WEBVTT - Big Oil's Multi-Billion-Dollar Blind Spot 0:00:10.560 --> 0:00:13.400 The oil and gas industry is getting out of a 0:00:13.440 --> 0:00:17.639 lot of obligations these days. They have pushed for and 0:00:17.880 --> 0:00:25.000 gotten regulatory pauses, rollbacks, tax breaks, all kinds of good stuff, 0:00:25.200 --> 0:00:28.480 although of course the American Petroleum Institute is still insisting 0:00:28.520 --> 0:00:31.680 that the industry is quote unquote not getting a bailout. 0:00:32.040 --> 0:00:34.200 One of the big ways that the industry is getting 0:00:34.240 --> 0:00:37.440 off the hook for its responsibilities is in the case 0:00:37.479 --> 0:00:40.720 of its wells, and more specifically, what happens to them 0:00:40.920 --> 0:00:43.920 when they're not producing oil or gas anymore. That is 0:00:44.000 --> 0:00:48.800 becoming an even bigger problem amidst the COVID nineteen pandemic, 0:00:49.000 --> 0:00:52.720 because a lot of wells have been temporarily idled, and 0:00:52.840 --> 0:00:56.120 some percentage of those will end up being abandoned altogether. 0:00:56.560 --> 0:00:58.960 Shale gas companies are already starting to go out of 0:00:59.000 --> 0:01:03.120 business in various parts of the country, and more are 0:01:03.240 --> 0:01:06.759 announcing their downfall every day. It remains to be seen 0:01:06.840 --> 0:01:12.240 whether demand will actually return to normal levels after the pandemic. Plus, 0:01:12.240 --> 0:01:15.280 there will be an energy transition at some point, and 0:01:15.360 --> 0:01:17.600 a lot of folks are starting to wonder what will 0:01:17.640 --> 0:01:21.399 happen to these oil and gas sites once that transition 0:01:21.480 --> 0:01:24.839 gets underway. In order to get permits to drill oil 0:01:25.000 --> 0:01:29.440 or gas wells. Fossil fuel companies are required to get permits, 0:01:29.640 --> 0:01:33.080 and with those permits, they have to commit to plugging 0:01:33.200 --> 0:01:36.560 and remediating well sites when they're done with them. It's 0:01:36.600 --> 0:01:40.200 an expensive proposition and one that the industry tends to 0:01:40.240 --> 0:01:43.000 put off as long as possible, in part because no 0:01:43.240 --> 0:01:47.559 states actually require these companies to put up the money 0:01:47.720 --> 0:01:51.840 for plugging and remediating wells before they start drilling. A 0:01:51.880 --> 0:01:54.960 new report finds that, on top of all that, the 0:01:54.960 --> 0:01:59.320 oil and gas industry has been dramatically underestimating the cost 0:01:59.800 --> 0:02:04.520 of doing this remediation for years. Report out today from 0:02:04.800 --> 0:02:09.880 Carbon Tracker finds that in fact, plugging shale wells can 0:02:09.880 --> 0:02:12.560 cost up to ten times what companies have been estimating. 0:02:12.800 --> 0:02:16.480 That's a huge financial liability that's not on the books 0:02:16.680 --> 0:02:20.160 of shale gas companies, which are already struggling financially for 0:02:20.240 --> 0:02:24.560 various other reasons. That report is called It's closing time 0:02:25.080 --> 0:02:29.440 the huge bill to abandon oil fields comes early. Joining 0:02:29.440 --> 0:02:33.359 me today are this report's co authors, Greg Rogers, who 0:02:33.400 --> 0:02:37.400 we've heard from in previous episodes, and Rob Schuerck, executive 0:02:37.400 --> 0:02:40.760 director of Carbon Trak or North America to talk about 0:02:40.840 --> 0:02:43.600 just how many of these wells we're looking at, what 0:02:43.680 --> 0:02:47.440 these costs may be, and what the heck States are 0:02:47.480 --> 0:02:50.200 gonna do about it. We'll have that conversation in a 0:02:50.240 --> 0:02:54.280 minute after award from this week's sponsor, I Mimi Westervelt 0:02:54.280 --> 0:03:18.760 and this is Drilled. I was hoping you could maybe 