By Tim Brown, County Information Senior Analyst
What happens when an oil or gas well stops producing, when it reaches the end of its economic life? Studies have shown that unattended wells can leak methane and other contaminants into groundwater and create other environmental problems according to the Wall Street Journal. To prevent this from happening, the well must be plugged, which typically involves pulling out leftover drilling equipment and filling in the hole with absorbent materials like bentonite (a type of clay) and then capping the well with cement. But, plugging costs can range from several thousand dollars to tens of thousands per well.1
State law requires all oil and gas well operators to post a bond, letter of credit or cash deposit — which the Railroad Commission of Texas (Commission) will collect if operators abandon a well — if they can no longer legally produce or sell oil and gas.2
While the well operators should plug the well, sometimes this does not happen. Particularly near the end of an oil or gas boom, companies often go bankrupt or simply abandon the wells for financial reasons. As a result, the state often ends up holding the bag as the payor of last resort.3
However, the bonds do not cover the full cost of plugging the wells. Last year, the Sunset Commission found that bonds and other sureties covered only 15.9 percent of the cost of plugging abandoned wells. Their June 2017 report noted that in 2016, the Railroad Commission spent $11,772,895 plugging 692 wells — spending $17,012 per well. Of that amount, approximately $7 million came from sources other than the bonds. The report also noted that, “With a backlog of 9,715 abandoned wells, the Railroad Commission could be on the hook to pay more than $165 million to plug all of those wells.”4 To deal with this issue, the Sunset Commission recommended an increase in statutory bonding requirements sufficient “to better reflect risk and increase equitability.”
Texas created the Oil and Gas Regulation and Cleanup (OGRC) Fund for this purpose during the 82nd Legislature in 2011, replacing previous well-plugging funds. The Railroad Commission maintains a list (http://www.rrc.state.tx.us/oil-gas/environmental-cleanup-programs/state-managed-plugging) of orphaned oil wells and gas wells (orphan wells) waiting to be plugged with state funds including, but not limited to OGRC funds.5
The Railroad Commission defines orphaned oil wells as “inactive, non-compliant wells that have been inactive for at least 12 months and the responsible operator’s Organizational Report (Form P-5) has been delinquent for greater than 12 months.”
The Railroad Commission’s “Oilfield Cleanup Program Annual Report for Fiscal Year 2017” (http://www.rrc.state.tx.us/media/43931/ofcu-program-annual-report-2017.pdf) noted the presence of 5,687 orphaned wells as of August 31, 2017. The report notes that the operators of record plug most of the compliant inactive wells and many of the non-compliant inactive wells; however, some number of the compliant and many of the orphan wells will be plugged by the Railroad Commission using OGRC funds as well as other state and/or federal funds.6
However, the Railroad Commission modified the definition of orphan wells effective September 2016 in Statewide Rule (SWR) 14(b)2. Consequently, comparing the current number of orphan wells to the number of such wells prior to that date is not straightforward. For example, the Railroad Commission notes in the “Oilfield Cleanup Program Annual Report for Fiscal Year 2016” a count of 10,161 orphan wells for August 2016 under the prior definition, but only 6,805 orphan wells in September 2016 using their new definition.7
Since then, the count fell to 5,687 orphan wells in August 2017, before increasing to 6,494 by June 2018.
Map 1 (above) shows the total number of orphaned oil and gas wells by county as of June 2018. The semi-transparent overlay shows the location of tight gas basins across the state as of 2015 according to the U.S. Energy Information Agency. These basins cover a much broader area than the current shale plays, but line up well with the counties that have orphan wells.
Not all orphaned wells are captured on these maps. The June 2018 list includes 69 orphaned wells in the Gulf of Mexico. These wells can be found in: Matagorda Island SB (3), Brazos LB (29), High Island LB (9), High Island SB (11), Matagorda Island LB (6), Mustang Island LB (9), and Mustang Island SB (2). For more information on where these areas located, see the Railroad Commission’s online map, “Texas Coastal Counties, Offshore and Bay Areas, Oil and Gas Division Districts.”8
In many cases, the orphan wells have been inactive far longer than 12 months. The June 2018 list of orphan wells includes 1,617 wells that have been inactive for 246 months. To put that into perspective, the Petrohawk Energy Corporation (now part of BHP Billiton) drilled the initial Eagle Ford Shale discovery well in 2008 in La Salle County. Petrohawk announced their findings in October 2008, a mere 116 months prior to June 2018.9
Map 2 (above) shows the location of wells that have been orphaned for more than ten years which is 120 months or four months longer than the Eagle Ford has been producing. To make this map easier to read, it does not include the basin overlay. Also, note that the brackets, which were adjusted due to the relatively smaller number of old orphan wells, differ from those used in the first map.
For June 2018, the Commission’s list included 3,504 wells orphaned for more than 120 months. Of those, 35 were located offshore in the Gulf areas previously mentioned.
The Sunset Commission estimated the Railroad Commission’s liability for 9,715 abandoned oil and gas wells to be as much as $165 million. With the change in definition for orphaned wells, that number appears lower with only 6,494 orphaned wells as of June 2018 – a difference of 3,221 wells. Still, even if we assume those 3,221 wells are not a threat to either our pocketbooks or our environment, that remains a large number of wells that need to be plugged – each of them potentially contaminating our water and air for years.
1. “What to Know about Orphaned Wells,” Wall Street Journal, February 25, 2015, accessed August 1, 2018, https://blogs.wsj.com/briefly/2015/02/25/what-to-know-about-orphaned-wells-the-short-answer.
2. §§ 91.103, 91.104, 91.1041, 91.1042, and 91.105, Texas Natural Resource Code.
3. “What to Know About Orphaned Wells.”
4. Staff Report with Final Results, Railroad Commission of Texas, Sunset Advisory Commission, June 2017, 44, accessed August 1, 2018, https://www.sunset.texas.gov/public/uploads/files/reports/Railroad%20Commissio%20of%20Texas%20Staff%20Report%20with%20Final%20Results_6-21-17.pdf.
5. “State Managed Plugging,” Railroad Commission of Texas, last updated July 9, 2018, accessed July 31, 2018, http://www.rrc.state.tx.us/oil-gas/environmental-cleanup-programs/state-managed-plugging.
6. Oilfield Cleanup Program Annual Report for Fiscal Year 2017, Railroad Commission of Texas, January 23, 2018, accessed July 31, 2018,
7. Oilfield Cleanup Program Annual Report for Fiscal Year 2016, Railroad Commission of Texas, December 6, 2016, accessed July 31, 2018,
8. “Texas Coastal Counties, Offshore and Bay Areas, Oil and Gas Division Districts,” Railroad Commission of Texas, accessed July 31, 2018,
9. Petrohawk Energy Corporation, “Petrohawk Discovers Shale Gas Field in South Texas,” Rigzone, October 21, 2008, accessed August 1, 2018, https://www.rigzone.com/news/oil_gas/a/68125/petrohawk_discovers_shale_gas_field_in_south_texas.