Chesapeake Energy bankruptcy raises questions over oil and gas failures

One of the most successful companies in the country’s hydraulic fracturing boom of the past decade is now bankrupt.

Natural gas pioneer Chesapeake Energy, founded by high-risk wild animal some described as a prophet of energy, was worth $ 37 billion at its peak. Now, struggling with low prices and a mountain of debt, Chesapeake is be struck off of the New York Stock Exchange and seeking to reorganize under Chapter 11 of the US Bankruptcy Code.

This failure will not be the last in the oil and gas industry during this recession, energy analysts predict, raising fears that bankrupt drilling companies will abandon their wells and let taxpayers hold the bag. Already oil and gas companies have given up about 3 million wells in the country, the Environmental Protection Agency estimates.

“I have certainly seen hydrocarbons coming out, from bubbles to films of oil,” said Mary Kang, abandoned well researcher and associate professor of civil engineering at McGill University in Montreal. To prevent an old well from leaking oil into water sources and polluting the air, it is important to cement key sections or areas underground.

“In the shallow areas you could have groundwater,” Kang said, “and in the deeper areas you could have different pockets of oil and gas.

According to his estimate, it can cost up to a million dollars to plug a well. States require companies to set aside financial reserves for environmental cleanup, but most need much less money than that. Taxpayers therefore find themselves at the mercy of so-called orphan wells, and the number of them could increase as the recession progresses.

“Everyone I have spoken to who is familiar with the situation expects the list to grow dramatically in the months and years to come,” said Daniel Raimi, energy regulatory specialist at the Resources for research group. the Future. “And everyone expects that existing public funds will not be sufficient.”

A proposal that is currently circulating: to pay federal money to clean up abandoned wells, thus creating environmental clean-up jobs.

“The idea of ​​helping displaced oil and gas workers return to work and provide environmental benefits to the state, in my opinion, is a big use of the money,” said Kenneth Wagner, secretary to Oklahoma’s energy and environment.

Sealing every abandoned well in the country could cost up to $ 435 billion, according to an estimate by the federal Government Accountability Office.

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