Wednesday, July 24, 2024

Louisiana will receive $25M federal grant to plug orphaned oil and gas wells

by BIZ Magazine

By Victor Skinner | The Center Square contributor

Louisiana will use a $25 million grant to plug, cap and reclaim up to 900 orphaned oil and gas wells across the state in the first phase of a $4.7 billion federal program included in last year’s infrastructure law.

Louisiana was among two dozen states awarded a total of $560 million in grants from the Department of Interior on Thursday to plug, cap and reclaim orphaned oil and gas wells, representing the first payments from $1.15 billion in phase one funding.

Louisiana is expected to use the funding to plug between 250 and 900 documented wells near low-income communities, where the state hopes to use displaced energy workers from disadvantaged communities to do the work.

The intent of the program is to clean up the well sites while creating jobs, according to the DOI.

“We’re particularly excited about these investments because they will be job creators,” Winnie Stachelberg, infrastructure coordinator at Interior, told The Associated Press. “In addition to creating immediate jobs addressing the pollution, these investments will build a foundation for future job growth once sites are cleaned up.”

Louisiana’s funds will also go towards developing procedures to measure and track ground and surface water contamination and for equipment to measure methane, which will be used to locate additional wells that need to be plugged.

“The state will also contract for an academic study of methane emissions from Louisiana’s oil and gas wells to assist in predicting those wells most likely to leak methane,” according to a DOI release.

In Louisiana’s notice of intent to apply for the grant, the Louisiana Department of Natural Resources identified 4,605 orphaned wells in need of remediation at an estimated cost of $401.7 million. The document states Louisiana lost 12,256 jobs in the oil and gas industry between March 1, 2020 and November 15, 2021, a 23.42% dip.

A 2021 survey of idle and orphaned oil and gas wells conducted by the Interstate Oil and Gas Compact Commission showed Louisiana has plugged 3,450 orphaned wells since it launched its state program in 1993, including 219 in 2018, one in 2019 and 135 in 2020.

The total cost of plugging the 135 wells in 2020 was $5.9 million, or about $44,000 each, including restoration, according to the report.

DOI officials contend methane leaking from unplugged wells is a serious safety hazard and significant cause of climate change, citing statistics that claim the gas is 25 times more effective at trapping heat in the atmosphere as carbon dioxide.

States eligible for the grants have identified over 10,000 high-priority well sites across the country that are ready for immediate remediation efforts, with more in the queue. States have so far identified a total of more than 129,000 orphaned wells on state and private lands, though that figure is expected to increase with research funded by the federal government.

The first phase funding announced Thursday includes $25 million Initial State Grants for 22 states, and two grants of $5 million each to support methane measurement and plugging wells in Arkansas and Mississippi.

Of the two dozen states that received initial grants, 15 will measure methane capacity, six will measure methane before and immediately after remediation, a dozen prioritized capping wells in disadvantaged communities, and several states including Louisiana will prioritize job creation and small business in the contracting process.

The new funding is in addition to $33 million recently allocated to plug 277 wells on federal public lands, the DOI reports.

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