Carbon credits are a promising option to fund orphan well caps
Work on plugging the thousands of abandoned natural gas wells that dot the Pennsylvania landscape recently received a boost in federal funding — but it’s not nearly enough to address the problem, and government oversight is still sorely lacking. Carbon credits could provide a missing incentive.
These wells leak oil, gas and volatile organic chemicals into the ground, onto the surface and into the atmosphere. Arguably the most damaging of these is methane, which can trap up to 80 times more atmospheric heat than carbon dioxide. The roughly $400 million federal dollars allocated the state to cap these abandoned wells can only reach about 12,000 of the 200,000 orphaned wells across the state.
The problem is also growing. Last year, as the state struggled to plug fewer than 200 wells, over 1,000 new ones were abandoned. Companies are only penalized $2,500 for doing so, while plugging a well would set them back an average of $33,000.
As long as this structure exists, companies will continue to abandon their wells. But many companies in the oil and gas industry are also looking to reduce their carbon footprints. This is where credits become an appealing option. Companies can simply pay other organizations to reduce, avoid or remove emissions elsewhere.
The idea goes like this: A high-carbon output company, as part of meeting its own emissions reduction goals, can buy carbon credits from another company that already did the work to avoid, reduce or recapture carbon emissions.
Credits have been criticized on several points, but especially the subjectivity of “avoiding” or “reducing” carbon emissions that haven’t happened yet. Does protecting a forest from development count? If so, how imminent does the development have to be? It’s a system asking to be gamed.
Well-capping, however, is unusually well-suited to carbon credit programs. The rate of leakage from an old well can be calculated, and the process of decommissioning them is always permanent, fulfilling the two most difficult requirements of successful carbon credits. And, in the face of a mounting problem lacking federal funding, and toothless legal penalties, carbon credits offer an incentive for plugging wells where none existed before.
That means credit marketplaces like the American Carbon Registry can help fill the (enormous) gaps in funding for well-capping in Pennsylvania. Best of all, it would ensure private money, not public, goes to fixing a problem caused by the private sector. The American Carbon Registry offered its first carbon credits for plugging wells in Oklahoma this January.
In Pennsylvania, the only player so far is Zefiro Methane, which plans to list its first carbon credits in the coming months. Because the marketplace is nationwide, it gives Zefiro — or other market entrants — access to credit buyers from around the country.
These could be the early days of a new industry, one that cleans up the remnants of an old one.