or the White House couldn’t say that any plugging job over $1 million needs to be placed into a project labor agreement. That would help keep those jobs local, and would help increase union jobs in the areas. But aside from that, I think what’s desperately needed, too, is for Kentucky and the EEC to create its own workforce. There would be some initial capital costs to buy rigs and equipment and those things, but I think it'd be a great idea. You’d save a lot of money, long-term, if you allowed states to have in-house public employees perform this work.

In light of my conversation with Boettner, I reached out to Robin Hartman from the Kentucky Energy and Environment Cabinet for clarification on a few issues. She responded to my inquiry about how the EEC will go about funding the plugging of the remaining two-thirds of known orphaned oil wells with the following statement: “Kentucky is expected to receive up to $78.9 million to plug orphan wells and clean up abandoned tanks, depending upon the grant application decision-making by DOI. That amount is estimated to complete work at approximately one-third of the total number of wells needing plugging. Since 1990, the division has addressed more than 4,100 wells, and will continue this important work as resources allow. Until the recent federal funding, the funds for the cabinet to plug wells has primarily come from bond forfeitures, with some additional funding from the state budget used to clean up abandoned tanks. The cabinet will continue to utilize forfeited bonds as available.”

In her recollection, there has been only one instance of the EEC suing an oil and gas company for plugging funds, back in the 1990s, with no plans to do so again in the near future. There are also no plans to explore the possibility of a statewide apprenticeship program, with an “estimated 6-8 additional field and/or office staff” expected to be hired, staged over a five-year period, as the program expands.

Yes, an additional 6-8 people for over 14,000 orphaned wells. Kentucky’s environment deserves better.

For additional information and ideas for maximizing the impact of federal dollars when it comes to plugging orphaned wells, the Ohio River Valley Institute has an extensive collection of easy-to-read, actionable white papers.

To report an orphaned well on your property or in your area visit the Division of Oil and Gas landing page or e-mail: orphanwells@ky.gov.