Idled wells, also called "orphaned" or "deserted" wells, are generally wells that have not produced oil and/or gas for a period of time, typically provided in each state's regulations.  These wells may also include those that the operator has walked away from and abandoned, either because the wells ran dry or the company has gone bankrupt.

Recently, I have been wonder who is responsible for the costs of plugging idled wells...Who gets left holding the bag?

Under many circumstances, the answer is the state.  Despite the financial assurances and bonds that state oil and gas commissions require operators to provide prior to commencing drilling operations, there are numerous occasions where the bond money falls short.

For example, in Colorado, the 700 Series of the Colorado Oil and Gas Commission ("COGCC" or "Commission") Rules articulate the required financial assurances that an operator must provide prior to drilling or assuming operations.  When those amounts are not adequate, the COGCC may become burdened with the costs of properly plugging idled wells.  Rule 709 provides that "[w]henever an operator fails to fulfill any statutory obligation described herein, and the Commission undertakes to expend funds to remedy the situation, the Director shall make application to the Commission for an order calling or foreclosing the operator's financial assurance."  However, under many circumstances, there is just not enough bond money in the coffers to cover the plugging expenses.  Plugging a well typically depends on the well's depth and can reportedly cost as much as $25,000 to $100,000 by some regulators' estimates.  The cost can vary dramatically – of the 452 wells Wyoming reportedly plugged between 1997 and 2014, the cheapest well cost $569 to plug and the most expensive cost $527,829.

Some states, like California, have an Idle and Orphan Well Program that requires operators to put up additional monies to address the idle status of the wells.  Similarly, Wyoming regulators have recently proposed to increase bonding amounts and require idle well bonding.  The redline proposals to the Wyoming Oil and Gas Conservation Commission ("WOGCC") Operational Rules and Drilling rules can be found here.  The proposed Idle Well Bonding Rules permit increased bonding in an amount up to $10 per foot for each idle well.

Public comment on the proposed rules in Wyoming will be taken through November 20 and the WOGCC reportedly will vote on the changes on December 8.  We will monitor the status of the proposed changes to the rules and keep you posted on who will be left holding the bag for these costs in Wyoming.

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