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Holding corporations accountable for America’s ‘zombie wells’ problem

ClientEarth Communications

23 February 2024

Fossil fuel companies have abandoned millions of polluting toxic wells on Americans’ properties in a widespread practice that worsens climate change, harms landowners, pollutes communities, and costs the taxpayer. In Colorado, we’re representing one group of property owners in a lawsuit asking the court to finally hold oil and gas companies accountable.

Fossil fuel corporations have left a haunting legacy of over two million polluting abandoned oil and gas wells across the United States. These ‘zombie wells’ – wells that continue to pollute the planet long after they have stopped being used to produce oil or gas – are a disaster for the climate, bad for human health, and a fraud on American taxpayers.

Zombie wells emit methane – a toxic gas more than 20 times more powerful than carbon dioxide at warming the planet – at 100 times the rate of oil and gas wells that have been plugged. In 2021 alone, abandoned oil and gas wells spewed more than 295,000 tons of methane into the atmosphere, the carbon equivalent of the annual emissions of 1.8 million cars on the road.

Experts estimate that methane pollution is responsible for up to 30% of the current human-induced global warming that is overheating our planet and causing extreme weather events such as heatwaves, floods and forest fires.

These wells are a threat to human health too. Wells are often abandoned on people’s property or in their communities. The methane pollution from the well forms ozone which is linked to serious health issues and premature deaths for people nearby. Lower-income communities and communities of color bear the brunt of this pollution as they are disproportionately likely to live near oil and gas infrastructure.

How did we get here?

When a fossil fuel company stops extracting oil or gas from a well because the well has stopped producing, it has a legal responsibility to ‘plug’ the well to ensure it doesn’t pollute.

Oil and gas companies have abandoned 3.7 million oil and gas wells across the US as the wells began to run dry. However, the majority of them - 2.1 million - have not been plugged. Our lawsuit alleges this is because fossil fuel companies have skipped out on their responsibility to clean up after themselves.

Instead of plugging the wells, at an average clean-up cost of $100,000 per well, the industry’s largest players systematically transfer these wells to smaller, private companies that are destined to go bankrupt or dissolve, leaving no one to pay for the clean-up. The well becomes an ‘orphan’, the responsibility falls to the state, the financial costs land on the taxpayer, and the climate disruption impacts all of us.

Our case

That’s why we’re litigating a new class action case to hold oil and gas companies accountable. We’re representing a group of Coloradans who have been directly affected by oil and gas companies that have abandoned wells on their properties without cleaning them up and making them safe.

Through a series of transfers, the wells on their properties were shuffled from major oil and gas corporations such as Chevron (via its acquired entity Noble) down through other fossil fuel companies before eventually ending up in the hands of a smaller, private company that subsequently went bankrupt, leaving the landowners with a polluting well on their land and no one responsible for plugging it and making it safe.

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What could the impact of this lawsuit be?

If our court action is successful, it will establish that the clean-up costs of plugging these wells can go back up the chain of ownership to a solvent company that previously owned the well.

This will not only result in the long-overdue plugging of hundreds of wells covered by this case in Colorado. Should the court validate this right, communities burdened with abandoned wells nationwide would have a new avenue for pursuing oil and gas companies for clean-up costs amounting to hundreds of billions of dollars.

That legal remedy has the potential to stop this zombie wells menace that threatens our climate, pollutes air and water, victimizes local communities – and sticks American taxpayers with a bill for billions of dollars.

And this is urgent. There are millions of active oil and gas wells across the United States that will run dry over the next decade. Unless we can use the law to force fossil fuel companies to clean up after themselves, many more will be abandoned – intensifying the climate crisis and sticking taxpayers with an ever-increasing bill.

When asked for a response by the Financial Times, HRM Resources declined to comment. Chevron said it follows state regulations when transferring ownership of wells and operates an active plug, remove and reclaim programme in the area.

FAQs

Why are the plaintiffs suing?

The plaintiffs allege that when the oil and gas wells on their lands were nearly depleted, instead of plugging the wells -- a costly process that involves securely sealing the well to prevent the escape of harmful pollutants into the environment -- the company operating them knowingly sold the oil and gas wells to a privately owned shell company that was designed to go bankrupt and shed the liability.

Consequently, the plaintiffs were left with approximately 200 polluting abandoned wells on their properties and with no one to pursue for the clean-up costs. The property owners are asking the court to establish their right to pursue clean-up costs from the company they allege fraudulently sold the wells.

Which oil and gas companies are being taken to court?

In this case, the plaintiffs are suing HRM Resources and Painted Pegasus Petroleum.

Who is responsible for cleaning up abandoned wells?

The company that owns the well is legally responsible for the well’s clean-up costs. However, if the company goes bankrupt or otherwise dissolves, it leaves no one responsible and forces the government to step in and plug the wells and taxpayers to pick up the bill.

Why is this fraud?

This case alleges that the oil and gas companies named in the lawsuit participated in fraudulent transactions in order to shirk liability for plugging the wells.

The complaint alleges the oil and gas company sold the wells to an entity that was designed to go bankrupt and shed the liability. These transactions were fraudulent because the values of these wells were upside down: the associated liabilities of the well (i.e. the clean-up costs) were greater than the amount of money that a company could expect to make from the well.

How could the court remedy this problem?

If the court agrees with the plaintiffs, it could establish that previous owners of oil and gas wells can be legally pursued for the clean-up costs that they had dodged using fraudulent transactions.

Where was the case filed?

The case was filed in Adams County, Colorado.

How do abandoned wells contribute to climate change?

Abandoned wells emit methane – a toxic gas 28 times more powerful than carbon dioxide at warming the planet. In 2021 alone, abandoned oil and gas wells released more than 295,000 tons of methane into the atmosphere, the carbon equivalent of the annual emissions of 1.8 million cars on the road.

Experts estimate that methane pollution is responsible for up to 30% of the current human-induced global warming that is overheating our planet and causing extreme weather events such as heatwaves, floods and forest fires.

What are the health impacts of zombie wells?

In addition to the climate impacts, zombie wells also can harm the people who live near them. Wells are often abandoned on people’s property or in their communities. The methane pollution from the well forms ozone which is linked to serious health issues and premature deaths for people nearby. Lower-income communities and communities of color often bear the brunt of this pollution as they are more likely to live near oil and gas infrastructure. Methane is also explosive under certain conditions and can cause zombie wells to explode if the gas is ignited.

Who provided legal advice to the plaintiffs?

The plaintiffs are supported by ClientEarth, an environmental non-profit and law firms Richards Carrington, LLC and Borison Firm, LLC.

Where can I read the complaint?

You can read the legal complaint here.

Help hold corporations accountable for America’s ‘zombie wells’ problem