Insights: When wells go idle – regulation, bankruptcy, and the business of decommissioning
What happens when an oil and gas operator goes bankrupt—or when decades-old wells still need to be plugged? In this episode of the Oil & Gas Journal ReEnterprised podcast, energy disputes partner Andrew Stakelum overviews some of the regulatory and business facets of oil and gas decommissioning.
In this episode of the Oil & Gas Journal ReEnterprised podcast, OGJ managing editor Mikaila Adams sits down with Andrew Stakelum, an energy disputes partner at King & Spalding LLP, to unpack oil and gas decommissioning from a big picture standpoint.
Wondering what happens when an operator goes bankrupt? Or when decades-old wells still need to be plugged? Stakelum explains why decommissioning is a business and regulatory puzzle shaped by bankruptcy law, fragmented oversight, and shifting federal rules.
From 'boomerang liability' to the ripple effects of financial assurance requirements, the conversation notes how operators, regulators, and sureties are all recalibrating in real time.
Podcast clip - bankruptcy and decommissioning obligations
In this clip from the recording of the Oil & Gas Journal ReEnterprised podcast episode, Mikaila Adams, OGJ managing editor, asks Andrew Stakelum, energy disputes partner, King & Spalding, who's responsible for decommissioning obligations if a company goes bankrupt.
Highlights
1:43 – Big picture A growing, multi-billion-dollar issue driven by bankruptcies, environmental pressure, and rising costs.
2:58 – Growing backlog US operators face a mounting inventory of idle and orphaned wells. Offshore projects add weather, vessel, and equipment constraints.
6:00 – Regulation, bonding complexities Offshore oversight is federally unified; onshore is fragmented across states and localities. Bonding requirements vary widely and heavily impact operator cash flow.
9:43 – Policy, political shifts Decommissioning is bipartisan, but rules differ by administration. The 2024 bonding rule withdrawal by the 2025 Trump administration underscores ongoing uncertainty.
18:59 – Bankruptcy, 'boomerang liability' After major bankruptcies like Fieldwood and Cox, prior owners are being called back to pay for decommissioning. Liability chains stretch decades.
25:44 – M&A, risk transfer Decommissioning costs are key deal drivers. Buyers assume obligations, but sellers remain liable if work isn’t done—security and bonding are critical.
28:59 – Litigation trends Rising disputes over cost allocation, bond payouts, and performance standards make decommissioning a legal flashpoint.
32:31 – What's ahead Companies are exploring joint ventures, standardized agreements, and new financial tools to manage cost and risk. Collaboration will be key.
Mikaila Adams has 20 years of experience as an editor, most of which has been centered on the oil and gas industry. She enjoyed 12 years focused on the business/finance side of the industry as an editor for Oil & Gas Journal's sister publication, Oil & Gas Financial Journal (OGFJ). After OGFJ ceased publication in 2017, she joined Oil & Gas Journal and was later named Managing Editor - News. Her role has expanded into content strategy. She holds a degree from Texas Tech University.
