Rob Eberhart, Bobcat Oilfield Services, Inc.
2023 2nd Quarter Newsletter
"Plugging away": The only time the phrase equals a great day in the oil industry!
"Plugging away" is not a phrase anyone in the oil industry likes to hear. It usually means a failed investment, a depleted well, or a major issue leading to a well-site closure. However, with the new Federal Plugging Program, Kansas has the opportunity to resolve about a centuries worth of abandoned wells throughout the state for which ownership (and thus responsibility) can no longer be established. Lance Town is the President of Ace Well Service and TDR Construction, whose companies have been awarded the largest contract to plug 1,200 of the 2,300 abandoned wells identified by the Kansas Corporation Commission (KCC) qualifying for the program's first round. Town says, "Everyone should be extremely happy about this program; producers, property owners, the people of Kansas… everyone. This is a rare opportunity to eliminate problems and potential problematic wells. Which is good for everyone."
With the November 15, 2021, passage of the BIL, Public Law 117-58 ("Infrastructure Investment and Jobs Act") being signed into law, Kansas has the opportunity for a once-in-a-generation investment in the Nation's infrastructure and economic competitiveness. Section 40601 of the BIL creates an orphaned well site plugging, remediation, and reclamation program within the Department of the Interior (DOI) to address orphaned wells and well sites on Federal lands. Kansas is eligible to receive $58.6 million for orphaned well site plugging, remediation, & reclamation ($25 million - Initial Grants; $33.6 million - Formula Grants)
Lance Town, President of Ace Well Service & TDR Construction, whose company was awarded the contract for plugging most of these wells in Kansas under this program, confirmed that his company had plugged 950 of the 1,200 wells they were awarded the contract, and they are on track to complete their work by the end of August. Based on his perspective, he also believes that all 2,300 wells will be plugged by the grant's completion date, and Kansas will be eligible for the additional $33.6 million in formula grants.
"Pretty much everyone we have dealt with has been pleased," remarked Town, "we try to do way more than we are expected; from the scope of the job to the details of what we are doing, they all seem to be extremely happy… especially with how the property looks when we leave." The Kansas Corporation Commission had previously vetted the 2,300 wells for qualification for the state well plugging program. The vast majority of these wells were decades old, and ownership (and thus responsibility) could not be established. Thus, when the federal program came into play, these wells were "shovel-ready." Town commented that plugging these wells was a much quicker process because of the work the KCC did in advance of the bill.
Due to the standards on wages, benefits, etc., to meet the federal requirements for the program, Town estimates the cost of the average well being plugged is between $8-10 thousand dollars. However, he has expanded his company by 30-35%, hiring six new employees and two sub-contractors to fulfill the work. They are currently plugging wells from Johnson and Jefferson County south to the Oklahoma border.
This program is a win for the Kansas Oil and Gas Industry as it continues moving towards more responsible and sustainable production in the state. Most of these wells were abandoned by companies that left the state decades ago. The program removes a blight on the state and the industry and clears the field for producers to work with landowners and stockholders responsibly moving forward.
With the successful completion of the first round of grants, Kansas will become eligible for a second round of grants. Town emphasized this program's success because of the Kansas Corporation Commission's work to identify these wells, provide GPS coordinates for each, and the collaborative approach to remedy the situation.
This program is in addition to the permanent well-plugging program conducted by the Kansas Corporation Commission. Cleaning up abandoned wells is a priority both for the state and the industry. In the end, one of the major problems producers face in building their business is the stories of neglect people point to in the history of our industry. This program allows the industry to wipe the slate of many of those problems and clearly points to the modern producer in Kansas committed to responsible and sustainable production in the future.