0:03:18.800 --> 0:03:21.240 start with sort of the genesis of the report. What 0:03:21.440 --> 0:03:25.400 made you realize that this was something that we needed 0:03:25.520 --> 0:03:26.079 data on. 0:03:26.480 --> 0:03:29.800 Really, we started, and this is a combination of Greg's 0:03:29.800 --> 0:03:33.359 long standing interest in ROS and carbon trackers, focus on 0:03:34.240 --> 0:03:37.920 really the implications of the energy transition for fossil fuel 0:03:38.040 --> 0:03:45.120 companies and their investors. We started looking at how you know, 0:03:45.360 --> 0:03:50.160 a asset retirement obligations on the balance sheet were reported, 0:03:51.040 --> 0:03:57.840 how frequently they were revised. Those estimates. Had had a 0:03:57.840 --> 0:04:01.360 working thesis that Greg is largely built over years of 0:04:01.400 --> 0:04:03.960 observation on this as to why that was the case, 0:04:04.000 --> 0:04:08.040 which was that as assets were retired, people had to 0:04:08.080 --> 0:04:11.200 revise those estimates to reflect the actual costs and those 0:04:11.480 --> 0:04:14.320 were a lot more significant. And we took sort of 0:04:14.360 --> 0:04:16.160 that work and sort of thinking about, well, in terms 0:04:16.160 --> 0:04:19.760 of an energy transition, what's going to happen here? Are 0:04:20.120 --> 0:04:25.240 these assets all going to live? They're full estimated useful lives. Right, 0:04:26.160 --> 0:04:30.000 If we can't extract and burn all of these fossil 0:04:30.000 --> 0:04:34.720 fuels consistent with our climate targets, how are we actually 0:04:34.760 --> 0:04:38.400 really going to expect that these assets? Do you live 0:04:38.640 --> 0:04:42.720 another thirty forty fifty in some cases you know, to 0:04:42.880 --> 0:04:44.680 through the end of the century, if you're thinking about 0:04:44.720 --> 0:04:49.800 oil sands assets, for example. So it was so so 0:04:49.839 --> 0:04:54.160 our initial focus was actually on individual companies and what 0:04:54.160 --> 0:04:56.000 they've got on the balance sheets and what kind of 0:04:56.040 --> 0:04:59.240 impact if we saw something called ro acceleration, and you 0:04:59.279 --> 0:05:01.280 see a little bit on that in this paper because 0:05:01.279 --> 0:05:04.680 it's still an important concept. But as we looked at it, 0:05:04.720 --> 0:05:06.680 we thought, well, okay, there's a great story here in 0:05:06.720 --> 0:05:09.920 the US. Let's focus on the US, let's focus on onshore, 0:05:10.680 --> 0:05:13.760 and let's look and see. Right, you know what you 0:05:13.800 --> 0:05:17.320 know in addition to just looking at the corporate reported figures, 0:05:17.360 --> 0:05:20.120 which don't really give you any of the backstory, right, 0:05:20.160 --> 0:05:23.000 they give you the discounted present value at some discount 0:05:23.080 --> 0:05:26.400 rate that company has used. You don't have the undiscounted numbers. 0:05:26.400 --> 0:05:28.760 You don't know what it really costs. But when we 0:05:28.800 --> 0:05:31.320 looked around for what things really cost. We saw a 0:05:31.360 --> 0:05:34.159 lot of claims from industry and in many cases from 0:05:34.200 --> 0:05:36.920 the regulators as well. I think comparating some of those 0:05:36.960 --> 0:05:40.320 industry numbers that were looking at you know, tens of 0:05:40.360 --> 0:05:42.640 thousands of dollars or less to close a lot of 0:05:42.640 --> 0:05:46.760 these wells, including you know the one with the one 0:05:46.920 --> 0:05:50.320 estimate from the from the Banker hues that we have 0:05:50.400 --> 0:05:53.919 in there that's focused on you know, thirty three thousand 0:05:54.000 --> 0:05:58.960 dollars to close wells in places like the Eagleford with 0:05:59.160 --> 0:06:03.080 average uh, you know, well board depths total vertical depths 0:06:03.080 --> 0:06:06.839 of like nearly ten thousand feet. Looking at actual data 0:06:06.880 --> 0:06:09.400 there were there was a lot of evidence to suggest 0:06:09.440 --> 0:06:10.320 that those costs. 