CHEYENNE, Wyo. — Wyoming will use federal coronavirus relief funding to help petroleum companies move ahead with oil and gas drilling projects interrupted by the pandemic and plug idle wells.
North Dakota already has been using Coronavirus Aid, Relief and Economic Security Act funding for well plugging and cleanup. Totaling as much as $81 million, the funding through the two major oil-producing states has qualified support from land stewardship advocates who don’t usually side with the petroleum industry.
The pandemic has taken a toll on the once-booming U.S. oil industry, reducing travel and lowering demand for gasoline and jet fuel, proponents said.
“These funds will have a direct impact on Wyoming’s employment rate and put people back to work in our oil and gas sector,” Wyoming Gov. Mark Gordon, a Republican, said in a statement Tuesday announcing up to $15 million in assistance through a new Energy Rebound Program.
Using the money to plug and clean up abandoned oil and gas wells is a good idea, but subsidizing them to complete oil and gas wells isn’t, Bob LeResche with the Powder River Basin Resource Council land stewardship advocacy group said Thursday.
“Let’s put oil workers back to work on projects with a public purpose, rather than subsidizing select private companies,” LeResche said in an emailed statement.
The $2.2 trillion CARES Act fiscal stimulus gave each state at least $1.25 billion to soften the pandemic’s economic effects. States have until the end of 2020 to use the money.
As of late 2019, Wyoming had over 3,000 “orphan” wells that companies have abandoned without plans to put back into production or plug and clean up, according to an Interstate Oil and Gas Compact Commission report.
North Dakota, which according to the report had no orphan wells but over 2,000 idle ones, this year allocated $66 million to plug and clean up 380 wells. State officials want to reallocate $16 million of that amount to boost hydraulic fracturing, a technique that boosts the productivity of wells.
North Dakota’s use of CARES Act funds to address both orphan wells and unemployment is a “model solution,” Kathleen Sgamma with the Denver-based Western Energy Alliance petroleum industry group said by email Thursday.
Many of the industry’s troubles predate the pandemic. A decade of low natural gas prices caused a bust that left the Rocky Mountain region littered with thousands of idle coal-bed methane wells, many of them in northeastern Wyoming.
The oil industry also has suffered from price drops, including one from 2014-2016 that stalled an oil boom. Prices in the current bust caused by the pandemic and worsened by an oil price war involving Russia and Saudi Arabia have recovered substantially since April. But at about around $40 per barrel, they are still down by about one-third since late 2019.
Combined with hard times in the coal industry — Wyoming is the top coal-producing state — the oil and gas bust has been brutal for state revenue. Last summer, Gordon slashed state agency spending by 10%. He has warned that another round of 10% cuts may be needed.
The CARES Act funding makes sense considering how much revenue Wyoming gets from fossil fuels, said Chris Merrill with the Equality State Policy Center state watchdog group.
Wyoming is among seven states without a state income tax, but it’s past time to implement one to help balance the state budget, Merrill said.
“We’ve relied for too long on oil and gas and coal to pay our bills. We need to ask the people of Wyoming to pay their fair share,” Merrill said.