Decommissioning Orphaned and Abandoned Oil and Gas Wells: New Estimates and Cost Drivers

Abstract

Millions of abandoned oil and gas wells are scattered across the United States, causing methane emissions and other environmental hazards. Governments are increasingly interested in decommissioning these wells but want to do so efficiently. However, information on the costs of decommissioning wells is very limited. In this analysis, we provide new cost estimates for decommissioning oil and gas wells and key cost drivers. We analyze data from up to 19,500 wells and find median decommissioning costs are roughly $20,000 for plugging only and $76,000 for plugging and surface reclamation. In rare cases, costs exceed $1 million per well. Each additional 1,000 feet of well depth increases costs by 20%, older wells are more costly than newer ones, natural gas wells are 9% more expensive than wells that produce oil, and costs vary widely by state. Surface characteristics also matter: each additional 10 feet of elevation change in the 5-acre area surrounding the well raises costs by 3%. Finally, we find that contracting in bulk pays: each additional well per contract reduces decommissioning costs by 3% per well. These findings suggest that regulators can adjust bonding requirements to better match the characteristics of each well.