Inglewood Oil Field. (Image Credit: Andrew Pabon / Flickr)

Inglewood Oil Field. (Image Credit: Andrew Pabon / Flickr)

Two recent studies, one by NOAA’s Cooperative Institute for Research in Environmental Sciences (CIRES), and another by NASA’s Jet Propulsion Laboratory (JPL), revealed that methane emissions in the L.A. basin are as much as 61 percent higher than estimated by the Environmental Protection Agency (EPA).

It was determined that more than 85 percent of the L.A. basin’s methane emissions comes from a combination of sources: leaks from pipeline-quality natural gas, geologic seeps (such as the La Brea tar pits), dairies and landfills. In addition, researchers estimated that eight percent of the methane emissions in the L.A. basin were due to leaks from the oil and gas industry operating in the basin, which corresponds to a 17 percent leakage rate. Estimates of leakage for oil and gas fields typically range on average from two to four percent.

So why do the leakage rates appear so high for the oil and gas industry in the L.A. basin? 

A Brief History of L.A. Oil

The first oil well in the Los Angeles area was drilled near the corner of Colton Street and Glendale Boulevard, near present day Dodger Stadium, in 1892 by William Doheny and his partner Charles Canfield. By 1897, there were over 500 wells. By 1915, the first year they officially started tracking and monitoring the industry through the newly created Department of Petroleum and Gas, there were approximately 1,755 active wells in the L.A. basin. Between 1915 and 1970, this entity had received approximately 27,500 notices of intent to drill in the area, with historical records indicating that approximately 6,500 were actually completed.

Historically, the price of oil has always had its ups and down. In the 1860s, the price of oil was in the $9.00 per barrel range ($120 in today’s dollars). By 1867, overproduction from Pennsylvania and Texas caused a precipitous drop in the price of oil, sending it as low as $0.25 per barrel – at which point, many California wells capable of producing were idled or simply abandoned.

Two men standing near a wooden shed in the midst of dozens of oil derricks in a Los Angeles oil field. (Image Credit: WikiMedia Commons)

Two men standing near a wooden shed in the midst of dozens of oil derricks in a Los Angeles oil field. (Image Credit: WikiMedia Commons)

In 1893, the Los Angeles City oil field, which lies north of present day downtown L.A., was beginning to produce. It went on to become one of the most productive fields in California, peaking in 1901.

The Salt River field, discovered in 1902, supplanted the Los Angeles City field. Underlying the area from the Beverly Center and the Cedars Sinai Hospital complex on the Western edge, to Melrose and Vine on the East, and South to Wilshire Boulevard, it became the largest producing field in California, its output declining precipitously in the 1930s, at which time the surrounding land values had increased sufficiently that most of the wells were abandoned in favor of real estate development.

Throughout the late 1890s through the early 1900s, oil prices continued to fluctuate, ranging from $0.50 to peaking at $3.00 per barrel in 1920. By 1930, oil had dropped down into the $0.60 per barrel range, approximately $10 in today’s dollars. Invariably, some low producing oil wells were idled, abandoned and sometimes plugged.

Plugging at the time was fairly haphazard, sometimes consisting of nothing more than dumping whatever was handy down the well: rags, tree stumps, trash, rocks and mud. No doubt an optimistic operator would want to be able to unplug the well should oil prices rebound.

The Shortcomings of the DOGGR’s Idled Well List

The Department of Oil, Gas and Geothermal Resources (DOGGR) 2014 idled well list is a walk through the history of the oil and gas industry in California. Many of the wells on this list are down as being idle for over 30 years, and there are a few dating back to the early and mid-1900s.

An abandoned oil well tank. (Image: WikiMedia Commons)

An abandoned oil well tank. (Image: WikiMedia Commons)

Some of the listed operators are long deceased individuals or bankrupt companies. A Mr. Chas. Fickert is listed as an operator of a well in Long Beach. Mr. Fickert passed away in 1937. Mr. L.T. Edwards idled his well in 1927, but the well is listed as still active. It does appear to be under a building at 16th and Elm Avenue in Long Beach.

The Chas. B. Behr Syndicate quitclaimed their drilling rights to a well in 1925 that the DOGGR still lists them as operating. And then there is the Garbutt Oil Company, formed in 1900, which idled some wells in the early 1920s and is still listed as the operator. Mr. Garbutt was himself an L.A. institution, having built the Riviera Country Club (the original was built for returning GIs at the end of WWI), as well as being one of the founders of the Los Angeles Athletic Club built in 1910. He passed away in 1947.

By 1970, there were an estimated 10,000 to 15,000 operating wells. This seemingly wide variance is due in part to having a category of wells drilled with potential to produce, but not producing for some reason. The Department of Oil and Gas (DOG) had on record over 6,000 notices for abandonment, receiving  200 to 300 notices of abandonment per year.

