The Cleanup Bill for the Fracking Boom is Already Here
In 1990 officials were warning the government that they needed a plan to make sure the costs to clean up the mess being made by the oil industry were not passed on to the public. If the public wants to avoid picking up the tab for the oil tycoons, it better get a plan of its own in place.
In the world of shale oil and gas production there is a concept known as “the Red Queen effect.” In this 2014 article, it explains that, “The ‘Red Queen’ effect refers to the relatively short lifespan of fracking wells, which tend to reach peak production earlier than conventional wells.”
The Red Queen is from Lewis Carroll’s Alice in Wonderland. After making Alice run faster and faster while remaining in the same place, the Queen explains the point that refers to the shale oil and gas industry.
"Now, here, you see, it takes all the running you can do, to keep in the same place.”
Due to the fast decline rates of shale oil wells, the industry has had to keep drilling more as fast as possible to fight the fast decline of new wells. While the Red Queen effect and the “relatively short lifespan of fracking wells” is often discussed in relation to the profitability and potential lifetime production of the shale oil industry, one thing that is not mentioned often is that this also radically changes the dynamics of the asset retirement obligations for these wells. In simple terms, shale wells have much shorter economic lifespans, which means the cleanup bills for these wells may come due a few decades earlier than we’ve been told to expect. A 2020 paper in the Journal of Petroleum Technology notes the challenge of expecting shale wells to “produce economically” aka “make money” for 30 years.
“These terminal decline rates represent a clear challenge for current reserves and ultimate recovery estimates from wells that were expected to produce economically for 30 or more years.”
Another aspect of the Red Queen effect is how the industry has committed/continues to commit reserves fraud by using production models for conventional wells to forecast the oil output for unconventional wells — which likely overestimates the final oil production for unconventional wells by 30%. Much of what the oil and gas industry has promised about the U.S. “shale miracle” is based on assumptions such as these that are not based in reality, as they are models and assumptions for a completely different technological approach to oil recovery (conventional). The lies that have allowed this to work are becoming much harder to hide and the shale industry is learning the Red Queen is a cruel mistress. Oil companies talking about making money off of “unconventional” shale wells for 30 years are doing the same thing they did when overestimating shale well oil production by using conventional well production models and it is not close to the truth.
In 2020 a paper in the Journal of Petroleum Technology acknowledged this fact stating: “... shale producers are now advised to not use conventional wells as a guide, or else run the risk of overstating and overvaluing unconventional assets."
"Overstating and overvaluing unconventional assets" is another way to say reserves fraud.
Shale wells decline so fast that no one is going to want to own them at year 30 as then they would be stuck with very low oil production and high clean up costs which the profits from the oil production won't come close to covering. The industry’s failure to acknowledge this is the basis of much of the fraud I have written about.
So when the oil companies run out of new acreage to drill to "keep running," they have no where else to run to keep the shale boom alive.
So instead they will stop and walk away when the profits are gone. We are now getting proof that the industry is starting to walk away from their cleanup liabilities for shale wells that are not even 20 years old.
Major Oil and Gas Companies Already Abandoning Shale Wells
One of the issues with the millions of old abandoned oil and gas wells in the U.S. is no one knows where many of them are due to lack of record keeping and they certainly aren’t easily visible from satellite photos. This recent article on efforts to locate the large number of old abandoned oil and gas wells in Pennsylvania gives you a good idea of how hard it can be to find old abandoned conventional oil and gas wells. Now, can you find the abandoned well in this photo?
It’s right there with the red dot on that relatively new well pad. The PA Environment Digest site run by David Hess, the former Secretary of the Pennsylvania Department of Environmental Protection, published a post on November 30th with a headline that included the phrase “More Abandoned Shale Gas.”
Apparently the oil and gas industry in Pennsylvania is now openly abandoning shale wells and thus sticking the public with the cleanup bill. And these aren’t just small-time operators who went bankrupt and walked away. EQT, one of the biggest shale gas producers in the U.S., is one of the companies.
Chesapeake, another massive gas company, is on the list.
Diversified which owns more oil and gas wells than any other company, is on the list.
Hilcorp, recently fined for methane emissions in Pennsylvania, is on the list.
And, XTO (owned by Exxon), also recently fined for methane emissions in Pennsylvania, is on the list.
On December 11th, PA Environment Digest documented another case of an abandoned shale gas well. If you’ve been to the shale fields of the Permian in West Texas, the rolling wooded hills of the shale fields of Pennsylvania seem quite beautiful in comparison. But the environmental damage and the the costly clean up are similar in both areas. Earlier this month Inside Climate News reported on the “elevated levels of radium” found in wildlife in Pennsylvania. Justin Nobel also reported on the issue of radioactive contamination in drinking water for DeSmog. Unsurprisingly the radium is likely coming from fracked waste water.
Source: Google Maps
The details of the above well, according to the state of Pennsylvania, describe it as an unconventional horizontal gas well drilled in 2012.
On December 11, 2024, DEP did a follow-up inspection of this site and found Nucomer had failed to comply with the December 6, 2023 order requiring the restoration of the well site and impoundment.
“The Impoundment remains filled with water. There is no earth moving equipment on site. There has been no observable attempt made to restore the Well Site or the Well Development Impoundment prior to this inspection.”
According to PA Environment digest, this company (Nucomer) currently has 49 drilling permits in the state.
