Stripper Wells: Big Polluters Or Necessary Evils?

Stripper wells, or marginal wells, are oil or gas wells that are nearing the end of their economically useful lives. In the United States, these wells make up a significant portion of domestic oil and gas production, with over 420,000 stripper wells producing nearly 915,000 barrels of oil per day, accounting for 18% of US oil production. However, their low production levels and the lack of proper regulations have led to concerns about their environmental impact, with investigations revealing pollution and emissions from these wells, contributing to health and climate issues. The question arises: are stripper wells big polluters, and what can be done to address their environmental impact?

Stripper wells are exempt from state production taxes and receive tax subsidies

Stripper wells, or marginal wells, are oil or gas wells that are nearing the end of their economically useful lives. They are typically defined as wells that produce less than 10-15 barrels of oil per day or less than 60,000-90,000 cubic feet of gas per day. In the United States, there are hundreds of thousands of stripper wells, with over 420,000 oil stripper wells and around 360,000 natural gas stripper wells. Together, they account for a significant portion of US oil and gas production, with oil stripper wells producing nearly 915,000 barrels of oil per day (18% of US production) and natural gas stripper wells producing over 1.7 trillion cubic feet of natural gas (9% of production in the lower 48 states).

Despite their economic and productive contributions, stripper wells have come under scrutiny for their environmental impact and the tax exemptions they receive. One of the main concerns surrounding stripper wells is their exemption from state production taxes. Stripper wells are largely exempt from state severance taxes, which are levied on the extraction of natural resources. In addition, stripper well operators benefit from tax subsidies provided by the federal government. For example, in 2022, the Marginal Well Tax Credit was expected to reduce taxes by $320 million for stripper well operators. These tax exemptions and subsidies have contributed to the proliferation of stripper wells, as they provide an economic incentive to keep these wells in operation, even when they are marginally productive.

The rationale behind the tax exemptions and subsidies is to support the domestic production industry and local economies. The Stripper Well Consortium (SWC) aims to enhance the ability of the industry to keep stripper wells producing at economic rates while maximizing the recovery of domestic hydrocarbon resources. Additionally, stripper wells are often operated by small companies in communities far from major cities, creating local economic benefits. The IOGCC estimates that for every $1 of stripper oil or gas production, $1.01734 of economic activity is generated, and about 10 American jobs are dependent on each million dollars of stripper production.

However, the environmental consequences of prolonging the life of stripper wells cannot be overlooked. The Ohio River Valley Institute highlights the issue of insufficient clean-up costs, with states and the public potentially bearing the financial burden of decommissioning and restoring well sites. Additionally, the emissions from stripper wells contribute significantly to air pollution and greenhouse gas emissions. For instance, the 177,000 stripper wells in the four-state region of Kentucky, Ohio, Pennsylvania, and West Virginia emit at least 199,000 tons of methane annually, equivalent to the greenhouse gas emissions of 553 million gallons of gasoline.

To address these concerns, states need to implement policies that ensure the oil and gas industry sets aside sufficient funds to properly plug, abandon, and restore well sites. This includes strengthening bonding requirements and closing loopholes that allow chronic polluting operators to evade regulatory enforcement. By balancing the economic incentives with strict environmental safeguards, a more sustainable approach to managing stripper wells can be achieved.

Stripper wells are a significant source of pollution, even when they are inactive

Stripper wells, also known as marginal wells, are oil or gas wells that are nearing the end of their economically useful lives. In the United States, a stripper gas well is defined as one that produces 60,000-90,000 cubic feet or less of gas per day at its maximum flow rate. Oil wells are generally classified as stripper wells when they produce 10-15 barrels per day or less over a 12-month period. These wells are common in older oil and gas-producing regions, such as Appalachia, Texas, and Oklahoma, and there are over 420,000 of them in the US, producing nearly 915,000 barrels of oil per day, or 18% of US production.

While stripper wells may produce less than other wells, they still account for a significant portion of America's oil and natural gas production, contributing over 7.4% of US oil production and 8.2% of natural gas production. This amounts to nearly 182,500 wells being plugged and abandoned over a decade, with a lost production market value of $7.6 billion annually.

The issue with stripper wells is that they are often kept alive, even at very low production levels, to avoid clean-up costs. This has led to a growing number of uneconomical wells that need to be decommissioned. In the four-state region of Kentucky, Ohio, Pennsylvania, and West Virginia alone, there are 177,000 stripper wells, emitting at least 199,000 tons of methane annually. These emissions are equivalent to the greenhouse gas emissions of 553 million gallons of gasoline.

Furthermore, investigations into stripper and inactive well sites in Colorado have revealed significant pollution, even from wells with low production levels or that are shut down. Well operators are often entrusted to calculate their pollution estimates, which may not be based on direct measurements, and are allowed to pollute up to a certain threshold without legal repercussions. This results in chronic pollution that poses a harm to human health and the climate, even when wells are inactive.

