Category Archives: Cleanup funding

Clean energy transition, Clean-up costs, Cleanup funding, Decommissioning, Fossil fuels, Keeping Watch on Earth News

Is this Benicia’s future? New Mexico stuck with $8 billion in fossil fuel cleanup

New Mexico Stuck With $8 billion in Cleanup for Oil Wells, Highlighting Dangers From Fossil Fuel Dependence

The oil industry boasts that it fills state coffers with revenues from drilling, but a new study finds a serious gap in funding available to tackle the environmental legacy of abandoned wells.

DeSmog.com, by Nick Cunningham, May 26, 2021
Oil stored in tanks. Credit: Bureau of Land Management (CC BY 2.0)

New Mexico is facing more than $8 billion in cleanup costs for oil and gas wells, an enormous liability that taxpayers could be left to pick up if drillers go out of business or walk away from their obligations.

Cleaning up old wells at the end of their operating lives can be expensive, and typically states require drillers to cover part of the cleanup cost at the outset, known as financial assurance requirements. The money is tapped later on when the well or pipeline must be dismantled and cleaned up.

But a study commissioned by the New Mexico State Land Office published on April 30 found that “financial assurance requirements do not exist for much of the oil and gas infrastructure explored in this study, and in some cases where such requirements are imposed, operators may have multiple ways of minimizing or avoiding those requirements.” The study was conducted by the Center for Applied Research, an independent analytical firm.

Inadequate bonding requirements means there is a serious gap in available funding to properly clean up after the fossil fuel industry. According to the report, it could cost as much as $8.38 billion to clean up the state’s tens of thousands of wells and associated pipeline infrastructure. Alarmingly, however, New Mexico only has $201 million tucked away for cleanup, leaving a hole of $8.1 billion.

“That’s $8.1 billion that we don’t have,” New Mexico Commissioner of Public Lands Stephanie Garcia Richard said in a statement. “Enormous sums of taxpayer money and money meant for public schools, along with the long-term health of our lands, are on the line.”

The industry likes to boast that oil and gas revenues contribute roughly a third of the state’s general fund — a fact that the New Mexico Oil & Gas Association (NMOGA) triumphantly advertised in a recent report and regularly highlights on social media.

Indeed, drilling accounts for a large source of state revenues. In April 2021, for example, the state took in $109 million in royalties, a record high. Those funds will be funneled into public services, including schools and hospitals.

As the report exposed, however, the massive liability put onto the public in cleanup costs somewhat undercuts the notion that the oil and gas industry is a financial godsend.

The industry has helped fill state coffers in recent years, with oil production booming to roughly 1 million barrels per day, more than double production levels from five years ago. According to the report, last year the oil and gas industry produced nearly 370 million barrels of oil and 2 trillion cubic feet of natural gas from roughly 60,000 wells, which was transported on 35,000 miles of pipelines.

But as the State Land Office study highlights, the industry is leaving behind enormous costs for the state and the general public to deal with at a later date, a liability that is mostly obscured from public discussion.

The average cost to plug an old well and reclaim the surface is over $182,000 per well, but the state only has the finances to cover a little over $3,200 per well. The funding gap is even more staggering for pipelines. Decommissioning and reclamation costs are roughly $211,000 per mile of pipeline, but available financial assurance only totals about $51 per mile.

A pump jack in Roswell, New Mexico. Credit: BLM. (CC BY 2.0)

The risk to the public from inadequate bonding requirements is compounded by the fact that oil and gas drillers can go out of business long before wells are cleaned up, which can be years or even decades later. The U.S. shale industry has burned through hundreds of billions of dollars in cash, and there have been more than 250 bankruptcies of North American oil and gas companies since 2015. And as the clean energy transition accelerates, the financial challenges to the industry are likely to only grow more severe.

The state has long suffered from the roller coaster cycles of extractive industry, according to James Jimenez, executive director of New Mexico Voices for Children, a health, education, and economic advocacy organization. “We’ve made policy choices in boom times that have really exacerbated our over-dependence on oil and natural gas revenues,” Jimenez told DeSmog.

“Because of the really volatile nature of the oil and gas industries, we haven’t had sustainability in the programs,” he said. A dependence on a boom-and-bust industry has forced the state to make cuts to school systems during downturns in the past.

