If fracking treated all people equally, that is, if every person in Colorado were threatened with anywhere from 10 to 50 fracked wells in their neighborhood, the oil and gas industry would be long gone. But it doesn’t, so only a minority of Coloradans reap the whirlwind in the state’s fracking fields.
That Prop 112, a citizen setback initiative, made it onto the fall ballot and that about one million Coloradans supported it shows there is growing public awareness and concern over industrial fracking. It mandated 2500 foot drilling setbacks from homes and other essential human resources such as watercourses. The oil and gas industry defeated the initiative by spending $40 million to create uncertainty about the factual health and safety hazards of fracking. That money onslaught influenced statewide politicians from both parties who didn’t want those deep pockets turned inside out on them. For too many, it appears, the business of government is business.
As a species we hate uncertainty. Like the cigarette industry before it, the oil business and their political allies have adopted uncertainty as their life blood. Sure, many people get sick living near fracking sites, but some don’t, say they. The air quality along the front-range is deteriorating and is a threat to all, but it’s not all the fault of frackers in Weld County, say they. And so it goes, for certainty is elusive in the complicated world we’ve created.
Still, some things about fracking are certain. As an example, fracked wells decrease in production very rapidly, after which they must be properly closed. The state contains over 100,000 wells, and about half are closed or inactive. A small subset, of roughly 720 wells, are called orphaned wells. These are wells where ownership can’t be determined. The state quietly allocated over $5 million out of the General Fund to begin cleanup and closure of these orphaned wells this fiscal year.
Closing wells costs about $85,000 each according to the Colorado Oil and Gas Conservation Commission (COGCC). Recently two wells in urban California cost over $1 million each to close. Obviously the expense range is great. Using the COGCC’s estimate, the closing of these “orphaned” wells will cost the taxpayers $61 million in the next few years. So it’s certain that $5 million is just a down payment.
How much will it cost to properly close the remaining 100,000 wells in the state? And who will pay for their closing and maintenance? Colorado requires bonding from drillers of $10,000 per well up to $100,000 for all wells they hold. The largest driller in the state has about 8,000 wells. Certainly, the bonds will not cover the company’s total well-closing expense. In many cases, it is not adequate to cover even one well closure.
That the fracking industry is deeply and intractably in debt is a certainty. Recently the oil and gas sector borrowing debt was estimated to be over $260 billion. Anadarko, the largest driller in Colorado, has about $14.5 billion in debt. Its operating costs exceeded its cash flow by $500 million in the last quarter alone. Anadarko’s stockholders are suing the company for mismanagement.
The stock of Extraction Oil and Gas, the new fracker in town, whose business model is to drill in urban areas, declined by over 70 percent this year. Extraction has amassed over $1 billion in debt in its short existence. These companies are not exceptions in the fracking industry. They are certainly the rule.
Industry bonding is inadequate. That’s certain. Less certain is what percentage of the well inventory will become a taxpayer obligation. At $85,000 a well the cost of properly closing these drilling operations is $8.5 billion, and that’s if expenses hold to budget. Certainly, exceptions will exist, just as it’s certain the number of wells to be closed will increase as long as the industry can find fresh money to frack new ones.
Certain too is the need to monitor even properly closed wells for many decades. Fracking is primitive; thus 90 percent of the resource is left behind to leak into the atmosphere if the closed wells are not properly maintained. Engineering studies show wells closed with concrete need to be drilled out and recemented about every 20 years. Cement simply breaks down as anybody with a drive-way knows. The cost of maintenance and reclosing the state’s entire inventory of wells will belong to the public. You can bank on it.