Regulator wants oil companies to clean up old wells

MarketsAssociated Press

An Alaska regulator has asked the Legislature to make sure oil companies clean up old wells, even after the wells are sold to a different company.

Cathy Foerster of the Alaska Oil and Gas Conservation Commission testified before the Senate Resources Committee on Monday, Alaska's Energy Desk reported .

Continue Reading Below

Foerster said it's becoming more common for smaller oil companies to operate in Alaska — and those companies may be more financially unstable.

Forester warned that if a big oil field such as Prudhoe Bay is sold to a smaller company that goes bankrupt and can't pay for cleanup, it could cost the state billions of dollars.

She said the state currently has a $200,000 bond to cover the cost of plugging and abandoning all the wells at Prudhoe Bay.

"For $200,000 we couldn't even pay for the engineering study that would give us the estimate on what the true cost is to plug all of those wells," Foerster said. "So we're in a bad situation on having adequate bonding for our wells, and we're working it."

Forester gave the example of Aurora Gas, which declared bankruptcy last year. Forester said the company is unable to pay to plug and abandon its wells, three of which are on state land, making the state financially responsible for cleaning them up.

"Aurora Gas doesn't exist anymore, we cannot go back to Aurora gas and ask them for the money to (plug and abandon) those wells," she said. "It ain't going to happen."

Foerster says her agency has the authority to increase bond amounts, but Foerster argued the Legislature should also act.

One idea she floated is to update the law so the state can require former operators to pay to clean up abandoned oil wells.

"Don't we want to have the ability to go back on BP, Exxon and Conoco and say, 'You guys made a boatload of money off of this, and you drilled these wells, now get back up here and clean them up.' We need you guys to take care of that," Forester said.

Foerster said California and Kansas have passed similar laws.

___

Information from: KTOO-FM, http://www.ktoo.org