Zurik: State could be out millions after passing up offer by major oil company to plug orphaned wells

Updated: May. 25, 2021 at 10:00 PM CDT
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TERREBONNE PARISH, La. (WVUE) - A major oil company’s offer to plug so-called orphaned wells, left for dead in Terrebonne Parish was passed up by the state Department of Natural Resources and now the state could end up paying millions to do the work themselves.

Thousands of abandoned oil and gas wells litter Louisiana, found anywhere from a person’s backyard to the many waterways in the state.

BP put in writing to the Department of Natural Resources that it wanted to plug up to fifteen abandoned oil wells in Terrebonne Parish. The wells are located in a remote area of the parish accessible only by water.

But it appears the state never reached out to BP and instead decided to plug the wells themselves -- a move that could cost the state, and taxpayers, millions of dollars.

“The burden comes to the taxpayers to plug these abandoned wells,” Retired Lieutenant General Russel Honoré said. “It shouldn’t be.”

The wells in Terrebonne Parish date back several years, not with BP, but with a now-defunct company called Baby Oil. It acquired more than a dozen wells in Terrebonne Parish and established what is known as a Site-Specific Trust Account, or SSTA.

SSTA’s allow an independent, third-party contractor to estimate the cost to plug the wells. The state can collect the estimated amount to pay for plugging the wells. The accounts are set up to provide a sort of security blanket for the state and the company. The way the state wrote the law puts the rest of the burden on taxpayers, meaning if the SSTA doesn’t cover the full plugging cost, taxpayers must fund the remainder.

A view of an abandoned tank battery in a remote area of Terrebonne Parish.
A view of an abandoned tank battery in a remote area of Terrebonne Parish.(WVUE-TV)

In 2005, Baby Oil used a third-party contractor, Environmental Equipment, Inc. to estimate the plugging cost. The estimate came back at $1.3 Million to plug thirteen wells. But the third-party contractor that decided how much Baby Oil should pay into the account, was not independent.

According to Louisiana Secretary of State records, the independent contractor, Environmental Equipment, has the same Lockport address as Baby Oil. The two companies also have the same owner -- Louis O’Neil or Neil Suard. The same people running Baby Oil provided the supposed independent estimate on how much it would cost to plug the wells in Terrebonne Parish.

Instead of giving Baby Oil an accurate cost of the plugging, the estimate -- and amount of money available -- came up well short.

Patrick Courreges, a spokesperson for the Louisiana Department of Natural Resources, said the estimate should not have been allowed.

“I don’t think we think it should be, at least as we’re currently constituted,” Courreges said. “We should not have the same company guaranteeing as doing the work – guaranteeing the SSTA as doing the operating -- because if one goes under, both go under.”

The law requires a fresh estimate to be done every few years. A new contractor, Settoon Construction gave one in 2009 and 2014, about the same amount of $1 Million. Insiders tell us typically these estimates rarely change much after the first estimate is done.

Baby Oil went out of business in 2015. Last year, the Department of Natural Resources put out a bid to plug some of the wells in Terrebonne Parish. The problem for taxpayers is that the initial estimate from Environmental Equipment and the updated estimate by Settoon came up short. Instead of thirteen wells being plugged for approximately $1 million dollars, that money could only plug and clean up three of the wells. That means the state -- and taxpayers -- will fund the rest of the work.

DNR said they do not know if they can hold Settoon accountable for the bad estimate.

“I think that’s one of the things we’re investigating, trying to revamp the way we do SSTA’s -- is to figure out is there a way to hold the folks who offered the estimates for the SSTA’s accountable currently? If not, is there a way to do that in the future?” Courreges said.

DNR admitted that not using the contractor is one possibility of actions that could be taken. But it appears the state is taking a slow approach to holding anyone accountable. Courreges said DNR has been investigating since 2018.

Retired Lieutenant General Russel Honoré has been a watchdog of these abandoned wells with the group Green Army. He said the examples shown reveal a broken system and state agency.

“It’s the most corrupt system I’ve ever seen,” Honoré said. “They’re useless. State agencies, the Office of Conservation and DNR are controlled by the oil and gas industry.”

A BP subsidiary was a former operator of record on the sites in Terrebonne Parish prior to Baby Oil. The state can often seek money from prior operators to plug orphaned wells.

In an April 2020 e-mail, BP gave the state a list of wells it planned to abandon, including the ones last owned by Baby Oil. In another e-mail three months later, BP’s well abandonment project manager again said BP’s legal department requested the company plug and abandon up to fifteen wells as soon as possible.

In a deposition from a lawsuit filed by the landowners against the oil companies, an attorney for the landowners questioned why the state did not ask BP to plug the wells.

“Did anyone at the Office of Conservation reach out to BP and say ‘Hey we’re about to go forward with this project that y’all expressed an interest in performing?’” the attorney asked. “Did anyone from DNR reach out at all to BP?”

The person answering the questions was Roby Fulkerson, the manager of the Oilfield Site Restoration program at the Department of Natural Resources, which oversees plugging the abandoned wells.

“I specifically did not and I don’t know that anyone else did,” Fulkerson said in the deposition.

According to the deposition, no one at DNR asked BP if it wanted to help plug the wells. According to Fulkerson’s application with DNR, he used to work for BP.

DNR said Fulkerson previously working for BP is not a conflict.

“No [it is not a conflict.] He plugs wells. I mean, he’s not holding them accountable,” Courreges said. “He’s in charge of plugging wells. When it comes to going back to older operators, that is the job of attorneys, those decisions are made above his head.”

DNR said the offer made by BP was one they could not take because they said BP wanted to use the SSTA money to help pay for plugging the wells. DNR did not supply an e-mail or anything in writing confirming that offer after multiple requests.

To Retired Lt. Gen. Honoré it is further proof that oil companies control a compromised state agency.

“The regulators -- the people they regulate tell them what to do,” Honoré said. “It’s called regulatory capture -- the industry owns the people doing the regulating.”

We reached out to the attorneys for the landowners where the wells are located, they had no comment on our story.

In a statement, BP said, “Respecting the communities where we operate is a priority for bp and something we take very seriously. We are unable to comment further on issues currently being litigated.”

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