Published in Energy

Federal funding could accelerate cleanup of abandoned oil and gas wells in Michigan

BY Tuesday, March 29, 2022 12:01pm

Michigan is seeking more than $30 million in federal funding to accelerate the cleanup of hundreds of abandoned oil and gas wells across the state.

Michigan’s Orphan Well Fund program created in 1994 dedicates $1 million a year to plug these abandoned wells that are found throughout the state and stem from decades of oil and gas drilling activity. However, state officials have identified 444 orphan wells, and plugging the backlog could take upwards of 40 years.

The federal infrastructure law signed a year ago by President Biden includes $4.7 billion to address and remediate orphan wells across the country, and Michigan could be eligible for up to $32 million to accelerate its orphan well cleanup program.

The Michigan Department of Environment, Great Lakes and Energy’s Oil and Gas Minerals Division (OGMD) oversees the orphan well program and welcomes the potential federal funding.

“EGLE OGMD is very excited about this funding opportunity to reduce current and future environmental risk associated with orphaned wells and see the economic impact that the funding was intended to create,” OGMD Director Adam Wygant said in a recent statement to MiBiz.

According to state officials, Michigan ranked 18th for oil production among states in 2020, and roughly 50,000 wells have been drilled here since 1925.

Michigan is among 26 states pursuing the federal funding, and already likely qualifies for at least $5.8 million. State officials plan to apply for another $25 million in the coming months, and Gov. Gretchen Whitmer’s latest budget proposal includes a $31 million line item for “plugging wells, remediation and reclamation of surrounding land, and removal of decayed and unused oil and gas well infrastructure.”

State officials and environmental advocates say unplugged or improperly plugged wells can leach contaminants into surrounding land and waters and can prevent property from being productively reused. These orphan wells also can leak methane and other greenhouse gasses.

Michigan Environmental Council Chief Policy Officer Charlotte Jameson called the potential federal funding “huge.”

“The interesting thing about Michigan is that it’s often more expensive on average to cap an orphan well because we’re finding a lot of these are in urbanized areas,” Jameson said, noting Muskegon and Oakland counties in particular had previous oil and gas speculation activity. “That’s why I think it’s been a struggle to make a lot of headway. I think this influx of funding will really help Michigan to move forward with wells we have out there.”

However, Jameson said questions remain about the state’s “manpower” to actually clean up wells, as well as how active officials will be in seeking additional wells.

“It’s not super easy to go looking for them,” Jameson said. “That’d be another piece of the puzzle in terms of resources.”

A severance tax on oil and gas producers generates revenue for the state’s Orphan Well Program. The fund is credited with 2 percent of severance tax revenue, but not less than $1 million, annually. Since the program was created in 1994, the state has restored nearly 400 sites, or about five to 10 wells per year, according to EGLE.

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