If the oil and gas companies are all going to start walking away from unconventional horizontal oil and gas wells when they are less than 20 years old, the scale of the bill to clean up the mess that will be left to the public is much bigger than thought and will come due much sooner. I’ve been making the case that if the American public wants to get the money owed to them by the oil and gas industry to clean up the industry’s mess, it better do it now while there is still money to get. That only becomes more urgent as the industry is already walking away from shale wells.
The Speed of Shale
In August the Journal of Petroleum Technology ran an article with the following headline.
Speed is the defining characteristic of the shale industry. The industry itself was built incredibly fast to take advantage of this new way to unlock oil from rocks. This meant that for places like North Dakota’s Bakken, they were flaring or venting as much as 20% of the natural gas produced as they had no infrastructure to capture and process it. The boom of American shale oil happened at such scale and so fast that the media was touting the shale industry as the new “swing producers” in the global oil markets, a role that Saudi Arabia always played and — thanks to the speed of the shale lifecycle — has now retaken.
In 2015 articles touting U.S. shale oil as the new global swing producer appeared and many such articles followed through 2020. Now as we begin 2025, the story is all about Saudi Arabia retaking that role. That is the speed of shale. One decade of dominance. Shale oil is called “unconventional oil” because it is a completely different process of producing oil than the conventional oil that Saudi Arabia produces. Because of this, the timeline of its economic life is also unconventional.
A quote from the article in the Journal of Petroleum Technology highlights what this means to the future of shale and the U.S. oil industry. Everything happens faster in shale. Especially production declines.
“We’ve observed that decline curves, meaning the rate at which production falls over time, are getting steeper as well density increases. Summed up, the industry’s treadmill is speeding up and this will make production growth more difficult than it was in the past,” Gregoris said.
The Red Queen is getting even faster in shale.
Unconventional Wells Will Have Higher Cleanup Costs
While speed is one of the main differences between unconventional and conventional oil and gas production, cost is another. Shale is expensive. And it is expected the asset retirement obligations for shale will be higher than conventional wells, too. The headline of a 2022 article in the Journal of Petroleum Technology posed the question we need answered: “Aging US Shale Wells: Years of Remaining Opportunities or Growing Asset Retirement Obligations?” The author noted that, “there is increasing industry concern about what to do with later-life unconventional wells.”
Later in the article it notes, “ongoing opex and full plugging and abandonment with reclamation are typically much higher for unconventional wells than conventional wells.”
An explainer on well plugging on an industry site notes that “Placing a cement plug in an open hole horizontal well is especially difficult….. In a technical paper published by the Society of Petroleum Engineers (SPE 113092*) the authors found that an average of 2.4 attempts are necessary to achieve a successful sidetrack. With each plug attempt consuming between 24 and 48 hours of rig time, well costs can increase dramatically.
Another industry site notes, “Plug cementing in highly deviated and horizontal wells is increasingly challenging, particularly as the reach and depth increase.”
A November article by the Ohio River Valley Institute includes significantly higher cost estimates for closing and cleaning up unconventional horizontal wells.
“The average decommissioning cost for conventional wells is estimated at $73,700 while the average cost to decommission horizontal wells—which tend to be more complex, deeper, and costly to plug—is $261,000 per well.”
While the real costs to cleanup the longest shale wells isn’t currently known to the public, it is reasonable to assume it will be significantly higher than the estimates for conventional wells. And that is when everything goes right. As Hawk Dunlop explains in this video, things are going wrong in Texas and it is making the costs to properly close and clean up wells many times higher which, a situation which Hawk explains can “bankrupt an oil company."
Riding Off Into the Sunset after Committing a Crime in Plain Sight
For the past several years, Mark Olalde at ProPublica has reported on the issue of unfunded oil industry liabilities and how the big oil companies are walking away from their liabilities. His most recent piece published last month says it all in the title, “The American Oil Industry’s Playbook, Illustrated: How Drillers Offload Costly Cleanup Onto the Public.” Olalde lays out a playbook explaining how the criminals in the oil industry walk away from their debts to the American public.
In the article, Olalde presents a document obtained from the research group Undocumented that includes warnings from officials in 1990.
Source: ProPublica/Undocumented
The document makes it clear that the officials know that the industry is setting up to walk away from cleanup liabilities and even describes the process as “sunset operations.”
The oil industry knows better than anyone when the profits run out aka the sun sets. And they are planning to walk away. Interestingly enough, as I wrote last year, an oil industry analyst was quoted in the Wall Street Journal talking about the oil industry using similar language:
“There’s still a lingering concern for this sector[oil industry], that it’s a sunset industry because of the energy transition,” said Biraj Borkhataria, an analyst at RBC Capital Markets.
The industry has a plan for its sunset operations. If you want to see what that looks like, read this piece on the state of the California oil industry. It is all going as planned for the oil industry and the public is being stuck with the bill.
In 1990 officials were warning the government that they needed a plan to make sure the costs to clean up the mess being made by the oil industry were not passed on to the public. Nothing changed. If the public wants to avoid picking up the tab for the oil tycoons, it better get a sunset operation of its own in place.
Justin Mikulka started reporting on the unfunded liabilities in the oil and gas industry in 2020 with his work at DeSmog. This work continues at Powering the Planet. Justin recently guest lectured on the topic of oil industry liabilities for University of Vermont Law School’s Oil & Gas & the Environment class. In the Fall of 2025 Justin will be presenting a paper on this topic at the annual Berle Center conference at Seattle University’s School of Law. The conference topic is “Climate Risk and the Corporation.”
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