FAQ

Abandoned Wells and Oil and Gas Bonding FAQ

Energy & Natural Resources, Oil and Gas, Public Lands Management, | Analysis

Jul 28, 2026 | 10 min read | Print Article

Taxpayers for Common Sense (TCS) has long advocated for reforms to address the growing taxpayer costs of orphaned wells and abandoned mines. Industry, not taxpayers, should be responsible for cleaning up operations and properly restoring sites.

This FAQ primarily focuses on abandoned and orphaned oil and gas wells. Below are answers to frequently asked questions (FAQs) to help explain the orphaned well problem and how oil and gas bonding reform can help address it.

Read our issue brief to learn more about orphaned wells.
Read our fact sheet to learn more about oil and gas bonding on federal lands.
Learn more about abandoned coal and hardrock mines.

1. What is an abandoned well?

Oil and gas wells become inactive when operators permanently cease production. Inactive wells must be maintained or plugged and reclaimed (cleaned up) in accordance with statutes and regulations. When they are not, these wells are considered abandoned.

2. What is an orphaned well?

Orphaned wells are a subset of abandoned wells for which no one is legally or financially responsible for cleanup, such as when the company operating the wells goes bankrupt.

3. How do wells become orphaned?

A well usually becomes orphaned when the company operating a well dissolves or goes bankrupt, which often happens during the oil and gas industry’s boom-and-bust cycles. It has been documented that larger companies sometimes shed their reclamation liabilities by selling assets like marginal wells at low prices to smaller companies hoping to squeeze out the last remaining production near the end of a well’s economically productive life. Smaller companies are generally more vulnerable to market fluctuations and bankruptcy, increasing the likelihood that these wells become orphaned.

4. What is well reclamation?

The Bureau of Land Management (BLM), the agency responsible for managing onshore federal oil and gas leasing, defines well reclamation as restoring land to a condition "equal to or closely approximating" its original natural state. This includes plugging the well, removing structures, and reshaping and revegetating the surrounding land.

5. Why do wells need to be reclaimed?

Abandoned and orphaned wells can damage the environment and pose significant risks to public health by leaking methane, contaminating surface water and groundwater, fragmenting habitats, eroding soil, and interfering with agricultural and recreational land uses.

6. How many abandoned and orphaned wells are there right now?

The Environmental Protection Agency (EPA) estimates there are approximately 3.9 million abandoned oil and gas wells, including orphaned wells and other non-producing wells, of which about 2.2 million remain unplugged.

In 2019, the BLM identified 296 orphaned wells on federal lands. However, we do not know how many wells become orphaned each year because the BLM does not systematically track this data. The Interstate Oil & Gas Compact Commission estimated there were 15,913 known orphaned wells on federal and tribal lands at the end of 2021, with many more likely undocumented.

7. What happens when a well is orphaned on federal land?

When a well is orphaned on federal land, the BLM uses the operating company's bond to cover the costs of any remaining reclamation work. If the bond is insufficient, taxpayers are forced to cover the costs of reclaiming the orphaned wells.

8. What is oil and gas bonding?

The BLM is required by the Mineral Leasing Act of 1920 to obtain adequate bonds or other financial assurances from operators before they begin drilling on federal lands. These bonds help ensure sufficient funds are available to reclaim wells if an operator fails to meet its obligations. If an operator properly reclaims its wells, the BLM returns the bond. If not, the BLM uses the bond to cover at least some of the costs of reclamation.

9. What are the different kinds of federal oil and gas bonds?

Operators may provide either a surety bond or a personal bond. A surety bond is a legally binding agreement with a third-party surety company that assumes financial responsibility if the operator defaults or cannot finance reclamation. A personal bond consists of cash or other approved financial instruments, including certificates of deposit, letters of credit, cashier's checks, certified checks, and negotiable Treasury securities.

