New Federal Funding to Plug and Abandon Orphaned Wells, Support CO2 Sequestration

Last year, the Department of Interior (DOI) updated its estimate of the number of orphaned or abandoned wells across the United States, documenting 130,000—more than double its previous estimate. The bipartisan 2021 Infrastructure Investment and Jobs Act (IIJA) contains the largest investment to date to address the problem, allocating $4.7 billion to plug orphaned wells and cap associated methane emissions.

As part of its efforts to address these issues, the DOI announced plans last month to distribute a combined $660 million in new funds appropriated under the IIJA to plug and abandon (P&A) orphaned wells on federal lands and decrease methane emissions in the process. The Department of Energy (DOE) also announced plans to distribute $23 million in IIJA funding to advance carbon sequestration projects. Below we outline the key details of this grant funding and relevant online resources.

Orphaned Wells: DOI will distribute $660 million in new grant funding to states to identify and triage orphaned oil and gas wells, measure methane emissions associated with orphaned wells, plug and abandon orphaned wells, and to remediate and reclaim well sites.

• Twenty-six states are eligible to apply for funding (including Colorado, New Mexico, Utah and Wyoming).
• States have until Dec. 31, 2023, to submit their applications through the GrantSolutions website.
• Funding allocations available by state are listed on the DOI’s website.

CO₂ Sequestration: DOE will allocate $23 million to 16 different carbon management projects across 14 states. The goal is to connect carbon management developers with local communities to spur the deployment of commercial technologies for carbon capture, transportation and storage. DOE is providing grants to both public universities and private businesses, including:

• $2.5 million to the New Mexico Institute of Mining and Technology to accelerate development of a carbon management hub in the Four Corners region; and
• $998,968 to the University of Wyoming to create a database of geotechnical information, social considerations and community benefits for Class VI permit applications, which will help Wyoming market itself as a carbon sequestration hub.

These funds top off more than $777 million that DOE has invested in carbon management projects since 2021. This website documents the various projects selected thus far.

Western States at the Forefront of Capture and Sequestration

Western states are collaborating to develop and deploy carbon capture and sequestration (CCS) technologies. On June 21, 2023, the governors of Colorado and Wyoming signed a Memorandum of Understanding (MOU) to partner on demonstrating and growing the direct air capture (DAC) industry. DAC extracts CO₂ from the air using chemical reactions for permanent sequestration underground. The MOU recognizes each state’s capabilities and investments in creating a carbon management infrastructure, training a workforce and innovating technology. Additionally, Wyoming Gov. Mark Gordon announced that “Decarbonizing the West” is his 2024 initiative as chair of the Western Governors Association. The initiative will examine how DAC and other CCS technologies can position Western states at the forefront of emerging carbon markets and reduce the impacts of climate change.

Beyond closely following regulatory developments and funding opportunities, attorneys in our Denver and Cheyenne offices are collaborating with clients to obtain funding to P&A orphaned wells, negotiate pore space leases and support development strategies and community assessments for CCS projects. Please feel free to contact our team for any potential project support needs.

Brownstein Summer Associate Michael Pappas contributed to this alert.

This document is intended to provide you with general information regarding federal Infrastructure Investment and Jobs Act funding for projects to plug and abandon orphaned wells and cap methane emissions. The contents of this document are not intended to provide specific legal advice. If you have any questions about the contents of this document or if you need legal advice as to an issue, please contact the attorneys listed or your regular Brownstein Hyatt Farber Schreck, LLP attorney. This communication may be considered advertising in some jurisdictions. The information in this article is accurate as of the publication date. Because the law in this area is changing rapidly, and insights are not automatically updated, continued accuracy cannot be guaranteed.