Therefore, it is evident that stripper wells are a significant source of pollution, even when they are inactive, and proper measures must be taken to plug and abandon these wells to mitigate their environmental impact.

Stripper wells are kept alive to avoid clean-up costs, which can be substantial

Stripper wells, or marginal wells, are oil or gas wells that are nearing the end of their economically useful lives. They produce less than 15 barrels of oil per day or 90,000 cubic feet of gas per day. In the United States, there are over 420,000 stripper wells, producing nearly 915,000 barrels of oil per day, or 18% of US production.

Stripper wells are often kept alive, even at very low production levels, to avoid the substantial clean-up costs associated with plugging and abandoning the wells. The clean-up costs for a single well can range from $30,000 to $86,000, and with hundreds of thousands of stripper wells in the US, the total cost of cleaning up and plugging these wells would be enormous.

The issue is exacerbated by the fact that well operators are not required to set aside sufficient clean-up costs upfront, leaving states and the public on the hook for these expenses. Political and industry entities have also championed the preservation of stripper wells, arguing that it is better to leave them unplugged for possible future use. Additionally, stripper wells are largely exempt from state production taxes, and the federal government provides tax subsidies to stripper well operators, further incentivizing their continued operation.

The result is a growing number of stripper wells that are kept alive well past their economically useful lives, contributing to pollution and posing a significant liability to the public. In California, for example, idle and low-production wells are stripping assets needed to pay for their retirement, and the state and its citizens may ultimately be left with the clean-up bill.

The negative environmental impact of stripper wells is significant. Investigations in Colorado, for example, have revealed chronic pollution and emissions from stripper wells, even when they are operating at minimal levels or are inactive. This pollution poses a harm to human health and the climate, and the longer these wells are allowed to operate, the greater the harm they cause.

Stripper wells are often owned by large companies but operated by small businesses

Stripper wells are oil or gas wells that are nearing the end of their economically useful lives. They are defined by their low production rates, typically less than 15 barrels of oil or 60,000-90,000 cubic feet of gas per day. In the United States, there are hundreds of thousands of stripper wells, with over 420,000 oil stripper wells and around 360,000 natural gas stripper wells. These wells make up a significant portion of America's oil and gas production, contributing over 7% of the country's total oil and gas production.

While most stripper wells are owned by large companies, they are often operated by small businesses. This is because large companies tend to sell or spin off late-life, minimally productive wells to smaller companies. The small businesses that operate these wells are usually located in communities far from major cities. This keeps the economic benefits of stripper well production focused at the regional or local level. For every $1 of stripper oil or gas production, it is estimated that $1.01734 of economic activity is created, and about 10 American jobs are supported for every million dollars of stripper production.

The practice of selling or spinning off late-life wells by large companies to smaller ones has been criticized as a form of asset stripping. The large companies are accused of stripping all remaining value from the wells and leaving the cleanup costs to the smaller operators. This has led to a growing number of "zombie wells," which are idle wells that have been shut down but not properly plugged and abandoned. In California, for example, the number of idle wells increased by 78% from 2014 to 2016, with many of these likely to be zombie wells.

The issue of zombie wells and the associated environmental risks have been recognized, and there have been calls for better regulation and enforcement to address the problem. Studies have shown that stripper wells can be a significant source of pollution, even when they are operating at low production levels. In Colorado, for instance, investigations into stripper wells led to the discovery of pollution and emissions that were not properly regulated or controlled. Similar issues have been observed in other states, with oil and gas operators often entrusted to calculate their own pollution estimates without direct measurements.

To address the environmental and economic concerns associated with stripper wells, states have been urged to require oil and gas companies to set aside sufficient funds to plug and abandon wells that are no longer productive. This would help ensure that the financial burden of cleanup does not fall on taxpayers and that the potential harm to health and the climate is mitigated.

Stripper wells contribute to the economy by supporting employment in smaller communities

Stripper wells, or marginal wells, are oil or gas wells that are nearing the end of their economically useful lives. They are typically defined by their low production rates, with oil wells being classified as stripper wells when they produce 10-15 barrels per day or less for any twelve-month period. Despite their low individual output, stripper wells make up a significant portion of America's oil and natural gas production, with over 420,000 of these wells in the United States, producing nearly 915,000 barrels of oil per day, or 18% of US production.

The preservation of stripper wells has been championed by political and industry entities, who argue that it is better to leave them unplugged for possible future benefit. However, this has led to a growing number of uneconomical wells that are at risk of becoming wards of the state. In the Ohio River Valley region alone, there are approximately 177,000 stripper wells, 72% of which produce less than one barrel of oil equivalent per day. The average cost to plug and abandon a well is $30,000, creating a substantial liability for the public when the owners of these wells are no longer in business.

The issue of stripper wells is complex, as they provide economic benefits to smaller communities while also presenting environmental concerns and potential cleanup costs. While they support employment and help avoid the transfer of American wealth overseas for imported oil, the accumulation of unplugged and abandoned wells may result in significant economic and environmental costs in the future.

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