Is Biden a friend of Big Oil? Financial Times Report
Biden's plan to clean up oil wells criticized as a bailout for fossil fuels. The in-depth analysis of the Financial Times
Joe Biden's plan to shut down tens of thousands of abandoned oil wells in the United States risks rewarding fossil fuel operators for shirking their remediation responsibilities and hooking the industry to taxpayer bailouts, critics say.
The president's $ 2 trillion infrastructure proposal includes $ 16 billion for reclamation of disused mines and wells. The White House believes the project could create "hundreds of thousands" of jobs while ending dangerous losses.
But some analysts argue that the project will leave taxpayers to foot the bill for past negligence and encourage other misconduct in the future, the FT writes.
"The concern is that the oil and gas industry will take this and say, 'We don't really have to clean up because if we don't, we know the federal government will step in,'" said Clark Williams-Derry, an analyst at the Institute. for energy economics and financial analysis.
State regulations require operators to plug wells at the end of their life – a process that can cost anywhere from $ 4,000 to $ 150,000. While this is only a fraction of the $ 8 million spend to drill a well in the first place, big drills have become adept at unloading old wells, which often end up in the hands of small producers who cannot afford the cleanup costs.
"There is a process that basically consists of unbundling liabilities into subsequently weaker operators … until the company thrives somewhere else, but it is not responsible for cleaning up the disaster it was initially responsible for," Williams said. Derry.
Most states require companies to send bonds to cover the costs of closing their wells in the event of bankruptcy. But the money set aside tends to be too low, leaving states unable to cover costs when companies fail.
The president's plan would target wells whose owners are unknown or have gone bankrupt. There are 56,600 documented cases of these "orphan" wells across the country, according to the Interstate Oil & Gas Compact Commission, with estimates of an additional 746,000 undocumented. Many of these date back to the oil boom of the late 19th and early 20th centuries, when wells were being drilled from Pennsylvania to Texas with little regulation or planning.
Biden sees the orphan well problem as an opportunity to address two of his administration's priorities – jobs and climate – simultaneously. The project would create jobs in rural communities hit hard by last year's collapse, while at the same time preventing the leakage of methane into the atmosphere and oil and mixture into the ground.
A Columbia University study last year estimated that abandoned wells emit about 280,000 tons of methane each year, equivalent to the annual carbon dioxide emissions of 2.1 million cars.
A program in North Dakota last year used $ 66 million in stimulus funds to create 1,380 full-time jobs to plug 280 wells. It was an "absolutely extraordinary success" and acted as a "pilot" for the Biden plan, said Ron Ness, president of the North Dakota Petroleum Council, an industry group.
But the North Dakota program drew criticism for including wells transferred from active operators who could have borne the burden themselves.
Some analysts argue that the Biden plan should make funding conditional on industry awarding larger sums to cover the costs of future remediation.
“If you have to get the water out of the bathtub, one of the first things you have to do is turn off the tap,” said Robert Schuwerk, executive director of Carbon Tracker.
One way to do this would be to prioritize funding for states that are committed to reviewing their bond programs.
"The matter is now really in the details," Schuwerk said. “Are they going to provide [funds] to states that are trying to tackle this problem? Or will they simply go, like it or not, to anyone to create jobs? ”.
Article taken from the foreign press review of Eprcomunicazione
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/biden-sotto-sotto-e-amico-delle-big-oil/ on Sun, 18 Apr 2021 05:14:18 +0000.