10. How much do federal oil and gas bonds cost?

The BLM is responsible for determining reclamation requirements, setting minimum bond values, and establishing the types of bonds it will accept. Currently, BLM accepts two types of bond coverage:

Bonds for an operator's wells on an individual lease, with a minimum bond amount of $150,000

Bonds covering all wells owned by an operator in a single state, with a minimum bond amount of $500,000.

Before June 2024, the minimum bond amounts were:

$10,000 for an individual lease

$25,000 for a statewide bond

$150,000 for a nationwide bond

These minimums had remained unchanged since they were established in 1951 (statewide and nationwide bonds) and 1960 (individual lease bond). According to the Government Accountability Office (GAO), 82 percent of bonds were accepted at these minimum amounts.

In June 2026, the Department of the Interior proposed revising the regulations to reduce the minimum individual lease bond back to $10,000 and the statewide bond back to $25,000.

11. How much does it cost to reclaim a well?

The Government Accountability Office (GAO) estimates that reclamation costs can range from $20,000 to $145,000 per well, with extreme cases as low as $3,069 and as high as $603,000. The BLM estimates that the cost to plug a well and reclaim the surface ranges from $35,000 to $200,000, with an average cost of $71,000 per well.

12. What affects reclamation costs?

Reclamation costs vary significantly depending on the depth and location of a well. Deeper wells are generally more expensive to reclaim, with costs typically increasing with well depth. Wells located in difficult-to-access areas, such as the middle of a river, also cost more to reclaim.

13. How much do taxpayers spend reclaiming orphaned wells each year?

We do not know the exact amount taxpayers spend reclaiming orphaned wells each year. Most recently, the Infrastructure Investment and Jobs Act (P.L. 117-58) appropriated $4.7 billion to reclaim orphaned wells, including:

$4.275 billion for state and private land
$250 million for federal land
$150 million for tribal land

14. What steps have Congress and the Administration taken to address orphaned wells and bonding reform?

Federal oil and gas bond minimums were originally established in the 1950s and 1960s and remained unchanged until 2024. Prior to the 2024 reforms, BLM accepted three types of bonds:

$10,000 for an operator’s wells on an individual lease
$25,000 for all wells owned by an operator within one state
$150,000 for all wells owned by an operator nationwide

In August 2022, an early draft of the Inflation Reduction Act (IRA) included provisions to raise the minimum bond amounts for federal oil and gas leases. Those provisions were ultimately removed because of the Senate’s budget reconciliation rules, which prohibit certain non-budgetary provisions from being included in reconciliation legislation.

In July 2023, the Department of the Interior proposed a rule that largely reflected those earlier provisions. The proposal increased the minimum individual lease bonds to $150,000, the statewide bond to $500,000, and eliminated nationwide and unit bonds. The rule was finalized April 2024 and took effect in June 2024.

In June 2026, the Department of the Interior released another proposed rule that would reduce the minimum individual lease bond back to $10,000 and the statewide bond back to $25,000.

15. Why did oil and gas bonding need reform?

Federal oil and gas bond minimums were originally established in the 1950s and 1960s to ensure that oil and gas operators, not taxpayers, would be responsible for reclaiming wells. Prior to the 2024 reforms, those minimums had not been updated in more than 60 years and no longer reflected modern reclamation costs.

First, the previous bond minimums had never been adjusted for inflation. The original $10,000 individual lease bond established in 1960 would equal approximately $108,765 in 2025 dollars. Likewise, the original $25,000 statewide bond and $150,000 nationwide bond established in 1951 would equal approximately $309,561 and $1,857,363, respectively, in 2025 dollars.

Second, advances in drilling technology have substantially increased well depth and reclamation costs. Oil and gas companies today routinely drill deeper wells than they did in the 1950s and 1960s, making wells significantly more expensive to plug and reclaim.

Finally, the Department of the Interior has now proposed reverting the bonding minimums to their pre-2024 levels. If finalized, the rule would once again increase the risk that taxpayers will be left to bear the costs of reclaiming abandoned and orphaned wells.