Reclamation funds are moneys set aside specifically to reclaim oil and gas drilling operations. Reclamation funds often pay to plug wells, restore the surface and land surrounding wells, fix roads and other infrastructure damaged in the operating process, and to repair other damages. States may use several mechanisms to create or collect funds for reclamation. States such as California, Oregon, and South Dakota collect fees on operators and various other aspects of the oil and gas drilling process to supply their reclamation funds. Other states, like Wyoming and New Mexico, use a percentage of a tax on oil and gas production in the state to fund reclamation.
Why Reclamation Funds Are Needed
A state without an oil and gas reclamation fund is at risk, especially considering the current state of the oil and gas industry. As drilling companies go bankrupt at an increasing rate, states will need to reclaim more wells. As we found in our comparison of oil and gas bonding amounts, many states do not require drilling companies to secure adequate funding to reclaim their wells. If a bankrupt company does not have funds to properly reclaim their wells, the state and taxpayers will be on the hook for cleanup and restoration costs. An oil and gas reclamation fund can allow a state to avoid this crisis by allocating dedicated funds when an operator can or will not cover well reclamation.
The Need For A National Reclamation Fund
At this time, only states have created reclamation funds. The Bureau of Land Management does not have a reclamation fund for oil and gas wells. The BLM should follow the example of the states and create a national oil and gas reclamation fund to protect American taxpayers from the increasingly likely and increasingly expensive reclamation costs. A national reclamation fund would remove this burden from the American public and allow for the safe and proper reclamation of abandoned oil and gas wells.
Check out WORC’s Newest Fact Sheet On Reclamation Funds
This summer WORC put together a nice fact sheet detailing reclamation funds in several states. You can check out the fact sheet by clicking here.