“We need to reduce this over reliance we have on oil and natural gas to fund really basic important programs like our K-12 education and higher education systems,” Jimenez said. He added that the state should diversify its revenue base, such as through progressive taxation on the wealthy and supporting non-extractive business sectors.

Even as money flows to the state from drilling today, the unfunded liabilities of cleanup that are dumped onto the public also highlight the downside to such high levels of drilling. “The $8 billion that it would take to do the cleanup would have to come from somewhere,” Jimenez said. Dollars spent on cleaning up the waste from the oil and gas industry, are dollars not spent on other important needs, such as rural broadband or road infrastructure, he added.

“The answers are simple and urgent — raise royalty rates and taxes on the industry, stash away the revenues in our Permanent Fund to stabilize cash flows, and spend current budget dollars on investments to diversify our economy,” Thomas Singer, senior policy advisor at the Western Environmental Law Center, told DeSmog via email.

NMOGA did not respond to a request for comment.

Well pad near Roswell, NM. Credit: BLM. (CC BY 2.0)

On top of the financial risks from abandoned wells, the fossil fuel industry brings numerous environmental and public health hazards as well. Oil and gas operations have contributed to a deterioration in air quality in the state. And in northwestern New Mexico, there have been more than 300 accidents since 2019, including oil spills, fires, blowouts, and gas releases, and much of it has occurred on Navajo land, as reported by Capital & Main.

A recently published peer-reviewed study found that shut-in conventional oil wells in the Permian basin could be leaking a substantial amount of methane, a powerful greenhouse gas that exacerbates climate change.

“New Mexicans must recognize that while industrialization of our landscape to produce oil and gas brings revenue today, if not properly cleaned up, it also jeopardizes our economy of the future,” Singer said. Allowing drillers “to defer this obligation indefinitely puts the state and taxpayers at great risk that they will have pick up the tab or leave these areas as polluted sacrifice zones.”

Clean-up costs, Cleanup funding, Crude By Rail, Derailment, Oil spill, Rail accidents, Rail industry, Washington State

Washington state requires railroads to show they could afford ‘worst case’ oil train spill

Repost from the Bellingham Herald

Washington asks if railroads could afford $700M oil train spill

By Samantha Wohlfeil, February 13, 2016 6:28 AM
Smoke rises from railway cars carrying crude oil that derailed in downtown Lac-Megantic, Quebec, on July 6, 2013. A large swath of the town was destroyed and 47 people killed in what became the worst oil train derailment in North America.
Smoke rises from railway cars carrying crude oil that derailed in downtown Lac-Megantic, Quebec, on July 6, 2013. A large swath of the town was destroyed and 47 people killed in what became the worst oil train derailment in North America. Paul Chiasson Associated Press

HIGHLIGHTS
•  Three new rail safety rules scheduled to take effect March 11
• Railroads must show they have means to pay for a ‘reasonable worst case spill’
• Railroads disagree with new rule methods and question state authority

Railroads that haul oil trains through Washington state will need to report whether they could afford around $700 million to pay for a derailment and spill, under a recently finalized state rule.

As announced Feb. 9, the requirement is one of three oil train safety rules the state Utilities and Transportation Commission crafted as required under legislation that state lawmakers passed in 2015.

The new rules, which take effect March 11:

▪ Require signs with basic safety information be posted at private rail crossings along routes that carry full or empty oil trains.

▪ Allow certain cities such as Bellingham, Aberdeen, Spokane, Tacoma, and Richland to opt into a state rail crossing inspection program to get free assistance with inspections.

▪ Require railroads to include financial information in their annual report to the UTC to show if they could address a “reasonable worst case spill” of oil.

Reasonable worst case

The portion of the rule most heavily scrutinized during a months-long comment process was the requirement to show financial ability to pay for a reasonable worst case spill. The rule required commission staff to first define what a “reasonable” worst case spill looks like, and second, calculate what cleaning that up might cost.

THEY DIDN’T WANT THE WORST CASE. THEY WANTED SOMETHING REASONABLE.
Jason Lewis, Utilities and Transportation Commission transportation policy adviser

Railroads objected to the proposed spill scenarios, and argued that the requirement to show whether they could afford cleanup was pre-empted by federal law.