0:06:10.120 --> 0:06:11.400 Were going to be far greater. 0:06:11.680 --> 0:06:15.080 It was a big aha for for me Amy is 0:06:15.640 --> 0:06:20.680 we were we were searching for actual cost data, uh 0:06:21.000 --> 0:06:24.000 preferably not estimates, but you know, actual. 0:06:23.680 --> 0:06:26.320 Cost What what did it cost to plug and abandon 0:06:26.880 --> 0:06:31.080 these onshore wells? And it started to look like there 0:06:31.160 --> 0:06:36.240 was a self referential loop going on between industry and 0:06:36.920 --> 0:06:40.760 state orphan well programs that are largely funded by industry, 0:06:41.320 --> 0:06:47.080 where industry would would point to the orphan well cost experience, 0:06:47.120 --> 0:06:50.000 which was the only available cost data we could find 0:06:50.040 --> 0:06:55.080 in the United States, and say, hey, we we we 0:06:55.279 --> 0:06:58.240 liked those costs, uh, which seemed to be you know, 0:06:58.360 --> 0:07:02.279 ranging from five thoul into up to forty thousand dollars 0:07:02.360 --> 0:07:06.919 as well, and so we're going to reference those costs 0:07:06.960 --> 0:07:13.160 as in terms of the economic analysis of you know, 0:07:13.640 --> 0:07:16.360 shale and fracking in the in the US on shore 0:07:16.680 --> 0:07:18.800 on shore oil industry. 0:07:18.920 --> 0:07:20.360 So we had we. 0:07:20.360 --> 0:07:24.400 Had this orphan well data. But one thing that started 0:07:24.400 --> 0:07:26.840 to stand out from that is that most of those 0:07:26.840 --> 0:07:31.840 wells are old and they're shallow. So there's there's a 0:07:32.360 --> 0:07:36.640 there's just millions of undocumented wells, even preregulatory wells in 0:07:36.680 --> 0:07:39.720 the United States, and a lot of those have found 0:07:39.760 --> 0:07:43.440 their ways way into orphan well programs. Some of these 0:07:43.440 --> 0:07:46.480 wells are just a few hundred feet deep, uh and 0:07:47.000 --> 0:07:53.640 don't even penetrate a groundwater source. So we knew that 0:07:54.200 --> 0:07:59.480 when we saw that that the average depth, the vertical 0:07:59.520 --> 0:08:04.239 depth the shale wheels was much much deeper, ranging from 0:08:04.520 --> 0:08:09.080 sixty five hundred to twelve thousand feet of vertical depth. 0:08:09.760 --> 0:08:15.440 And we're wondering, well, what's the correlation between depth and cost? 0:08:15.680 --> 0:08:18.520 And there were a few studies out. They looked at 0:08:18.720 --> 0:08:22.720 the US orphan well data suggesting that there was a 0:08:22.760 --> 0:08:25.480 correlation between depth and costs, but that it was linear. 0:08:26.160 --> 0:08:29.080 So just you know, ten dollars of foot, let's say, 0:08:29.120 --> 0:08:32.000 and doesn't matter whether it's one thousand foot well or 0:08:32.920 --> 0:08:35.319 twenty thousand foot well, it's going to cost ten dollars 0:08:35.360 --> 0:08:39.440 a foot. And you had some state bonding regimes actually 0:08:39.440 --> 0:08:43.640 incorporated a dollar per foot and determining bond values to 0:08:43.960 --> 0:08:46.440 as financial assurance for the plug and abandon that cost. 0:08:47.400 --> 0:08:51.520 So that was interesting and something that obviously made depth relevant. 0:08:52.440 --> 0:08:56.640 But the most important finding was came out of research 0:08:56.720 --> 0:09:02.320 of industry data outside the United States in Australia that 0:09:02.640 --> 0:09:07.040 indicated that the correlation between depth and cost was exponential 0:09:07.160 --> 0:09:10.640 rather than linear. And when we looked more closely at 0:09:10.640 --> 0:09:15.600 the orphan well data that was available in the US, 0:09:15.920 --> 0:09:20.199 it also seemed to support an exponential correlation rather than 0:09:20.200 --> 0:09:21.280 a linear correlation. 