Lack of bidders increasing costs to plug abandoned oil and gas wells in Kentucky

Contractors  have started plugging some of the thousands of oil and gas wells abandoned by the fossil fuel industry across Kentucky, using new federal funding. But a lack of companies able or willing to bid on the work is increasing costs, a Kentucky official said recently. 

Kentucky received an initial $25 million grant through the Bipartisan Infrastructure Law this August to plug, reclaim and cap between 1,000 to 1,200 documented sites — known as “orphan” wells — that if poorly plugged or unplugged, can be a significant contributor of greenhouse gas emissions like methane. 

The federal grant is part of a broader plan from the White House to reduce nationwide emissions of methane. The greenhouse gas remains in the atmosphere for a shorter time compared to carbon dioxide but is 25 times more potent than carbon dioxide at trapping heat in the atmosphere. Unplugged or poorly plugged orphan wells can also leach toxic chemicals into underground aquifers or cause methane to unknowingly accumulate inside buildings, creating an explosive hazard. 

Dennis Hatfield, director of the Division of Oil and Gas in the Kentucky Energy and Environment Cabinet, in a Dec. 2 meeting said 171 wells across Kentucky have so far been plugged with the funding, and work is ongoing or completed in 12 counties. 

The cabinet has sent out phases of requests to plug hundreds of orphan well sites in 26 counties in Eastern and Western Kentucky. 

Hatfield said a shortage of participating bidders is a problem. “You know, you got to keep this thing competitive,” he  said.

In a couple of instances, he said, packages of well sites had to be re-bid because of a lack of responses from companies who could do the work. He said bonds required to be taken on by the bidders, along with added federal regulations regarding payroll, have made it harder for smaller companies to get involved. 

“It’s probably doubled or tripled the cost of the labor component,” Hatfield said. “Our goal is to have as many contenders in there so that we get the most competitive price.”

A report last year by the Environmental Defense Fund shows more than 13,000 documented orphan wells lie across the state, a tenth of the national total of more than 120,000 wells. 

The nonprofit research group Resources for the Future in a report analyzed data on nearly 20,000 orphan wells in four states, finding that the the average cost to plug a well to be around $20,000; the price per plugged well jumps to an average of $76,000 when the ground surrounding the well site is also rehabilitated.