Johan Hellman, on behalf of BNSF, wrote Sept. 21, 2015, that the company was concerned with a draft that had defined the reasonable worst case spill as half the train’s contents, and had set minimum cleanup costs at $400 per gallon.

“We find both the definition and the minimum cost to be greatly exaggerated,” Hellman wrote.

The worst case calculation was refined to be based on the fastest speed an oil train travels, but both BNSF and Union Pacific Railroad continued to object to the requirement.

In a Dec. 7 letter to the commission, Melissa Hagan argued on behalf of Union Pacific that requiring the railroad to detail the insurance it carries, along with its ability to pay for the reasonable worst case cleanup, would “compromise the integrity of Union Pacific’s confidential business records” and was “blatantly discriminatory.”

Other people who commented said the rule didn’t go far enough in its estimates for how much oil could spill and how much those damages could cost.

State Sen. Christine Rolfes, D-Kitsap County, told the commission she thought the reasonable worst case spill amount was “far too conservative” and the estimated cleanup cost seemed “excessively low.”

Dale Jensen, spill prevention preparedness and response manager for the state Department of Ecology, also wrote to say an estimated $400 per gallon cleanup cost would cover only a “portion of the overall costs of an oil spill” and “in the event of a worst case spill, the true cost of damages incurred could certainly exceed the level established within the proposed rule.”

The commission agreed with Jensen but said the legislation refers to a “reasonable” worst case, not an absolute worst case spill.

Calculating the reasonable worst

In crafting the rule, commission staff looked to federal rule-making by the Pipeline and Hazardous Materials Safety Administration and Federal Railroad Administration, and to the actual worst derailment of ethanol or crude oil in North America, which happened in Lac-Megantic, Quebec.

“Quebec was a terrible tragedy that really put a lot of these types of regulations more in the public eye,” said Jason Lewis, who helped craft the rule as transportation policy adviser for the commission.

In Quebec, a parked, unmanned 72-car train loaded with Bakken crude oil rolled downhill, reaching 65 mph before crashing into the downtown and killing 47 people in July 2013. Sixty-three cars derailed and about 1.6 million gallons of oil leaked.

THE WORST OIL TRAIN DERAILMENT IN NORTH AMERICA OCCURRED IN LAC-MEGANTIC, QUEBEC, WHERE 63 CARS OF A 72-CAR BAKKEN CRUDE OIL TRAIN DERAILED AT 65 MPH, KILLING 47 PEOPLE.

Although Quebec is the worst oil train derailment to date, Washington state legislators specifically asked the commission to find a “reasonable” worst case scenario for the financial reporting requirement, Lewis said.

“They didn’t want the worst case. They wanted something reasonable,” Lewis said. “It’s an ambiguous term that we really had to work to define.”

The commission looked to other state rules and used PHMSA and FRA logic to scale down from the incident in Quebec, Lewis said.

The final rule says to take the maximum oil train speed (usually 45 to 50 mph), divide it by 65 (the speed in Quebec), and account for kinetic force to get the estimated percentage of the train’s cargo they should be prepared to clean up.

To illustrate, assume the longest BNSF crude oil unit train transported in 2015 was 110 tank cars and that those trains go 45 mph at their fastest.

Under the new formula, the railroad needs to show whether it has the means to pay for a theoretical spill of 47.9 percent of that oil.

Each tank car has a maximum volume of 30,000 gallons, so the train could carry at most about 3.3 million gallons.

At a cleanup cost of $400 per gallon, the new guidelines want to know if the railroad could pay $632.3 million.

If that train were to go 50 mph at its fastest, the reporting amount would be closer to $781 million.

$632.3 million to $781 million
Amount railroads need to show they could pay for a spill in Washington state if their fastest 110-car oil train goes 45 to 50 mph

UTC staff also took into account that supertanker vessels that can carry 84 million gallons of oil through Puget Sound are required to get certificates of financial responsibility through Ecology that cap out at $1 billion, Lewis said.

“If we went much higher in terms of total release or cost of cleanup, it would be difficult to justify a higher cap,” Lewis said.

BNSF challenged similar legislation in California, claiming in court that federal rules pre-empt state laws that try to regulate rail.