0:09:22.320 --> 0:09:24.600 Could you guys speak a little bit to how or 0:09:24.640 --> 0:09:27.680 why is it that there's no transparency about these costs. 0:09:28.000 --> 0:09:30.679 No one has made them provide that cost information, They 0:09:30.720 --> 0:09:33.360 have no interest in providing that information. Just to make 0:09:33.400 --> 0:09:36.240 that clear, right, right, So someone need to be interested 0:09:36.240 --> 0:09:39.559 in having them do it, and I think that really is, 0:09:39.920 --> 0:09:43.040 you know, at the regulatory level, you're suffering from some 0:09:43.200 --> 0:09:45.640 level of capture, which you'll typically see when you have 0:09:46.120 --> 0:09:49.760 a regulator for a specific regulated industry. But that was 0:09:49.760 --> 0:09:52.680 also combined with the belief that I think a lot 0:09:52.679 --> 0:09:56.679 of people have had about oil and gas, the idea 0:09:57.559 --> 0:10:01.839 that this industry may not have the money on its 0:10:01.880 --> 0:10:04.439 balance sheet today to close all of its wells immediately, 0:10:04.520 --> 0:10:07.160 but they will close over time, and it will keep 0:10:07.240 --> 0:10:10.120 making money and keep drilling wells, and they'll be cash 0:10:10.120 --> 0:10:14.040 flows in the future. Because we all need energy, right, 0:10:14.080 --> 0:10:17.400 if we're going to have economic growth, it's correlated with it, 0:10:17.480 --> 0:10:21.040 and so it's going to be you know, this is 0:10:21.080 --> 0:10:23.800 going to be cash in the future to close these 0:10:24.040 --> 0:10:25.160 So why worry about it? 0:10:25.200 --> 0:10:26.240 Why worry about what. 0:10:26.160 --> 0:10:30.679 The actual costs are? Right? The problem, of course, is 0:10:30.679 --> 0:10:34.839 all those assumptions have been completely upended by the energy transition, right, 0:10:34.920 --> 0:10:38.800 and in the pandemic rights has been sort of a 0:10:38.960 --> 0:10:42.440 shot across the bow on that to realize how quickly 0:10:42.480 --> 0:10:46.320 things can turn potentially shut in and it gives a 0:10:46.360 --> 0:10:50.360 glimpse also of the financial condition that the companies are 0:10:50.400 --> 0:10:52.640 then in and the arguments, of course they're going to make, 0:10:52.640 --> 0:10:54.640 which is that we can't afford to do that now. 0:10:55.240 --> 0:10:57.600 So I think that has kind of shaken things up, 0:10:57.640 --> 0:11:02.679 and so the question is, really, should regulators still not 0:11:02.800 --> 0:11:05.960 pay attention to what these actual costs are and or 0:11:06.000 --> 0:11:09.120 will they continue to do that? And I think that 0:11:09.200 --> 0:11:14.200 those you know, that's that's becoming increasingly bigger and bigger issue. 0:11:14.320 --> 0:11:18.520 For most of the oil and gas industry's history, it's 0:11:18.600 --> 0:11:23.120 been sort of a self bond, self reporting situation, and 0:11:23.200 --> 0:11:26.120 states are starting to realize, oh, this is this is 0:11:26.200 --> 0:11:28.440 potentially going to leave us holding a bill that we 0:11:28.480 --> 0:11:31.079 can't necessarily afford to pay either. Can you just talk 0:11:31.120 --> 0:11:33.560 about what this problem looks like for states and what 0:11:33.760 --> 0:11:36.559 some of them are trying to do about it. 0:11:37.000 --> 0:11:39.800 One of the things that's that's happening is that the 0:11:40.000 --> 0:11:44.280 coronavirus pandemic has accelerated the shut in of wells, which 0:11:44.280 --> 0:11:47.320 has drawn a lot of attention to this topic and 0:11:47.720 --> 0:11:50.960 kind of shining a light on the reality that the 0:11:51.080 --> 0:11:55.080 orphan