Abandoned Wells, Abandoned Responsibility: The Reckoning Big Oil Thought It Could Avoid

Big oil’s careful plan to prevent an energy transition is on the verge of coming off the rails even though petroleum runs Washington. Many of its leaders think they can now, for the first time in decades, call the shots, continue to poison their customers, avoid paying their bills and dump the mess they create when they leave an exhausted oil field behind landowners and communities to clean up after them.

And above all, oil thought it could now ignore climate change and the existence of cheaper, cleaner energy sources derived from the sun and deployed through electrification. The energy transition could, courtesy of the Trump Administration, be prevented from moving forward.

Community driven resistance is emerging on a wide variety of non-federal fronts. Led by Vermont, a variety of cities and states have either passed state superfund legislation requiring the oil industry to compensate local and state governments the costs of climate change or simply sued directly.

Repeated efforts by the industry to neuter these challenges to its profit model by moving them to favorable federal courts have been rebuffed.

Voters have signaled they aren’t falling for the Administration’s effort to revive US dependence on fossil fuels based on affordability. The off-year elections were heavily fought on what the oil industry thought was its strong suit – that renewables were expensive.

Voters in states as diverse as California and Georgia rejected by 2-1 the “bring back fossil fuels” solutions and cast their affordability votes with economic reality – renewable power is dramatically cheaper to use than oil or gas for power, electrified vehicles and buildings are cheaper than those powered with gasoline, diesel or gas furnaces. Cleaner = Cheaper, and by a lot. So a lot of voters rejected the oil industry pitch that gas was the future.

A major new challenge emerged recently to the decade-long oil industry strategy to avoid paying its bills. Oil companies have set up sophisticated legal strategies to use bankruptcy courts to shift a quarter of a trillion dollars of exhausted oil well cleanup costs to local governments and landowners.

The oil industry – already facing substantial risks that it might have to pay in court its bills for disrupting the weather – was suddenly put on notice that its long-standing strategy to leave the bills for clean up of devastated oil fields to taxpayers and communities is also facing new legal scrutiny.

Individual land owners with abandoned oil wells polluting their property had already sued with limited success in West Virginia and much better prospects in Colorado. Now, in California, the power of local governments stepped in.

Abandoned or almost exhausted oil wells don’t contribute any significant resources to America’s fossil fuel energy supplies. But because oil wells near the end of their life, and even after they stop producing altogether, continue to release an array of toxic pollutants until sealed, most significantly climate wrecking methane, a full half of all pollutants emitted by US oil wells are released by wells no longer producing any economic value for the economy.

Los Angeles County, the site of the most densely urban legacy oil field with 5000 wells, has a huge concentration of these depleted or marginal – half the total. Each one of these wells, given their location in immediate proximity to homes, schools and clinics, may cost hundreds of thousands of dollars to safely shut down and clean up.

The law in every state requires the companies who pumped oil from a well and made the profits to pay the costs of shutting it down. But the oil industry has long plotted to shift ownership of depleted wells to shell companies. These companies lacked the resources to pay for decommissioning idled wells could walk away by declaring bankruptcy. That ensured that the shutdown costs would be transferred to landowners and communities.

Current estimates suggest that this might constitute a $250 billion bailout of the oil industry, even though leases, contracts and laws all agree – this bill belongs to big oil.

It was a major breakthrough when counsel for Los Angeles County brought suit against a half dozen oil companies, including giant Chevron, to force them to assume responsibility for cleaning the mess they had so carefully plotted to leave behind.

The legal complaint also shows an often-forgotten reality – states, cities and yes, counties have often underused powers to protect the public. If Los Angeles can protect its citizens from having to bail out oil, so does the rest of California.

Indeed, so can oil production states like New Mexico, Colorado, and Texas, with the greatest number of abandoned wells.

The LA County lawsuit is elegantly simple. It argues that abandoned oil wells are dangerous and hence qualify under Common Law as nuisances. The current and original owners were, therefore, each legally obligated to properly plug and seal these wells when the oil ran out. Mighty Chevron, which owned the most of these wells, is still responsible, the County argues, for its failure to ensure proper capping funds were left behind when it sold them to smaller companies.

The battle isn’t won. Chevron will no doubt argue that it is not liable for wells it no longer owns – although California law specifically states otherwise. But now that Los Angeles County has put this issue of who pays for oil well shut down solidly before the public, the oil industry stealth strategy has been undermined – the era of oil is coming to an end.