FOR IMMEDIATE RELEASE
April 29, 2021
Washington, DC — A new report released today by the Center for International Environmental Law (CIEL) examines the mounting risks that the unmanaged shutdown of oil and gas wells poses to communities, governments, and investors, and argues that confronting the toxic legacy oil and gas leaves behind is a critical part of a just transition to a fossil-free future. Toxic Assets: Making Polluters Pay When the Wells Run Dry and the Bill Comes Due is the third in a series of reports that explores an industry in long-term decline. The new report focuses on the environmental, social, and financial costs associated with closing down and cleaning up oil and gas production — costs that loom larger and closer on the horizon than previously thought.
The report highlights how unplugged oil and gas wells and stranded infrastructure threaten both public health and the public purse. Improper closure and cleanup of oil and gas operations leads to environmental and health hazards for frontline communities and exacerbates climate change through methane leakage and other emissions. The scale of the problem is massive: There are millions of oil and gas wells around the world, and the costs of properly shutting them down and decommissioning associated infrastructure represent a significant looming liability. But flaws in regulatory frameworks too often let polluters off the hook for these inevitable and foreseeable “end-of-life” expenses, foisting the costs on taxpayers. While proposed solutions to address orphaned wells are at a fever pitch in the United States and Canada, any fixes need to address the root causes of the problem and uphold, not undermine, the polluter pays principle.
Nikki Reisch, Director of CIEL’s Climate and Energy Program says,
“Closing down and cleaning up oil and gas operations is a necessary step in a just transition to a fossil-free future — and one that needs to happen at an accelerated pace. But it is not as simple as shutting off the tap. Properly addressing the toxic mess oil and gas wells leave behind requires urgent attention and concrete action to ensure that people and the environment are protected and that polluters, not taxpayers, cover the costs. Making polluters pay is a matter of justice and of economic necessity as we phase out fossil fuels. Unless they are safely plugged, the millions of oil and gas wells around the world — in cities and rainforests, on farmlands and ocean floors — will be the ghosts of the fossil fuel era, which could haunt communities for years to come.
“The tremendous costs of addressing the oil and gas industry’s lasting toxic legacy are yet another reason why sinking public or private money into oil and gas production today invites disaster tomorrow.”
Key findings of the report include:
- The oil and gas industry’s end-of-life expenses are ballooning due to higher-than-expected closure costs, particularly for fracked and deepwater wells, and accelerating timeframes for shutting wells down. These significant liabilities represent a material risk that should deter financing for oil and gas.
- International human rights and environmental law require governments to protect communities from polluting industries throughout their lifecycle, including by ensuring prompt and adequate closure and cleanup post-production, paid for by the companies responsible.
- Flaws in existing legal and regulatory frameworks for well closure and bankruptcy regimes in the United States and Canada have too often let polluters avoid the costs of properly shutting down their facilities.
- Policies designed to accelerate the phase-out of oil and gas or provide support for COVID-19 economic recovery must ensure proper decommissioning of fossil fuel infrastructure and hold private actors accountable for cleanup costs — consistent with the polluter pays principle. Recovery funds should not cover polluters’ costs.
- Governments must take immediate action to eliminate loopholes that enable the industry to shift the cost and consequences of contamination onto the public. Measures should include: increasing bonding requirements and charges for keeping wells idle, earlier compelled closure of wells, and stricter application of bankruptcy laws.
- Closure and cleanup concerns will increasingly come to the courts. Lawsuits addressing problems posed by inadequate decommissioning of inactive wells may prove an important tool both in inducing regulatory reform and compelling remedial action.
- Safely plugging and remediating oil and gas wells and addressing the industry’s toxic legacy is a global concern. Experiences in the United States and Canada offer a warning to countries starting up new oil and gas production, such as Guyana, Mozambique, and Argentina: Properly shutting down those operations is neither easy nor cheap, and failing to do so safely threatens communities and the environment.
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Media contact: Cate Bonacini, press (at) ciel.org