The Bureau of Land Management (BLM) has been busy. Over the last three months, it leased more public land for oil and gas development than it has in any quarter since 2019. At the same time, it’s proposing to weaken rules that help ensure oil and gas companies, not taxpayers, pay to clean up after drilling is done. If the rule is finalized, taxpayers could be left holding a cleanup bill for more than $6 billion. Taxpayers have already been asked to pay for orphan wells when decades-old rates lagged.
Today, 21 million acres of federal land, an area larger than South Carolina, are leased to private companies to develop taxpayer-owned oil and gas resources. Across those leases are 92,000 wells. Someday, every one of those wells will stop producing. That’s just the way business works. The important question is who will pay for cleanup: the companies that drilled and profited from the wells or federal taxpayers?
Federal taxpayers own mineral resources across the United States, including a 700-million-acre onshore subsurface mineral estate. The BLM manages the development of those publicly owned resources by leasing land to private companies to extract oil and gas for profit.
The rules of the game should be simple. We lease companies public land to produce oil and gas, make their money, clean up after their business operations, and go home. Unfortunately, if we don’t get the rules right, taxpayers get stuck with the tab after companies pocket profits and skip town.
But the rules of the game should work for taxpayers. It’s America’s land and resources. Companies should compete at competitive auction—not scoop up public lands through noncompetitive leasing. They should pay market-rate royalties after production begins, not the current 12.5% rate that falls far below what states and private landowners charge. Then, when wells reach the end of their useful lives, it should be the companies that profited from the well’s responsibility to reclaim the land to its proper state.
Properly retiring oil and gas wells is important. In addition to being an eyesore, old wells leak methane, pollute groundwater and drinking water, disrupt fish and wildlife, and interfere with agricultural and recreational land use. That’s why wells need to be plugged and the surrounding land reclaimed — so America the Beautiful stays beautiful. Federal lands can then continue supporting recreation, conservation, and other resource development.
The cost of reclamation across federal wells and operators quickly adds up. The BLM estimates cleanup can range from $35,000 to $200,000 per well, with an average cost of $71,000 per well. The 92,000 wells currently on federal lands could cost $6.5 billion to clean up. To ensure reclamation is paid for by the operators that profited from the development, BLM requires companies to post an adequate bond before drilling begins. Once an operator reclaims its wells, the bond is returned in full. But if operators walk away and posted bonds are insufficient to cover the full costs, taxpayers end up with the bill.
We’ve seen this problem play out before. Prior to the 2024 reforms, minimum financial assurance requirements hadn’t been updated in more than half a century. They failed to keep pace with inflation or the growing cost of plugging increasingly deeper wells, effectively providing a massive subsidy to the oil and gas industry.
In 2023, the last year under those outdated bond minimums, the BLM reported there were approximately 1,500 bonds covering 110,000 existing wells nationwide. We did the math. Average coverage ranged from a high of $5,864 per well under statewide bonds to a low of just $671 per well under nationwide bonds. Combined, each existing well had an average bond coverage of only $3,873, covering just 5 percent of estimated reclamation costs.
Now BLM is proposing to return to those same outdated standards. This means operators would once again be able to set aside just $10,000, instead of the current $150,000 minimum, to reclaim all wells on a lease. Ten thousand dollars isn’t even enough to clean up a single well! Even worse, operators could set aside just $25,000, instead of the current $500,000 minimum, for all wells across an entire state. If the average bond amount once again falls to roughly $3,873 per well, the federal government would hold about $360 million in financial assurances against $6.5 billion in estimated cleanup costs, leaving taxpayers exposed to a $6.2 billion shortfall.
As the government continues to offer more and more public land for lease, the risks from inadequate bonding grow. Since April, the BLM has leased 389 parcels covering 355,456 acres for oil and gas development. Every producing well will eventually need to be plugged and reclaimed.
Not only do lower bonding minimums increase the risk that taxpayers will pay for cleanup, but they also delay cleanup itself, prolonging the significant fish, wildlife, and public health impacts posed by orphaned wells. Don’t believe us? Even the proposed rule acknowledges that reducing minimum bond amounts “could delay reclamation of orphaned wells by an estimated 1,440 to 2,400 days annually.” That’s as much as 6.7 additional years of methane leaks and polluted drinking water for every year that the rule will be in place.
The bottom line is modernized oil and gas bonding requirements are not a penalty. Reclaiming wells is part of the cost of doing business. And ensuring companies set aside enough money to pay for those costs is a common sense measure to ensure taxpayers don’t end up with the bill and communities aren’t put at risk.
