Dave Sirota – This spring, states pitched the Trump administration on an innovative jobs proposal: use federal stimulus funds to hire thousands of unemployed fossil fuel workers to plug oil and gas wells leaking emissions that are intensifying the climate crisis. Instead, the Trump White House funneled nearly $100 billion in bailouts to oil and gas corporations through the Federal Reserve.
That move enriched fossil fuel industry executives and investors that have been among Trump’s big boosters, but it has left a huge problem: State governments could now be on the hook for up to a quarter trillion dollars to plug methane-leaking wells that fossil fuel corporations have abandoned, according to a new report.
The $280 billion price tag is the estimated cost of plugging onshore wells and remediating the surrounding land after they are no longer in operation, according to the study released today by Carbon Tracker, a think tank that documents the impact of the energy transition on capital markets.
States from Colorado to Louisiana to Ohio are being warned that the costs of cleanup could be enormous. State governments cannot run deficits — so those costs would have to be paid either by raising taxes or slashing government programs.
“For a long time, those liabilities were far off in the future,” study co-author Robert Schuwerk told The Daily Poster. The thinking was, “the industry is going strong, it’s going to get bigger, as the world grows, we’ll need more oil.” So regulators and industry leaders agreed, “let’s just accept that we’ll let these liabilities be settled by these companies’ future cash flows, and we’re comfortable enough that we are going to have that.”
The problem now, Schuwerk says, is that the oil and gas industry is in decline, and oil companies aren’t going to be able to afford the cost of remediation.
Moreover, regulators and oil companies are severely underestimating the cost of cleaning up the wells those corporations profited from. Industry and regulatory projections put the cost of cleanup at $30,000 per well, but Carbon Tracker has previously found that plugging many wells would cost closer to $300,000.
Millions Of Wells Must Be Plugged To Combat Climate Change
As part of the transition away from fossil fuels, 2.6 million documented onshore oil wells in the United States need to be plugged, because they leak methane and pollute groundwater. Of the more than 4 million onshore oil wells that have been drilled in the U.S. since 1900, only 1.6 million have been plugged, according to the report.
Climate scientists are only beginning to understand the extent of the methane leaks from these abandoned wells.
According to EPA projections, abandoned oil and gas wells, or improperly plugged wells emit enough methane each year to cause the climate-damage equivalent of one day of U.S. oil consumption. It is possible that the abandoned wells emit three times that amount, according to the EPA, because the projections were based on incomplete data.
Fossil Fuel Companies Offload Cleanup Costs Onto The Public
Oil and gas companies are, by law, on the hook for these obligations — they are required to “plug and abandon” their wells once they are no longer in use. However, when companies file bankruptcy, this cleanup responsibility falls to creditors or state governments — even though fossil fuel companies had previously banked big profits off the wells.
For many years, the oil industry has heavily discounted the costs of plugging wells, assuming most of those expenses will be incurred far into the future. And even for these lowball estimates, state governments have only required oil and gas companies to cover, on average, 1 percent of their liabilities through surety bonds.
But the new Carbon Tracker report finds that these loose regulations and low estimates could cost taxpayers hundreds of billions of dollars.
This is already happening. In Colorado, oil and gas company PetroShare Corporation filed for bankruptcy with nearly $16 million in cost liabilities for reclamation for its oil wells. But the state of Colorado had only required PetroShare to set aside $400,000 for reclamation costs.
Last month, the state reached a settlement that allowed PetroShare’s creditors to leave the orphaned wells to the state without paying the reclamation costs. In other words, taxpayers are on the hook for at least $16 million in cleanup costs since PetroShare declared bankruptcy.
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California will be first to accelerate transition to an all-electric future for vehicles
California Governor Gavin Newsom signed an executive order last week that will accelerate the transition for all new cars to be electric, or otherwise zero-emissions. In California, as in other states, transportation is the single largest source of the greenhouse gas emissions that cause climate change. While California is the first U.S. state to announce this step, at least 15 countries have pledged a similar phase-in, and other states are expected to follow suit.
During the same announcement, Gov. Newsom also asked state lawmakers to pass a ban on new fracking permits by 2024. The Governor has received criticism from climate advocates in the state for his history of mixed signals on fracking; Grist Magazine responded to last weekend’s announcement by asking, why hasn’t California banned fracking yet?
Clearing the air on wildfire and climate change
Climate change arrives on debate stage amidst supreme focus on environmental legacy
After receiving criticism for leaving the issue off the list of topics for the first presidential debate this week, Fox News moderator Chris Wallace inserted a surprise question on climate change. It was the first time in more than a decade that nominees were asked to address the climate crisis in a presidential debate. President Trump’s weak and incoherent responses perfectly reflected the overall climate record of his administration, which one journalist recently summarized as “a plan to not fight climate change.”
Meanwhile, as the November election draws near, the White House continues to pursue that plan with vigor; E&E News reports that “the White House has been quietly working in recent weeks to reshape the leadership of NOAA” by installing climate deniers in key science positions. Climate and environmental advocates worry, however, that President Trump’s most durable blow to progress on clean energy could turn out to be his controversial selection of an Associate Justice to replace the late Justice Ruth Bader Ginsburg on the Supreme Court.
Appreciations of Justice Ginsburg’s career are properly focusing on her advancement of equal rights; it is also worth noting her her environmental accomplishments.
Climate commitments and backtracking
Climate Week 2020 was marked by a fresh round of commitments from multinational corporations and governments to reduce climate pollution. China announced plans to achieve carbon neutrality by 2060, and German automaker Volkswagen unveiled plans to manufacture at least 1.5 million EVs annually by 2025. Prince Charles called for a “Marshall-like plan” to fight climate change, reminiscent of sweeping US efforts to rebuild Europe in the aftermath of WWII.
On the other hand, many fossil fuel corporations have been hard at work not furthering climate goals. With some fanfare, BP and Royal Dutch Shell recently issued net-zero pledges and withdrew their support from several industry trade groups lobbying against climate action. But an investigation by Unearthed and Huffington Post revealed that both oil conglomerates remain “active members of at least eight trade organizations lobbying against climate measures” and continue to support groups like the Alliance of Western Energy Consumers, “which crusaded against Oregon’s efforts to put a price on carbon emissions.”
A report from Oregon Public Radio revealed that reputedly green Oregon businesses, including Nike, are fighting a transportation ballot measure that would provide transit fixes serving communities of color, expand the MAX light rail system, and invest in more electric buses for the Portland metro region. Meanwhile, Amazon Employees for Climate Justice renewed calls for the company and its CEO to lead on climate action commitments, not just climate rhetoric. They want the company to commit to reaching zero carbon emissions by 2030, a more ambitious target than that which Bezos announced last year.
IMF slams fossil fuel subsidies
A new report from the International Monetary Fund criticizes governments, including the US, for continuing to subsidize the fossil fuel industry to the tune of more than $5 trillion a year. The US spends more on fossil fuel subsidies each year than it does on the military. The report suggests that ending subsidies would bring “staggering” benefits “fiscally, but also in terms of human life.”