well funds are not sufficient to plug and abandon 0:11:55.440 --> 0:11:58.840 you know a large number of wells that are becoming 0:11:59.400 --> 0:12:02.480 idle and non economic. At the same time, but the 0:12:02.559 --> 0:12:06.160 states were realizing the problem they were in before the 0:12:06.160 --> 0:12:09.640 pandemic hit, and they were starting to do things like 0:12:09.760 --> 0:12:14.880 increasing bond amounts, increasing idle wealth fees, and tightening up 0:12:15.120 --> 0:12:20.800 on the regulatory flexibility about allowing temporary abandonment of wells. 0:12:21.160 --> 0:12:25.680 So temporary abandonments this state went. A well is shut in, 0:12:26.040 --> 0:12:29.880 but not permanently, so production has stopped, but the well 0:12:29.960 --> 0:12:33.240 is left in a state of limbo, where at least 0:12:33.240 --> 0:12:36.400 in theory, it can be started back up again. So 0:12:36.440 --> 0:12:38.240 those are the types of things I think that we 0:12:38.720 --> 0:12:42.000 see states doing. And there's a there's a few other actions, 0:12:42.040 --> 0:12:44.920 but essentially they're tightening up on the credit aman. I 0:12:44.920 --> 0:12:48.000 think the easiest way to think about this is that 0:12:48.760 --> 0:12:52.520 the legal obligation to plug an abandon an oil well 0:12:52.679 --> 0:12:56.200 at the end of its economic you know, useful life 0:12:56.920 --> 0:13:01.840 is a is a liability to the state. And normally 0:13:02.720 --> 0:13:05.600 you think of a debt like this as a that 0:13:06.160 --> 0:13:11.600 has a financial consequences. The creditor would charge interest on 0:13:11.720 --> 0:13:17.920 that or require collateral. So effectively, self bonding means free 0:13:18.440 --> 0:13:22.800 credit on these liabilities, and that's largely been the case 0:13:24.000 --> 0:13:29.320 for decades. But what the states are doing, they can 0:13:29.400 --> 0:13:34.200 either require immediate permanent retirement of wells that have been 0:13:34.240 --> 0:13:37.560 sitting idle for a long time, or they can increase 0:13:37.640 --> 0:13:41.079 the carrying costs of that outstanding debt. 0:13:41.720 --> 0:13:44.200 I feel like every day I'm seeing another news story 0:13:44.240 --> 0:13:49.360 about a shell company declaring bankruptcy or warning that it 0:13:49.400 --> 0:13:54.439 will be going bankruptcy. So what is the real situation 0:13:54.600 --> 0:13:56.320 that a lot of these states are in right now? 0:13:56.440 --> 0:13:58.800 How much of this debt does it look like some 0:13:59.160 --> 0:14:02.880 states are going to be absorbing no matter what you know? 0:14:02.960 --> 0:14:06.960 Initially, the parameters that are important trying to understand a 0:14:07.000 --> 0:14:11.439 statewide orphan well risk would include the number of wells, 0:14:12.640 --> 0:14:16.719 an average cost per well, the bond coverage, So how 0:14:16.720 --> 0:14:20.440 many is proble speaking, how much security is actually in place. 0:14:21.320 --> 0:14:23.760 Then then you get into some more complex issues like 0:14:23.800 --> 0:14:25.680 the useful life of the well. I mean, are all 0:14:25.680 --> 0:14:28.520 the wells do they need to be plugged in abandon now? 0:14:29.000 --> 0:14:33.120 Or you know, are some going to continue to produce 0:14:33.280 --> 0:14:37.000 for many years into the future. And then the credit 0:14:37.120 --> 0:14:39.280 risk of the operators, so to the extent that they're 0:14:39.320 --> 0:14:42.280 self bonding, can can is the operator good for it? 0:14:42.400 --> 0:14:45.800 Will the operator remain good for it? I'll give you 0:14:45.880 --> 0:14:48.760 just a couple of pieces of information you know, that 0:14:49.120 --> 0:14:52.480 help fill in that framework. So just look at the 0:14:52.560 --> 0:14:55.040 number of operating and idle wells that