A top state regulator is asking the legislature to make sure oil companies pay to clean up old oil 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.
Foerster said it’s becoming more common for smaller oil companies to operate in Alaska, and those companies may be more financially unstable. She gave the example of Aurora Gas, which declared bankruptcy last year. Foerster 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. It ain’t going to happen — just take a deep, cleansing breath and let that one go,” Foerster said.
Foerster warned that if a big oil field like 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.”
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,” Foerster said.
Foerster said two other states, California and Kansas, have passed similar laws.
Alaska Oil and Gas Association president Kara Moriarty said her group wants to see legislation before it forms a position on Foerster’s proposal, but she added that the issue of future well abandonments is “a potential problem that may not exist.”
Moriarty said her group is generally wary of additional regulations.
“I would just be cautious of anything that seems to put another hurdle on companies either coming to Alaska or being interested in investing in Alaska,” Moriarty said.
Elizabeth Harball is a reporter with Alaska's Energy Desk, covering Alaska’s oil and gas industry and environmental policy. She is a contributor to the Energy Desk’s Midnight Oil podcast series. Before moving to Alaska in 2016, Harball worked at E&E News in Washington, D.C., where she covered federal and state climate change policy. Originally from Kalispell, Montana, Harball is a graduate of Columbia University Graduate School of Journalism.
