Abandoned but Not Forgotten: Improperly Plugged and Orphaned Wells May Pose Serious Concerns for Shale Development

Abstract

This Article addresses the intersection of oil and gas law and environmental law on a topic that has profound significance for the nation’s oil industry and for the environment. In this regard, the Permian Basin is experiencing a renaissance that has fundamentally impacted oil production in the United States. Horizontal drilling and hydraulic fracturing now allow the industry to produce in the Permian Basin’s unconventional shale formations in ways that were unimaginable a decade ago. But, the hot shale plays within the Permian Basin exist above conventional fields that are littered with a century’s worth of abandoned wells. Fracturing new wells near improperly abandoned wells creates a risk of environmental pollution as the fracturing of the shale allows hydrocarbons to migrate within the formation, potentially to an improperly abandoned well. The American Petroleum Institute (API) recognizes the environmental pollution risks associated with hydraulically fracturing close to an abandoned well and has set forth a detailed report on the best practices that an operator could employ to mitigate this risk, but that proposal overly relies on operator discretion and judgment and lacks transparency to potentially affected parties. The Environmental Defense Fund has issued a model regulatory framework, but that report overly relies on operator actions and bright-line standards. A growing number of state agencies in oil producing states around the nation have issued regulations, but there is considerable divergence in the adopted standards. The academic work on this topic is sparse to non-existence. Thus, this Article fills an important void in the literature at an important moment. The goal of any regulatory regime should be to ensure sustainable energy development occurs in a manner that adequately addresses the environmental concerns posed by modern development activities. Because contamination and collateral consequences of pollution can have far-reaching impacts, the public has a vital public policy interest that the regulatory regimes that govern this development require the industry to utilize best practices. The Article proposes that the regulatory agency should use its expertise and operator supplied information to make a fact-based determination of the area of fracturing interest as part of the permitting process for any new well that will be hydraulically fractured. The regulatory agency then would utilize its existing data on well locations to determine what existing wells are sufficiently close to the new well that will be hydraulically fractured and then will set forth requirements for the operator to investigate that well. The regulatory agency can then set forth a remediation proposal for the operator to perform. The Article uses the State of Texas as a model for its suggestions. The framework set forth in this Article also affords operators with an opportunity to provide their solutions to any regulatory concerns, and also provides other affected parties an opportunity to participate in the well permit process. Thus, the proposed regulatory framework sets forth a transparent and objective regime that does not solely rely on the business judgment of operators. Moreover, by requiring this analysis to be done in a scientific manner and by providing an opportunity for notice to be given to affected parties, the proposal also provides an opportunity for potentially affected parties to take precautionary steps on their own wells. Currently, Texas does not have any explicit requirements with respect to investigation of close proximity abandoned wells in its well permitting process, and the failure to require an upfront investigation creates an unnecessary environmental risk that could be mitigated if addressed upfront.