Colorado Oil Firms Fix Leaky Wells Ahead of New Rules, Energy News, ET EnergyWorld

In Colorado, oil companies are fixing leaking wells before new rules apply

KERSEY: Northern Colorado’s largest oil-producing region is becoming a test case for energy companies hoping to address the industry’s most pressing regulatory and environmental problem: shutting down old wells that are leaking climate-warming methane and other emissions.

In this farming community, oil giant Chevron Corp is sending crews to stop leaks as part of a nationwide operation. Once the wells have been plugged with cement and the equipment removed, workers restore the land to its original condition.

Colorado, the fifth largest oil-producing US state, has been at the forefront of anti-drilling sentiment spreading across the country. Voters have restricted operations near homes and schools, banned routine burning of unwanted gas, and imposed restrictions on fracking chemicals.

Energy companies are being asked by cities, investors and governments to reduce emissions. Federal regulations requiring them to monitor and report on climate-warming methane emissions from larger wells are expected early next year.

Last week, US officials vowed to expand those rules to require companies to find and plug leaks at every well, no matter how small, and to respond to complaints of large-volume leaks.

Chevron Corp operates 16 “workover rigs” that are easy to remove. It plans to deconstruct and plug about 500 old wells in Colorado each year. That work, along with new equipment to clean up oil operations, will reduce greenhouse gas emissions by about 100,000 US tons a year, the company said, about the same as 21,7000 cars.

Chevron estimates it spends between $80,000 and $100,000 each to plug and remove a well and leftover equipment.

‘EVOLUTION’ IN DRILLING

Since 2016, Chevron has removed 3,400 wells in the state and plans to build another 2,200 in the coming years, part of its effort to make oil fields greener. Companies are also using electric rather than diesel-powered drilling rigs, eliminating routine flaring and pipe production instead of using heavy trucks.

“We have lower emissions, we have lower ground interference. So that’s just part of this evolution of what we’re doing out here,” said Hodge Walker, vice president of Chevron’s Rockies business unit.

Critics say these initiatives are “green-washing” that encourages fossil fuel production, leading to more emissions.

Plugging old wells could also become big business for energy and service companies, given the sheer number of wells that are shut down and $1.15 billion in federal funding being made available to states to seal them.

In parts of Ohio, West Virginia and Pennsylvania, natural gas producer Diversified Energy transformed its in-house well-plugging unit into a for-profit business. It also removed about 90 of its own wells at a cost of about $21,000 each in the first half of 2022. It now aims to cap 200 of its own wells a year.

One such plugging program has given investors comfort by addressing wells that could pose a risk to the public and become a liability, said Rusty Hutson, CEO of Diversified.

But now he sees a sizeable business in state and federal funds geared toward stopping methane leaks. The operation will have 15 rigs and has already received contracts from West Virginia and Ohio to plug abandoned wells that have no identified owners and are prone to methane leaks.

Environmentalists think the effort is overdue.

“We learn in kindergarten how to clean up our own messes. It’s not something that deserves applause, it should be expected,” said Anne Lee Foster, an environmental activist from Colorado.

She said Colorado taxpayers have been spending about $5 million a year since 2018 to subsidize the cleaning of abandoned wells.

RECOVERY OF AGRICULTURAL LAND

On a sunny October day in Kersey, a Chevron crew was in the middle of removing a well drilled in 1992 on 78-year-old Bill Klein’s farmland.

The well, named Patriot 16-12, is a vertical well from before the shale oil revolution, when new drilling techniques helped transform the US into a world-leading oil and gas producer.

“I’ve never had any problems with the oil companies,” says Klein, who has owned land in the area where Patriot 16-12 operated and collected royalties on oil and gas drilling for 57 years. He plans to re-crop the land once the wells are securely sealed.

That doesn’t mean the oil industry is leaving Kersey. PDC Energy Inc. is drilling a new horizontal well that may extend 2 miles underground several hundred feet from Chevron’s plugging operations.

PDC Energy and Chevron regularly exchange drill plans to avoid potential collisions that could provide a path for methane to reach the surface.

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