United States: Louisiana To Receive Federal Funding To Help Address Thousands Of Orphaned Oilfield Sites Throughout The State

The U.S. Interior Department recently announced that it is awarding Louisiana with about $47 million to be used to plug and abandon the orphaned well sites throughout the state. This is part of phase one of many under the Infrastructure Investment and Jobs Act, which was signed by President Biden in November.

Louisiana first turned its attention to orphaned well sites in 1993, when the Louisiana Department of Natural Resources (LDNR) created the Louisiana Oilfield Site Restoration Program ("OSR Program") to address a growing number of unrestored orphaned oilfield sites throughout the state. See La. Rev. Stat. Ann. § 30:80, et seq. (known as "Louisiana Oilfield Site Restoration Law"). Under the statute, an oilfield site is orphaned when it "has no continued useful purpose for the exploration, production, or development of oil or gas" and has been declared to be orphaned by the Assistant Secretary of the Office of Conservation. La. Rev. Stat. Ann. § 30:82(9). To be declared orphaned, either (1) no responsible party can be located, or the responsible party cannot financially undertake the plugging and abandonment, and (2) the well was not closed or maintained properly under the regulations or is dangerous or potentially dangerous to public health, the environment, or an oil or gas strata. La. Rev. Stat. Ann § 30:91(A). Essentially, the State takes on the plugging and abandonment obligations of a well when the responsible party is unresponsive or no longer financially viable. But the State does not take ownership of the orphaned well. Instead, the last operator of record remains the owner. La. Rev. Stat. Ann. § 30:93(A).

Since launching the OSR Program in 1993, the Louisiana Department of Natural Resources has plugged about 3,300 wells, ¹ and the OSR Program aims to undertake approximately 46 well sites per year.² Louisiana's list of orphan wells currently sits as 4,605. State officials are certain that there are many more undocumented orphaned wells across the state, a number that can likely increase due to the impacts of lower oil prices (i.e., bankruptcies and downsizings of smaller oil companies).

Funding from the federal government under the Infrastructure Investment and Jobs Act will significantly help tackle the growing number of orphaned well sites throughout the state. Louisiana is expected to receive a total of at least $111.4 million in later phases, which is estimated to cover only about 25% of the State's documented orphan wells.

Footnotes

1. State of Louisiana Department of Natural Resources, Office of Conservation, Oilfield Site Restoration (OSR) Program, http://www.dnr.louisiana.gov/index.cfm/page/155.

2. State of Louisiana Department of Natural Resources, Office of Conservation, OSR Program, Frequently Asked Questions, http://www.dnr.louisiana.gov/index.cfm/page/157.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.