Chair Grijalva, Rep. Lowenthal Release GAO Report on Taxpayer Exposure from Inadequate BLM Oil and Gas Bonds, Look Ahead to Hearing on Reform Bill
Washington, D.C. – Chair Raúl M. Grijalva (D-Ariz.) and Rep. Alan S. Lowenthal (D-Calif.), Chair of the Subcommittee on Energy and Mineral Resources, today released a Government Accountability Office (GAO) report finding that oil and gas bonds held by the Bureau of Land Management (BLM) are insufficient to clean up orphaned wells, putting U.S. taxpayers potentially on the hook for reclamation costs ranging from tens to hundreds of millions of dollars.
The GAO report, Oil and Gas: Bureau of Land Management Should Address Risks from Insufficient Bonds to Reclaim Wells, available at http://www.gao.gov/products/GAO-19-615, finds that oil and gas bonding on public lands has been set at too low a level for many years. GAO finds that current bond amounts do not reflect actual reclamation costs, that bonds have not prevented wells from becoming “orphaned” – the term for a bond being insufficient to pay for reclamation expenses – and that bond levels should be increased.
The bonding issue, and Rep. Lowenthal’s Bonding Reform and Taxpayer Protection Act (H.R. 4346) designed to address it, will be the subject of an Energy and Mineral Resources Subcommittee hearing on Tuesday, Sept. 24, at 10:00 a.m. Eastern time in Longworth 1324, along with other bills that reform fossil fuel development on public lands to protect taxpayers and eliminate industry giveaways. GAO will testify at the hearing on the new report’s findings.
Currently, BLM oil and gas bonds are $10,000 for all operator wells on an individual lease; $25,000 for all operator wells in a given state; and $150,000 for all operator wells nationwide. According to GAO, 84 percent of bonds held by BLM – covering 99.5 percent of wells in BLM’s data – would not fully cover reclamation costs even under a low-cost scenario.
Lowenthal’s H.R. 4346 would increase minimum BLM oil and gas bond amounts to $50,000, $250,000, and $1,000,000 for all of an operator’s wells on an individual lease, in a state, and nationwide, respectively, and require the amounts to adjust regularly for inflation.
Federal laws require BLM to ensure adequate bonding before oil and gas operators begin surface-disturbing activities on a lease. BLM regulations aim to prevent wells from becoming orphaned because taxpayers eventually cover reclamation costs for orphaned wells. If not fully reclaimed, wells can leak methane and other pollutants; contaminate soil, groundwater, and surface water; degrade wildlife habitats; and impede land reclamation for other purposes.
Current bond amounts are not reflective of reclamation costs for multiple reasons. Bond minimums have not been adjusted since the 1950s and 1960s to account for inflation and do not adjust to account for the number of wells they cover, which can vary greatly from one operator to another.
“Polluting industries have been getting away with taxpayer-funded cleanups for years, and it’s time to end a corporate giveaway culture that costs the public much more than it provides,” Grijalva said today. “With the information in this report and Rep. Lowenthal’s carefully prepared bill, this Committee is ready to revisit a federal bonding system in need of an overhaul. This isn’t a question of whether the status quo is still working, because we know it’s not working, and anyone who suggests otherwise will have to explain the outrageous numbers GAO found.”
“Much to the pleasure of the oil and gas industry, bond amounts have been ignored for decades, resulting in levels today that are woefully inadequate to cover cleaning up the oil and gas wells they are supposed to cover,” Rep. Lowenthal said. “Inadequate bonds result in un-reclaimed wells, which can in turn lead to methane and other pollutants contaminating the air, soil, and water—which often have to be cleaned up on the taxpayer dime. The Bonding Reform and Taxpayer Protection Act will ensure that oil and gas companies, not taxpayers, pay for these reclamation costs.”
“American taxpayers should not have to bear the costs of restoring public lands that have been left damaged by the oil and gas industry,” said Will Fadely, senior government relations representative for The Wilderness Society. “We applaud the Energy and Mineral Resources Subcommittee and Chairman Lowenthal for their leadership on this issue, on the heels of the Government Accountability Office’s eye-opening report.”
“As we have seen firsthand in the West, and GAO has reported today, the boom-and-bust nature of the oil and gas industry is resulting in more and more abandoned wells, leaving us, the American taxpayers, to pick up a steadily increasing tab,” said Barbara Vasquez, of Cowdrey, Colo., who chairs the Western Organization of Resource Councils Oil and Gas Campaign Team. “Bond amounts must be scaled to match the size and complexity of the disturbances, keep pace with the changes in oil and gas extraction technologies, and cover reclamation costs. Otherwise operators will continue to have no financial incentive to reclaim their wells and BLM won’t have the funds to do the job if it comes to that.”
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