Senator Steve Daines (R-MT) has introduced a resolution (S.J. Res. 78) in Congress that would kill new oil and gas reforms designed to protect U.S. taxpayers. Those reforms, recently finalized in a rule by the Department of Interior (DOI), include fiscally conservative measures first proposed by the Reagan Administration.
This rule that Senator Daines wants to kill includes bonding reform that will finally address the scourge of abandoned and orphaned oil and gas wells that are costing us taxpayers billions of dollars.
How bad is this orphaned well problem? There are more than 130,000 documented orphaned wells across the country, with some estimates putting the actual number at over 3 million. This, despite the fact that drilling companies promise to plug and clean up wells as a condition of their drilling permit.
The 2021 bipartisan infrastructure law included $4.7 billion of our tax dollars to plug and clean up orphaned wells, and that amount is proving to be just a drop in the preverbal bucket. It will take at least three times that just to clean up the orphaned wells documented so far.
American taxpayers are victims of a scheme where companies extract oil and gas, along with the profits, from state and federal public lands — lands that belong to all of us — then purposely leave us on the hook for the reclamation costs, which can be more than $100,000 per well.
This deliberate scheme functions a bit like a shell game. Often, a group of individuals will own numerous companies, utilize one company to lease, drill, and produce, and then use bankruptcy or ownership transfer to get out of the clean-up obligation. They then repeat the process under a different company.
A recent example of how this scheme works is the subject of an ongoing lawsuit in Colorado. The complaint alleges that HRM Resources LLC serves as a middleman company that accumulates depleted oil wells and then transfers those wells to companies structured to go bankrupt. At issue in the suit are 200 wells that HRM transferred to a shell company called Painted Pegasus, which subsequently filed for bankruptcy.
Given the huge number of existing wells — more than 96,000 on federal public land alone — the potential taxpayer exposure is mind-boggling—easily in the tens of billions.
The new bonding requirements will greatly reduce that taxpayer exposure by ensuring that the companies doing the drilling, and profiting from it, honor their promise to plug and clean up well sites when they are finished.
So why would someone like Senator Daines, who claims to be a fiscal conservative, side with scammers and oppose protecting taxpayers from fraud that is costing us billions?
Someone should ask him.
His resolution, along with his partner Lauren Boebert’s (R-CO) companion resolution in the House of Representatives, is nothing short of fiscal malpractice. He is siding with industry bad actors and trying to give them license to keep ripping off average taxpayers like you and me.
Rolling back these reforms also represents a massive subsidy for the oil industry, making the $535 million Solyndra boondoggle pale by comparison.
Other reforms contained in the DOI rule were passed by Congress and are also designed to protect taxpayers.
For example, the rule will increase the royalty rate for oil drilled on federally managed lands from 12.5% to 16.67%, making it exactly the same as the rate Montana charges for oil and gas produced from state lands — and much less than the 25% rate Texas charges.
The conservative thing to do is support these fiscally responsible, common-sense reforms that can help keep our tax bills from going up.
Unfortunately, Daines and Boebert have chosen a different path. They have chosen to do the bidding of special interest cheats who are addicted to evading responsibility and shifting their cost burden onto the rest of us.
It’s the worst kind of swamp politics, and there’s nothing remotely conservative about it.
David Jenkins is president of Conservatives for Responsible Stewardship, a national organization with members in Montana.