Federal fund could help plug New Mexico’s abandoned wells

As New Mexico’s energy production looks to bounce back from historic lows, some regulators and lawmakers support the idea of a new federal fund to give oil and gas workers jobs plugging abandoned wells.

There are more than 700 orphaned or abandoned oil and natural gas wells in New Mexico, said Adrienne Sandoval, director of the Oil Conservation Division of the state’s Energy, Minerals and Natural Resources Department.

Plugging each well has a price tag of about $35,000, meaning it would cost upward of $24 million to plug all the abandoned wells in New Mexico.

Sandoval said federal money to expand the state well plugging program could support 100 jobs, with additional jobs for complete site remediation.

“The work could start tomorrow,” she said during a Monday hearing of the U.S. House Natural Resources Committee. “…We could begin ramping up contracts immediately.”

The OCD oversees about 57,000 active wells. When wells are no longer productive, they are filled with cement, dirt and plugs to prevent contamination of soil, water and air.

New Mexico operators plug wells and remediate sites with state supervision. If a company goes bankrupt, the state steps in. New Mexico plugs about 50 wells a year by contracting with local companies.

The program is funded by about $2 million in financial assurance from operators, $1 million each year from the Bureau of Land Management, and a reclamation fund fueled by taxes on operators.

But that money is not nearly enough to address all abandoned wells. The state’s funding may also be in jeopardy during the pandemic as operators limit oil production.

Sandoval said active rigs in the state had dropped from 113 in January to 66 in May. And as of May 5, more than 4,000 oil and gas workers had filed for unemployment.

“Operators face tough economic decisions,” Sandoval said. “With limited capital and the possibility of bankruptcy, the oil and gas operators may not be able to plug wells and reclaim (sites).”

Lawmakers said funding an expanded plugging program for New Mexico and other oil-producing states would stimulate the local economy.

“This is a great opportunity to put many people who have lost their jobs back to work, and in a way that supports cleanup of our lands and waters,” U.S. Rep. Ben Ray Luján said during the hearing.

U.S. Rep. Xochitl Torres Small and U.S. Sen. Martin Heinrich, both Democrats, also issued statements of support for more federal money to plug abandoned wells on state and tribal land.