At ClimateWells, we are reducing potent methane emissions by shutting down old, low-producing oil and gas wells. These wells, called “marginal” wells, are often conflated with orphaned wells. Both are a climate issue – however, there are major distinctions between marginal and orphaned wells and their associated carbon credit projects.
The team at ClimateWells spent nearly two years studying the emissions from orphaned wells and evaluating their carbon-crediting solutions before deciding to focus on marginal wells. While there are high-integrity carbon credit projects in both categories and both types of wells need coordinated efforts to address emissions, we’ve found substantial advantages to focusing on marginal well projects.
TL;DR
We believe orphaned wells are a symptom of the problem that we are currently addressing by decommissioning marginal wells. If operators are incentivized to shut down their low-producing oil and gas wells, these wells would not become orphaned in the first place. Even if we plug 1,000 orphan wells, there will be a new 1,000 orphan wells next year unless we tackle marginal wells.
We choose to develop carbon credit projects from the early decommissioning of marginal wells because there are clear additionality and verifiability advantages. Marginal wells are also a much larger source of emissions and have a greater effect on frontline communities.
Read on to dig deeper into why we’ve prioritized marginal wells over orphaned wells.
Some Helpful Definitions
Throughout this blog, we’ll be referring to various types of oil and gas wells. These are the types we’re concerned with – and what exactly each term means:
Marginal Wells: Marginal wells are defined as low oil and gas production sites with average combined oil and gas production of less than 15 barrels of oil equivalent per day. In many cases, marginal wells are owned by small operators with ten or less employees. According to the EPA, approximately 70% of the 900,000 onshore oil and gas wells in the U.S. were low-producing in 2021. Amazingly, while they only accounted for 7% of 2021 U.S. oil and gas production, these wells were responsible for 60% of U.S. natural gas production emissions.
Abandoned Wells: An abandoned well is any well that is no longer used to produce oil or gas and is no longer operated by a solvent owner. This includes wells that were properly plugged and abandoned by their operators, wells that were improperly plugged and abandoned, and wells that were never plugged (see orphaned wells). There are between 2 and 3 million abandoned wells across the U.S. Some of these wells leak methane, and many do not.
Orphaned Wells: An orphaned well is a type of abandoned well that is not plugged. If an operator goes bankrupt or otherwise disappears before plugging their wells, these wells become orphans and are the responsibility of each state to properly plug and abandon. There are approximately 130,000 documented orphan wells and potentially as many as 1 million undocumented orphaned wells in the U.S.
Selecting Marginal Well Carbon Credit Projects
Both marginal and orphaned wells pose a threat to our climate, but our carbon credit projects focus on marginal wells. Here’s why:
Additionality
There are agencies in every U.S. state and province of Canada assigned to plugging and remediating orphan wells, whereas there are currently no governing bodies assigned to the shutdown of marginal wells. While orphan wells have been designated over $7 billion in federal funds delivered for plugging and remediation, there are currently no regulations that require marginal oil and gas wells to be plugged and abandoned.
While plugging every orphan well in North America would be far more expensive than $7 billion, each regulatory body has developed a prioritization system. First, orphan wells that cause direct safety concerns to nearby residents are plugged. At this point, the majority of these orphan wells have been plugged or will soon be. Next, each regulator focuses on wells with especially high emissions and reasonably low remediation costs. Coincidently, this is the same way a carbon credit developer would prioritize projects. Said another way, if an orphan well has high enough emissions and low enough plugging costs to make an attractive carbon credit project, it would also be highly prioritized for federal and state funding.
Because of government funding and governing bodies designated for the decommissioning of orphan wells, it is increasingly difficult to prove that there is no other reasonable mechanism than carbon credits to fund an orphan wells shutdown project. On the other hand, the lack of incentives for shutting down marginal wells makes that effort a perfect candidate for carbon credits, aligning with our efforts.
Carbon Accounting
Carbon accounting is a way of calculating how much greenhouse gas a project removes or reduces. For orphan wells, carbon accounting involves two separate methane emissions measurements approximately 30 days apart. The crediting term on these projects is an arbitrary 20 years. This creates carbon credit integrity problems because, in almost all cases, if a regulator is informed of a methane emitting orphan well, the regulator will work to fix the leak and plug the well far sooner than 20 years from now.
For marginal well projects, carbon accounting is determined by the amount of curtailed oil and gas production and the carbon intensity of that production, provided by Rocky Mountain Institute’s lifecycle emissions models. The crediting term is capped at either ten years or the amount of time the well would continue to profitably produce – whichever is less. There are no readily available mechanisms that would alternatively cause an operator to shut down an active, producing, profitable oil and gas well, making the impact of these projects a higher integrity use of carbon finance.
Information Risk
Marginal wells have decades of historical production data to reference. This, alongside independent petroleum engineering analysis, allows these projects to be easily verifiable.
For most orphan wells, there is no historical emissions data. Without this data, there is an increased risk that wells have been manipulated to increase credit volumes.
Environmental Impact
Every marginal well emits both methane and CO2 emissions. However, less than 10% of orphan wells showed emissions above detectable levels. Over 1 million marginal wells are active across North America, and their emissions footprint is estimated to be over 250x greater than that of all abandoned wells -- making marginal wells’ environmental impact much more significant.
Social Impact
Marginal wells exist within cities and across populated areas. In areas like Los Angeles, there are nearly 5,000 marginal wells still pumping small amounts of oil and gas. These wells are often located in frontline communities and the areas that will feel the greatest effects of climate change first. On the other hand, most orphan wells are rural, located reasonably far from populated areas with little direct impact on local communities.
Growing Problem
More than 200,000 productive wells will reach marginal levels over the next 10 years. As their production declines, their emissions increase. In fact, the emissions intensity of an oil field doubles every 25 years. There are many reasons for this (old valves and transmission lines, methane venting due to the shut down of regional gas processing infrastructure, steam flooding, etc). At a certain point, the emissions are so great they outweigh any value created by the low and decreasing energy production. We must target these marginal wells as they continue to release high levels of methane into the atmosphere.
ClimateWells is proud to zero in on marginal wells carbon credit projects as a necessary and impactful way to tackle emissions from U.S. oil and gas.