When asked whether BNSF would similarly challenge Washington’s rules or still had concerns about the worst case scenarios, BNSF spokeswoman Courtney Wallace wrote that BNSF was committed to work in good faith with Washington to promote safety.

WE HAVE NEVER EXPECTED TAXPAYERS TO ASSUME THE EXPENSE OF A CLEANUP AFTER A DERAILMENT, AND WE STAND BY THE PRACTICES THAT HAVE ALLOWED US TO KEEP THAT RECORD TO DATE.
Courtney Wallace, BNSF spokeswoman

“Nothing is more important to us than safely moving all of the commodities we carry, including crude oil. BNSF is a common carrier and our operations are governed by the Interstate Commerce Commission Termination Act, which generally pre-empts state and local regulations of railroads,” Wallace wrote to The Bellingham Herald.

“BNSF has a strong record of corporate responsibility,” Wallace wrote. “We have never expected taxpayers to assume the expense of a cleanup after a derailment, and we stand by the practices that have allowed us to keep that record to date. BNSF is financially sound with a long history, substantial assets and a track record of being a responsible corporate citizen.”

Because the rule only requires railroads to show whether they could afford that level of spill in their annual report to the commission, rather than requiring they carry a certain level of coverage, the commission believes the rule does not conflict with federal laws.

Annual reports from the railroads are due to the UTC in May.

Cleanup funding, Crude By Rail, Derailment, DOT-111, Emergency Readiness & Response, Explosion, Federal Regulation (U.S.), Fire, Rail inspection, Rail routing, Spill, Train length

Senator: Using bad tank cars? Then pay a fee

Repost from The Columbus Dispatch

Using bad tank cars? Then pay a fee, Brown proposes

By Rick Rouan, June 30, 2015 11:36 PM

Sen. Sherrod Brown wants shippers using tank cars that have been linked to fiery train derailments to pay fees that would be used to reroute train tracks, train first responders and clean up spills.

Brown has proposed fees that start at $175 per car for those using the DOT-11 [sic], a tank car that federal regulators have warned hazardous-material shippers against using.

The fees would pay to clean up hazardous-material spills, to move tracks that handle large volumes of hazardous material and to hire more railroad inspectors. Brown’s bill earmarks about $45 million over three years to train first responders near rail lines that carry large quantities of hazardous material.

Earlier this year, federal regulators tightened rules on newly manufactured tank cars but did not require shippers to immediately remove the old cars.

“(The rule) probably didn’t go far enough,” Brown said on Tuesday at the site of a 2012 derailment and explosion near the state fairgrounds. “If it’s a threat to public safety, they probably need to be off the rails.”

The federal rule will phase out or require retrofitting of thousands of the oldest tank cars that carry crude oil by 2018. Another wave of the oil-carrying tankers would have to change by 2020.

Some of the tank cars that aren’t carrying crude oil would not be replaced or retrofitted until 2025.

Brown’s proposal calls for a tax credit for companies that upgrade their tank cars to the new federal standard in the next three years.

Chet Thompson, president of the American Fuel & Petrochemical Manufacturers trade association, said his organization would oppose the fee structure Brown proposed.

“We think the federal focus should be on the rail carriers and their efforts to improve track integrity,” he said. “We want to see legislation that beefs up track integrity to keep the trains on the track.”

A spokesman for the American Association of Railroads declined to comment on Brown’s proposal. The organization is appealing the new federal standard, arguing that it doesn’t do enough to require shippers to stop using the DOT-111 tank cars and should require more heat protection on the cars, spokesman Ed Greenberg said.

The cars have been involved in several fiery derailments while carrying crude oil from the Bakken shale formation in North Dakota to East Coast refineries. In July 2013, a runaway train killed 47 people and destroyed the business district in Lac-Megantic, Quebec.

And in February, a train carrying volatile Bakken crude derailed in Mount Carbon, W.Va., after it likely traveled through Columbus. The train was run by CSX, which has three tracks that carry crude oil converging in Columbus before they head toward West Virginia.

On July 11, 2012, a Norfolk Southern train slipped the rails just north of Downtown. One of the cars punctured, spilling ethanol and causing an explosion and fire. Two people were injured and about 100 people were evacuated.