are out there, 0:14:55.040 --> 0:14:56.960 and the numbers are pretty staggering. So these are not 0:14:57.360 --> 0:15:01.160 These are not orphan wells, preregulatory wells, documented wells. These 0:15:01.200 --> 0:15:05.240 are wells that are currently out there, tagged to a 0:15:05.280 --> 0:15:09.640 specific operator and they're either producing now or they're in 0:15:09.680 --> 0:15:14.080 a state of temporary abandonment or shut in. Texas has 0:15:14.120 --> 0:15:18.520 over four hundred thousand wells, California over one hundred thousand wells, 0:15:18.560 --> 0:15:22.880 Pennsylvania over one hundred thousand wells, Kansas over ninety thousand, 0:15:23.480 --> 0:15:27.960 Ohio over ninety thousand, New Mexico over fifty thousand, in 0:15:28.000 --> 0:15:31.640 North Dakota over twenty five thousand. So one is we're 0:15:31.680 --> 0:15:36.800 talking about a large population of wells, and our research 0:15:36.960 --> 0:15:42.360 is indicating that the cost to plug these wells is 0:15:42.440 --> 0:15:45.880 going to be significantly more than the orphan well cost experience, 0:15:46.720 --> 0:15:49.960 and that for the for the shale wells may be 0:15:50.080 --> 0:15:53.760 as much as three hundred thousand dollars a well. That's 0:15:53.840 --> 0:15:57.320 based on evidence that we have. Cost data is coming 0:15:57.360 --> 0:16:00.360 out of Australia, so maybe more, maybe less in that 0:16:00.760 --> 0:16:02.600 but still a pretty big number. 0:16:02.880 --> 0:16:06.000 And still like around ten times what they've been saying. 0:16:07.280 --> 0:16:09.600 Yeah, so we're talking, we're talking numbers that are in 0:16:09.640 --> 0:16:12.160 the billions. For some states are going to be in 0:16:12.200 --> 0:16:15.800 the tens of billions, and the exercise is going to 0:16:15.840 --> 0:16:19.040 require getting a full inventory of the of the wells 0:16:19.080 --> 0:16:22.440 in each state and knowing the depth of those wells, 0:16:23.000 --> 0:16:26.560 so that because when you're talking about an exponential correlation, 0:16:26.720 --> 0:16:29.960 depth becomes really important. But I think what I think 0:16:29.960 --> 0:16:33.240 we can get at that, and you know, we will 0:16:33.280 --> 0:16:38.680 be able to put a rough cost estimate for statewide 0:16:39.200 --> 0:16:41.920 orphen well risk, and I think the numbers are going 0:16:41.960 --> 0:16:44.440 to be shocking to a lot of folks. 0:16:45.240 --> 0:16:47.520 At a certain point. The states don't have money to 0:16:47.520 --> 0:16:49.680 do this either, and some of this work will just 0:16:49.760 --> 0:16:52.920 be left undone. Is that something that you're looking at 0:16:52.960 --> 0:16:57.040 and what the impact of that on you know, communities 0:16:57.040 --> 0:16:59.240 that might lives near these wells. 0:17:00.080 --> 0:17:02.760 Number of different ways of thinking about the environmental impact 0:17:03.160 --> 0:17:06.320 from these welds. So you could think even in places 0:17:06.359 --> 0:17:09.960 where people are not nearby, you have the potential. You know, 0:17:09.960 --> 0:17:13.199 when you have improperly plugged or you have wells that 0:17:13.240 --> 0:17:16.119 are abandoned but have not been plugged, right, you have 0:17:16.200 --> 0:17:20.800 the potential for leakage, you have the potential for toxic emissions, 0:17:20.800 --> 0:17:23.879 you have the potential for greenhouse gas emissions, and the 0:17:23.920 --> 0:17:29.159 potential to infiltrate groundwater right and contaminate groundwater. But the 0:17:29.200 --> 0:17:32.920 reality is that actually you do have situations in Colorado, right, 0:17:33.080 --> 0:17:36.119 you know Burnfield's classic example. There are many places in 0:17:36.160 --> 0:17:38.680 Colorado where you have wells that are literally within neighborhoods. 