US taxpayers could be left footing a bill of tens or even hundreds of billions of dollars to clean up oil and gas wells across the country as a growing number of producers collapse into bankruptcy, according to a new report. A tiny proportion of the costs of “plugging ” America’s active wells are currently covered by insurance mechanisms, the report from the Carbon Tracker think-tank estimates. That means when companies go bust, the bill for doing so will often be left to the state authorities.
“If companies are in dire straits plugging these wells is probably one of the very last things on the list of management ideas for how to use cash,” said Robert Schuwerk, one of the authors of the report. “If they happen to go bankrupt, and nobody wants to pick up the well out of the bankruptcy, then the state’s going to end up picking up the tab.”
The findings come as a growing number of US oil and gas producers are being forced to seek protection from their creditors in the wake of this year’s price crash – prompting concern over what becomes of their liabilities. Oasis Petroleum on Wednesday became the latest big name to succumb.
A total of 36 oil and gas producers filed for bankruptcy in North America in the first eight months of the year, according to Houston law firm Haynes & Boone. They had combined debt loads of around $51bn – more than half of which was unsecured.
In order to drill a well, companies usually need a bond, which ensures that they either cover the clean-up costs at the end of its life, or forfeit a certain sum. However, the amount paid in many states is significantly less than the ultimate cost of plugging the well. According to Carbon Tracker, current bonds would cover just 1 percent of the $28obn costs of plugging the US’s 2.6m active
documented wells.