Utah has benefited from abundant energy resources, helping to build and power communities, support families and create economic opportunities.
With this opportunity comes responsibility. Energy development brings real environmental challenges that must be carefully managed. When wells used to extract oil and gas reach the end of their productive life, they must be properly plugged and remediated to minimize pollution and other harmful impacts. The work and costs of proper closure should be carried by those who profit from energy development, not by Utah taxpayers.
That is why we strongly support the Utah Division of Oil, Gas and Mining’s proposed Bond Rule, a carefully considered, risk-based approach to ensure that operators — not the public — bear the cost of plugging and reclaiming their wells. As the state moves to finalize this rule, we urge its Board of Oil, Gas and Mining to strengthen two critical areas as they bring this important reform across the finish line.
The rule proposal is rooted in common sense. You don’t evaluate financial risk by looking only at assets. You also look at liabilities. The proposed bond rule applies this same principle to oil and gas development. This type of performance bond considers how many of an operator’s wells are “at risk” — producing so little that future revenue can’t cover the cost of proper closure — and sets bonding requirements accordingly. In this proposal, greater risk comes with greater financial assurance. While the state is ultimately liable to plug orphan wells left behind to limit environmental impacts, it is just good business for a company to provide assurance that they won’t place this burden on others.
This is not an abstract problem. A 2019 performance audit by Utah’s Legislative Auditor General found that the state’s oil and gas bonding requirements were antiquated, and that recently abandoned wells had shifted hundreds of thousands of dollars in financial liability onto the state and taxpayers. Projected future state liabilities are in the millions.
Older “legacy” wells drilled before 2002 are not bonded at all, meaning their plugging costs can fall entirely on taxpayers. Since the audit, the state has worked on updating this rule and the time to finalize it is now.
The proposed bond rule is a major step forward because it aligns financial responsibility with risk, and adds a statutory periodic review. Stronger rules create certainty, reward responsible planning and development, and ensure that cleanup obligations are met before wells become a public burden.
But two areas of the current proposal still need attention.
First, temporarily abandoned or “shut-in” wells that have received an extension to remain idle should still count as “at-risk” wells. The division has acknowledged that these wells remain a major risk, and the data confirms it. After 10 years of inactivity, only 11% of idle wells return to production. Some industry representatives are asking to exclude these from “at-risk” calculations. But this creates a loophole, allowing operators to seek extensions to avoid supplemental bonding, shifting risk back to taxpayers. We encourage the board to not exclude them.
Second, the state should re-evaluate the formula for calculating risk. Under the most recent proposal updated in March, there is a clear concern in the formula to calculate a company’s risk. While “at-risk” wells only count those on state and private lands, companies can dilute their total wells for determining bonding to include those on state, private, federal and tribal lands. In short, some companies may look less risky than they actually are, increasing taxpayer exposure.
Reducing the state’s financial obligation was a key reason for updating the bond rule, and we think the board’s intention to minimize taxpayer risk warrants correcting this formula.
The principles at work here are straightforward. If you drill a well, you should be financially prepared to close it properly. If you own riskier wells, you should set aside more to cover your obligations. The rules that govern these requirements should reflect current costs, not those from two decades ago.
Utah values protecting taxpayers and promoting responsible stewardship. A stronger bond rule will protect communities, create accountability and help ensure that today’s economic opportunities do not become tomorrow’s public liabilities.
Let’s get this right.