According to DOGGR, there are approximately 4,000 operating wells in the L.A. basin, approximately 3,340 idled wells, and 10 orphaned wells. As to the list of idled and orphaned wells, as quoted by the sole DOGGR engineer in charge of idled and orphaned wells, these are only the ones they know about. By looking at the idled date of some of the idled wells, no doubt there are a few more orphaned wells than those listed (also evidenced by DOGGR’s interactive well finder map: http://maps.conservation.ca.gov/doggr/index.html#close).

The Problem With Orphaned Wells

Orphan wells are those that have been abandoned by previous owners, and for which no responsible party can be identified. There is a long history of operators abandoning their wells. The costs associated with properly abandoning a well, (i.e., properly plugging it) can be significant, especially with very deep wells, and as an expert in the field related in a paper on plugging and abandonment (P&A) issues, “The P&A work takes capital to complete and provides no return on the investment for the oil companies.”

Image: Creative Commons

Image: Creative Commons

With no real restrictions on the transfer and selling of wells, there has been a history of larger operators selling off their low-producing, stripper wells to small operators, thus avoiding any future plugging or abandonment liability.

The historic $5,000 well bonding requirement has been notoriously insufficient to cover the cost of plugging. Based upon DOGGR’s own numbers from their 2013/2014 budget, DOGGR oversaw the plugging and abandonment of 24 wells at a cost of $ 2,270,727, or $94,614 per well. Of this, 21 were identified as “Hazardous and Idle-deserted Wells,” which were plugged and abandon at a cost of $1,787,921, and three orphaned wells which were plugged and abandoned at a cost of $482,806, or $160,935 each.

Interestingly, the DOGGR shows $0 reimbursed from any bond or liens. The State finally revised its bonding requirements in 2013, increasing bonding of proposed wells to $25,000 for onshore wells less than 10,000 feet and $40,000 for wells over 10,000 feet. Idled well fees remained unchanged.

Oil train cars (Image Credit: Albert Bridge)

Oil train cars (Image Credit: Albert Bridge)

The Problem With Idle Wells

An idled well is defined as “a well that has not produced oil and/or gas or been used for fluid injection for six consecutive months during the last five years.”

There are regulations regarding idled wells that on the surface might appear to be fairly conscientious. According to regulations, an idle well operator must do one of the following: 

  • File an annual fee based on the length of time a well has been idle ($100 for five years, $250 for 10 years, or $500 for 15 years or more).
  • Establish an escrow account of $5,000 for each idle well, funded at the rate of $500 per year.
  • File a bond of $5,000 per idle well.

In addition to either establishing an escrow account, submitting a bond, or paying an annual fee, an idle well plan must be filed with DOGGR and the well inspected. Thereafter, the regulation states that well inspection “may be required every two years in areas containing a useable water aquifer, additionally potentially productive hydrocarbon zone, or other prospectively valuable mineral deposits; or (2) once every 5 years in all other areas.” 

As to how religiously they enforce this requirement, the use of “may” leads me to believe that this bi-annual inspection may or may not take place, as does a conversation with the engineer for the State charged with overseeing idle and abandoned wells.

One problem with the DOGGR idled well list, is that a fairly large number of these wells listed as idled are in actuality abandoned, or  “buried,”  a somewhat ambiguous status that seems to mean they really only know the approximate location based upon historical records, long abandoned and under some parking lot, or maybe a building. DOGGR generally doesn’t know if a “buried” well was plugged properly or not.

The State’s engineer responsible for idled and abandoned wells related that he relies on the field engineers to inspect these wells, but based upon the number of engineers working for DOGGR, it would seem they have their hands full just inspecting the “active” wells in the State. He also said these engineers do not generally carry hydrocarbon sniffers and did not indicate that there was any robust program to inspect idle and abandoned wells for leakage. He explained that they generally only act upon receiving a complaint.

Image: WikiMedia Commons

Image: WikiMedia Commons

In Texas, a well must be plugged if it has been inactive over one year – with certain exceptions – but a bond equal to the estimated plugging costs must be posted in order to get such an exception. All wells over 25-years-old that have been inactive for over a year must be tested annually for pollution potential in order to qualify for an exception to plugging (first time I’ve seen Texas’ environmental regulations more stringent than California’s). Even some of the large, well known oil and gas players on this list have wells that have purportedly been idled for over 50 years. Chevron appears to have wells that have been listed as officially idled since the early and mid-1920s.

So what is the actual status of the estimated 3,340 idled and over 6,000 abandoned wells in the L.A. basin?  We know there were no industry standards for plugging and abandonment prior to 1952. Quoting a National Petroleum Council white paper published in 2011, “Most wells are plugged at the lowest cost possible following the minimum requirements set forth by the oil and gas regulating agencies.” 

We also know that the L.A. basin has historically experienced considerable leakage from old abandoned wells, sometimes with explosive results.

(Read Part 2 in this series, “Hazards of Living in an Oil Field.”)

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