0:17:39.800 --> 0:17:42.080 The same as true in California, right, whether you go 0:17:42.200 --> 0:17:44.440 to you know, from Los Angeles to Long Beach, those 0:17:44.480 --> 0:17:47.800 are often credibly costly to close. I mean we were 0:17:47.800 --> 0:17:50.439 talking with we were talking with somebody from Calgium the 0:17:50.480 --> 0:17:54.399 other day about this, who is responsible for that in 0:17:54.920 --> 0:17:57.119 Los Angeles and they had to close some wells that 0:17:57.160 --> 0:18:00.520 were like seven hundred feet deep something like that, actually 0:18:00.600 --> 0:18:03.520 quite shallow, but it was over a million dollars well 0:18:03.640 --> 0:18:06.720 to close it because they had to redrill the well board. 0:18:07.000 --> 0:18:09.040 Costs can be quite significant. I mean, when you think 0:18:09.040 --> 0:18:11.320 of the three hundred thousand that we're talking about here, 0:18:11.960 --> 0:18:14.760 that's sort of an average. There's all kinds of contingencies 0:18:14.760 --> 0:18:17.119 that could make it much more costly as well. But 0:18:17.440 --> 0:18:19.080 you have to do that because you have people that 0:18:19.119 --> 0:18:22.760 are getting sick, you know, headaches, you know, nose bleeds. 0:18:23.680 --> 0:18:26.400 Obviously there's plenty of carcinogens and petroleum. 0:18:26.400 --> 0:18:28.520 No, the question is really who's going to pay. So 0:18:28.560 --> 0:18:30.800 once we once we get a handle on what's it 0:18:30.880 --> 0:18:33.159 going to cost, the questions who are actually going to 0:18:33.200 --> 0:18:35.600 pay this bill? And I think you can start, you know, first, 0:18:35.600 --> 0:18:38.440 and say is it going to be industry as well? 0:18:38.440 --> 0:18:41.840 The orphan well funds are are not even close to 0:18:41.880 --> 0:18:44.880 being up to the task of retiring all the existing 0:18:44.920 --> 0:18:48.520 producing and temporarily idled wells. And then you get into 0:18:48.600 --> 0:18:52.240 landowners and citizens. So you know, landowners have a have 0:18:52.880 --> 0:18:54.520 a lot at stake here because many of them have 0:18:55.400 --> 0:19:00.719 abandoned equipment on their land and surface contamination. It's not 0:19:00.760 --> 0:19:04.159 what they bargained for, and so they're just kind of 0:19:04.280 --> 0:19:06.840 left with a mess on their property. And then you've 0:19:06.840 --> 0:19:10.320 got citizens that are impacted by can be impacted by 0:19:10.520 --> 0:19:15.880 toxics or groundwater contamination. And then you get to the environment. 0:19:15.920 --> 0:19:19.560 There are a lot of negative consequences to abandon and 0:19:19.760 --> 0:19:20.679 unplugged wells. 0:19:20.960 --> 0:19:23.119 I guess this is naive, but I'm still sort of 0:19:23.280 --> 0:19:27.840 shocked at how willing states have been to just be 0:19:28.000 --> 0:19:29.440 left holding the bag on this. 0:19:30.800 --> 0:19:32.919 We talk a little bit about that in the paper 0:19:33.080 --> 0:19:35.200 to try to make sense of how did we get here? 0:19:35.760 --> 0:19:39.600 So Rob describes the moral hazard that exists, which is 0:19:41.000 --> 0:19:43.520 quite evident when you look at it. So it begs 0:19:43.560 --> 0:19:46.800 the question, well, why did states do this? Why did 0:19:46.800 --> 0:19:49.639 they operate this way? And I think it's actually pretty 0:19:49.680 --> 0:19:54.840 obvious this was inevitable. These regulatory agencies were initially set 0:19:54.920 --> 0:19:58.800 up to protect the oil and gas resource, basically right 0:19:58.880 --> 0:20:01.119 to protect itself. We could get as much of that 0:20:02.119 --> 0:20:06.360 hydrocarbon resource out of the ground as possible, and putting 0:20:06.440 --> 0:20:11.879 additional costs on the industry was viewed negatively because that 0:20:12.000 --> 0:20:14.399 