Interior Department to Require Plugging of Old Wells

Oil and gas companies must permanently plug almost 3,500 nonproducing wells in the Gulf of Mexico and dismantle about 650 production platforms under rules announced by the U.S. Interior Department.

The regulations will help improve safety and environmental protections on the Outer Continental Shelf, Interior Secretary Ken Salazar said today in a statement. Hazards from old wells and non-producing “idle iron” platforms increase substantially during storm season, the department said in the statement.

“We have placed the industry on notice that they will be held to the highest standards of planning and operations in developing leases,” Salazar said.

U.S. regulators have been tightening environmental and safety requirements since BP Plc’s oil spill in the Gulf in April. A moratorium on deep-water drilling has idled 33 rigs.

Hercules Offshore Inc., a Houston-based company that helps companies decommission wells in waters 500 feet (152 meters) deep or less, rose 17 cents, or 7.5 percent, to $2.45 in Nasdaq Stock Market trading.

Cal Dive International Inc., the owner of 29 diving vessels and 10 barges used in subsea construction, gained 82 cents, or 17 percent, to $5.74 in New York Stock Exchange composite trading.

Tetra Technologies Inc., an offshore well-abandonment contractor, rose $1.24, or 14 percent, to $10.36. Global Industries Ltd., an offshore contractor based in Carlyss, Louisiana, increased 68 cents, or 14 percent, to $5.63.

Superior Energy Services, a well-abandonment contractor based in New Orleans, advanced 10 percent to $26.51.

Shutting Wells

Federal regulations require non-producing wells, platforms and pipelines to be decommissioned, the agency said in the statement. Producers have been reluctant to plug wells permanently, arguing that they add value to leases and may be used in the future to support other active wells.

Under the rules, any well that hasn’t been used during the past five years will have to be permanently sealed, the agency said. Associated production platforms and pipelines will have to be dismantled.

The oil and gas industry is concerned about companies getting the permits necessary to take their facilities out of service, Carlton Carroll, American Petroleum Institute spokesman, said in an interview. Companies should have enough time to meet the requirements, he said.

“As of now, we don’t think compliance will be a major issue,” Carroll said.

To contact the reporters on this story: Jeff Plungis in Washington at jplungis@bloomberg.net.

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