Why Oklahoma Gets a Bill When the Oil and Gas Industry Abandons a Well

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To drill an oil, gas or disposal well in Oklahoma, operators have to post a bond with the Corporation Commission.

But the financial requirements to drill in Oklahoma are the lowest in the region — too low to cover the risk of abandoned wells, the Journal Record’s Sarah Terry-Cobo reports.

Currently, a single operator can cover all its wells by posting a $25,000 bond. The highest bond — for particularly risky wells — is $100,000.

Terry-Cobo writes:

If the [drilling] company goes out of business, the state is responsible for safely capping the wells with cement, and each can cost as much as $55,000.

Oklahoma has 559 abandoned wells. One cent of every $100 of oil and gas produced goes into a well-plugging fund. The Corporation Commission says it could cost tens of millions to seal them all. The problem: “There is only $1.3 million in the account,” the paper reports.

The agency and State Rep. Seneca Scott, D-Tulsa, want to raise the bond requirements to drill in Oklahoma. A representative of the oil and gas industry says increasing the bond amounts — which haven’t been changed since 1986 — isn’t necessary, the paper reports:

The Oklahoma Independent Petroleum Association represents thousands of producers, and spokesman Cody Bannister wrote in an email that the industry has a record of environmentally responsible production. Increasing the surety is unnecessary, he wrote.

The bond requirements for drilling are higher in other oil and gas states, the Journal reports:

Texas’ financial security requirements are calculated based on the depth of the well: $2 per foot. With wells as deep as 20,000 feet, surety requirements can run as high as $40,000. Pennsylvania has a tiered system that accounts both for the number of the wells and the depth, ranging from $35,000 to $600,000. In North Dakota the minimum is $50,000, and a blanket bond for multiple wells is a $100,000 surety.

But North Dakota can raise the bond to $50,000 per well if a company has more than three wells out of compliance, said Doug Goehring, the North Dakota agricultural commissioner and a member of the state’s Industrial Commission

The federal Bureau of Indian Affairs requires a $50,000 bond for drilling in Oklahoma’s Osage County — “double the state’s requirement,” the paper reports.


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Comments

  • Pat Maloy

    Hey genius the state of Oklahoma has made billions in free royalty since the beginning of the oil industry in ok Yourworried about 1.3 mi in plugging liabilities Oklahoma should give money back to plug a few wells maybe 1 percent of the free money

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