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article imageAs fracking firms fail, well sites will become climate disasters

By Karen Graham     Jul 13, 2020 in Environment
Oil and gas companies are hurtling toward bankruptcy, raising fears that wells will be left leaking planet-warming pollutants, with cleanup costs left to taxpayers.
Back at the end of June, when crude oil prices inched to over $40 a barrel after the pandemic-induced plunge, the petroleum industry seemed to breathe a sigh of relief - hoping that the worst was over, according to World Oil. But this may be nothing more than wishful thinking.
Interestingly, the picture - looking into the future is much gloomier. Matt Gallagher, chief executive of Parsley Energy, one of Texas’s biggest independent oil producers, says the record crude oil high-output seen in the U.S. earlier this year will end up "being the high water mark."
“I don’t think I’ll see 13m [barrels a day] again in my lifetime,” the 37-year-old Mr Gallagher told the Financial Times. “It is really dejecting because drilling our first well in 2009 we saw the wave of energy independence at our fingertips for the US, and it was very rewarding . . . to be a part of it.”
An active pumpjack east of Andrews  TX
An active pumpjack east of Andrews, TX
Zorin09 (CC BY 3.0)
Shale production last year made the U.S. an energy leader, however, with the coronavirus pandemic and the spat between Russia and Saudi Arabia, the picture turned into a negative and petroleum imports are trending upwards. And after the price of crude dropping to zero in April, the come-back to $40 a barrel is still below the break-even price for most companies.
Gallagher is an interesting fellow in his own right. He has earned the reputation as a progressive voice within Texas’s oil industry. He even bought an electric car recently. And he has great admiration for the Big Oil majors that have committed to net-zero emissions goals.
Gallagher is also outspoken in his concerns over flaring, calling for an end to flaring in the shale patch. “From that perspective, some healthy regulation would, over time, probably benefit the industry’s reputation,” he said, potentially helping to lure environment-focused investors back to the sector.
US shale oil producers are ramping up output  denting OPEC's efforts to fight a global supply g...
US shale oil producers are ramping up output, denting OPEC's efforts to fight a global supply glut
Bankruptcies by the dozens
This is not the first time in the past few months that we've raised the question of whether oil production has reached its peak. According to Rystad Energy, an analytics company, nearly 250 oil and gas companies could file for bankruptcy protection by the end of next year, more than the previous five years combined, according to the New York Times, And that is not counting the ones that have already filed this year.
Just last week, the International Energy Agency (IEA) forecast that average daily oil demand will drop by eight million barrels per day this year, a decline of around eight percent from last year.
Many in the industry say it has changed its focus from "peak production" with experts forecasting that prices would reach astronomical levels as recoverable oil in the ground runs out - to "peak demand."
Eagle Ford Shale methane gas flares visible from space (green and infrared wavelengths)  in the arc ...
Eagle Ford Shale methane gas flares visible from space (green and infrared wavelengths), in the arc between "1" and "2", amid cities in south Texas in 2012, acquired by NASA's acquired by the Suomi NPP satellite.
A climate disaster in the making
Now, Rystad analysts are also expecting oil demand will begin falling permanently by the end of the decade as renewable energy costs decline, energy efficiency improves, and efforts to fight climate change take hold again.
Should this scenario come to pass, Mr. Gallagher's comments will take on greater importance. What do we do with abandoned wells that are still leaking methane gas, a powerful greenhouse gas that is detrimental to our health and the planet's health?
The New York Times also points out that while production companies are supposed to set aside money, as required by law, to restore well sites to their original state, very few are doing so. The federal government estimates there are over three million abandoned oil and gas wells across the United States, two million of which are unplugged, releasing the methane equivalent of the annual emissions from more than 1.5 million cars.
“They’re sitting there and they’re leaking. And they’re much leakier than a well that’s still in production and being monitored, although those leak, too,” said Robert Schuwerk, executive director for North America at Carbon Tracker. “And companies haven’t been setting aside the money, because they’d rather spend the money on drilling a new well.”
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