Carbon credits are a valuable tool for plugging orphaned wells in the U.S.
Earlier this year, a company in Oklahoma was issued the world’s first carbon credits for plugging orphaned oil and gas wells. This marked an important milestone for the Sooner State, where more than 17,000 of these wells can be found in farm fields, woodlands, and near where people work and play.
Oil and gas wells become orphaned when the company that operates them goes bankrupt or ceases to exist. When this occurs, governments you and me as taxpayers) are burdened with plugging them and addressing local environmental impacts. In Oklahoma, this responsibility falls to the state. Over the past decade, the Oklahoma State Funds Plugging Program has plugged an average of a few hundred orphaned wells per year, which has not kept pace with the number of wells that are orphaned, resulting in an enormous backlog of known wells that require plugging. In addition to documented orphaned wells, there are many unknown orphaned wells across the United States that are unmapped and unaccounted for in official records. The EPA estimates that the U.S. may have more than 3.2 million wells that will require plugging.
The federal government recognizes the potential environmental and climate harm from these unplugged wells. The Inflation Reduction Act (IRA) and Bipartisan Infrastructure Law (BIL) have unlocked $6 billion in funds to help address the issue across the U.S. This has encouraged states to identify tens of thousands of additional wells in need of plugging. Yet these funds will cover just a small fraction of the need; Columbia University estimates that the cost of plugging just 500,000 wells — approximately 15% of the estimated total in the U.S. alone — could be as high as $24 billion.
Why is this a problem? Orphaned wells, some drilled as early as the 1800s, exist across the United States in our backyards, fields, forests and near our waterways. The exact number of orphaned wells in Oklahoma and across the U.S. is still unknown. Many of them release toxic pollutants into our air and water, including known carcinogens like benzene and arsenic. A recent paper from a group of scientists led by Mary Kang of McGill University found that over 4.6 million people live within one kilometer of these orphaned wells. The wells have also been found to emit high levels of methane, a climate super pollutant that is responsible for a third of global warming to date. Experts estimate that U.S. orphaned wells release 280,000 tons of methane each year, roughly equivalent to four and a half percent of the country’s total methane emissions in 2020.
Costs for plugging and cleanup of orphaned wells can vary widely, with some estimates showing the average cost of plugging a well to be around $20,000. However, plugging costs can ramp up quickly and easily exceed $100,000 per well, depending on the well location, construction and how much it has degraded. Additional work to clean up the environmental damage at some sites and restore the surface alongside plugging activities can exceed $1 million.
High-quality carbon credits can provide a new funding source that can support plugging more wells, like those in Oklahoma. The demand for carbon credits is anticipated to increase five times by 2030 among companies with net zero goals. Additionally, buyers are seeking carbon credits that allow them to tell a positive story, and plugging orphaned wells can do just that. This climate solution prevents environmental pollution; provides secure, quality jobs to oil and gas workers; and addresses the urgent issue of methane pollution.
The plugging projects in Oklahoma, led by Tulsa-based Rebellion Energy Solutions, show how this can work. In their Heartland project, 16 orphaned wells were plugged across Blaine, Canadian, Kingfisher, Nowata and Washington Counties. Rebellion, as the project developer, measured the amount of leaking methane from each well, plugged each well in compliance with Oklahoma's stringent requirements, confirmed total methane abatement post-plugging, and even restored the land surface to native prairie. The revenue from the sale of the resulting carbon credits will help cover the cost of this work.
Carbon credits are a valuable tool for solving the problem of orphaned wells in the U.S. They can work alongside state and federal funding and vastly accelerate action and deliver benefits for the climate, as well as communities and landowners. Oklahoma is showing us the way forward, and we look forward to other states following its lead.
Maris Densmore is director of American Carbon Registry’s Industrial Program and a licensed geologist with extensive field experience in both environmental and oil and gas operations.