was going to reduce the amount of oil and gas 0:20:14.560 --> 0:20:17.640 that could be extracted. And then you add to that 0:20:18.400 --> 0:20:23.199 the dynamics of the various oil producing states and the 0:20:23.200 --> 0:20:26.480 ability of industry to play one state against the other, 0:20:27.960 --> 0:20:31.200 creating a race to the bottom. And you still hear 0:20:31.280 --> 0:20:34.280 this kind of discussion from states that well, if we 0:20:34.359 --> 0:20:37.960 increase the cost on industry, they're going to withdraw from 0:20:38.000 --> 0:20:41.160 our state and go someplace else, though it's in our 0:20:41.240 --> 0:20:45.439 financial best interests to keep their costs low and you know, 0:20:45.600 --> 0:20:49.600 that makes perfect sense until you look at the liability 0:20:49.680 --> 0:20:53.280 side of the balance sheet. So as long as you're 0:20:53.280 --> 0:20:59.400 pushing those costs off, discounting them over decades, and essentially 0:20:59.440 --> 0:21:02.640 sort of out site out of mind on the closure 0:21:02.680 --> 0:21:07.280 cost issue, then the idea of reducing the bonding costs 0:21:07.560 --> 0:21:10.679 makes good economic sense. What we're trying to do in 0:21:10.720 --> 0:21:14.919 the paper is draw attention to that, to the liability 0:21:14.960 --> 0:21:17.159 side of the balance sheets so that folks don't just 0:21:17.200 --> 0:21:20.119 see the asset side and realize that there is a 0:21:20.200 --> 0:21:22.800 huge bill to pay here and we simply haven't planned 0:21:22.800 --> 0:21:25.639 for it because the incentives were all going in the 0:21:25.720 --> 0:21:28.160 other direction for the past one hundred years. 0:21:28.440 --> 0:21:35.040 Has there been any indication of willingness from states to 0:21:35.080 --> 0:21:38.760 potentially take these things to court? I covered the climate 0:21:38.800 --> 0:21:41.879 liability cases for a long time, and this sounds so 0:21:42.560 --> 0:21:46.000 similar to a lot of kind of the basis of 0:21:46.040 --> 0:21:48.760 those suits, and especially the fact that you know we're 0:21:48.760 --> 0:21:52.800 getting more specific costs in place here. Are you seeing 0:21:52.840 --> 0:21:57.840 any potential for liability suits that would cover the cost 0:21:57.880 --> 0:21:58.760 of damages here? 0:21:58.840 --> 0:22:01.240 You'll know if the stage is interested in doing that 0:22:01.359 --> 0:22:05.280 when they actually follow complaint. Probably not, probably not before then. 0:22:07.200 --> 0:22:10.520 But the fact is what you know, are the conditions 0:22:10.520 --> 0:22:12.159 there for that? And I think the answer to that 0:22:12.280 --> 0:22:12.640 is yes. 0:22:20.440 --> 0:22:23.000 That's it for this time. We will stick a link 0:22:23.080 --> 0:22:25.000 to the report in the show notes so you can 0:22:25.040 --> 0:22:28.240 read through the entire thing. We will have a couple 0:22:28.240 --> 0:22:30.760 more episodes for you here and there in the next 0:22:30.880 --> 0:22:35.640 few weeks, but otherwise we are going on production hiatus 0:22:35.720 --> 0:22:39.400 until we're ready to release the next investigative series. That 0:22:39.440 --> 0:22:42.600 will be in July sometime. I'm not going to commit 0:22:42.640 --> 0:22:44.919 to a date just yet. As a reminder, if you 0:22:45.000 --> 0:22:49.040 are a Patreon subscriber or you subscribe to our newsletter, 0:22:49.080 --> 0:22:52.119 which is a collaboration between Drilled and Hot Take that 0:22:52.240 --> 0:22:56.200 I do with Mary Anise Hegler, you will get early 0:22:56.359 --> 0:23:01.199 access to the next season add free. So if you 0:23:01.320 --> 0:23:03.600 haven't signed up for either of those yet and you 0:23:03.680 --> 0:23:06.919 want to support our work, we appreciate it. 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