The National Transportation Safety Board said a broken track caused the derailment.

“Unfortunately, that was not an isolated incident,” Brown said.

A recent analysis for Franklin County Emergency Management and Homeland Security found that crude oil represents the largest share of hazardous material transported by rail through the region, Director Mike Pannell said.

Earlier this year, the state released reports showing that 45 million to 137 million gallons of Bakken crude travel through the state each week.

Local first responders have procedures in place to handle derailments but not specific plans for every piece of track, including lines that run through residential areas, said Karry Ellis, an assistant chief in the Columbus Fire Division.

Brown’s proposal calls for the U.S. Department of Transportation to study whether first responders are prepared for flammable-liquid spills and whether longer freight trains pose a greater risk.

Information from the Associated Press was included in this story.

Bakken Crude, Cleanup funding, Crude By Rail, Derailment, Environmental Impacts, Explosion, Federal Regulation (U.S.), Fire, Hazmat notification, High threat urban areas, Oil spill, Public Health, Rail Safety, Tank car retirement, Tank car retrofit, Tar sands crude, Train speed, Water contamination

Riverkeeper sues U.S. DOT over oil train safety rules

Repost from The Times Union, State College, PA
[Editor: Note that this is a new filing, closely following the filing of May 14 by a coalition of environmental groups.  – RS]

Riverkeeper sues U.S. DOT over oil train safety rules

By Brian Nearing, May 18, 2015

The Hudson River environmental advocacy group Riverkeeper is challenging new U.S. Department of Transportation crude-by-rail standards in federal court, saying that they fail to protect the public and the environment from proven threats, according to a statement issued Monday.

The release states: Riverkeeper filed its lawsuit in the 2nd Circuit Court of Appeals in New York City on May 15, a little more than a week after the DOT issued a final tank car and railroad operation rule which had been the subject of scrutiny and controversy since its proposal in 2014. The suit closely follows another filed in the 9th Circuit Court of Appeals by a coalition of conservation and citizen groups that includes Earthjustice, Waterkeeper Alliance, ForestEthics and the Sierra Club.

The Hudson River and the Greater New York/New Jersey region, a thoroughfare for up to 25 percent of all crude shipments originating in the Bakken shale oil region, faces a daily risk of spills and explosions that could devastate communities, local economies, drinking water security, and the environment.

“These seriously flawed standards all but guarantee that there will be more explosive derailments, leaving people and the environment at grave risk,” Riverkeeper President Paul Gallay said. “The shortcomings are numerous, including an inadequate speed limit, unprotective tank car design, and time line that would allow these dangerous tank cars 10 more years on the rails. The DOT completely fails to recognize that we’re in the middle of a crisis – we don’t need bureaucratic half measures that are years away from implementation, we need common-sense protections today.”

Just this month, tank cars laden with crude oil derailed and exploded in Heimdal, North Dakota. Under the new DOT standards, the same type of cars that exploded in that disaster could stay in service hauling volatile crude oil for another five to eight years, or even indefinitely if they are used for tar sands.

Over the past several years, a series of fiery derailments, toxic spills, and explosions involving volatile crude and ethanol rail transport has caused billions in damages across North America. Crude-by-rail accidents threaten irreversible damage to waterways, many of which, like the Hudson River, serve as the source of drinking water for tens of thousands of people. This year alone,six oil-by-rail shipments have caught fire and exploded in North America. In July 2013, a derailment in Lac-Mégantic, Quebec, killed 47 people. The total liabilities for that rail disaster could easily reach $2.7 billion over the next decade.

Here are some of the ways the new safety standards fail to protect people and the environment:

• Hazardous cars carrying volatile crude oil can remain in service for up to 10 years.

• The rule rolls back public notification requirements, leaving communities and first responders in the dark about explosive crude oil tank cars rumbling through their towns.

• While new tank cars will require thicker shells to mitigate punctures and leaks, retrofit tank cars will be allowed to stay in use with a less protective design standard.

• Speed limits have been restricted only for “high threat urban areas,” but only two areas in New York have received that designation, Buffalo and New York City.

• The “high threat” category relates to cities seen as vulnerable to terrorist attacks by the Department of Homeland Security. It is unrelated to actual risks posed by crude-by-rail.