Orphan Well Projects: Market Growth, Challenges and Outlook

Alexandra: Hello, and welcome to this "Carbon" podcast from Argus Media. I am Alexandra Luca, reporter for the Argus carbon report. And today, I'm joined by Oliver Chornous from CH4mber. It's great to have you on, Oliver.

Oliver: Hi, Alexandra. Thanks very much for having me.

Alexandra: Today, we'll be speaking about the growing market for orphan well plugging projects, the forces that have shaped the market as it is now, and what buyers are looking for in these types of credits. So I suppose the best place to start would be, tell us about yourself and your company. What do you do?

Oliver: I was lucky enough to attend graduate school at the University of Oregon, do my MBA in sustainability and master of science in financial mathematics. And as a passionate backcountry skier my entire life, I knew that I wanted to work in business, but I also knew that I wanted to do something that I thought interesting and would hopefully have some positive externalities to keep the snow falling instead of rain in the winter. When Malcolm and I were ideating on this, we were encouraged by the immediate impact that can be made from methane abatement, and the tangible, measurable, and repeatable nature of these projects really appealed to me. As a former sell-side analyst at an investment bank, I felt that there could be extremely solid disclosure and obvious additionality with these projects, and it was exactly the type of project that I was looking for, coming from a finance background, because I could see as an analyst where the value was.

So what CH4mber Technologies does is we find and abate orphan oil and gas wells that are leaking fugitive methane emissions completely unabated into the atmosphere. And the operative part about an orphan oil or gas well, there's about 2 million of them potentially or more in the United States, and nobody actually owns them. So what happens is once these wells are abandoned, once the companies that produce them either go out of business or lose their right to operate in that state, there is then no one left responsible for the abatement of that well because the company no longer exists. So what we do is we build lists of these things. We go out, meet with landowners. We try to figure out exactly which of these wells is leaking the most, prioritize those, and then provide financing through the sale of voluntary credits to plug those wells. And I'm happy to go into that a little further as well if you like.

Alexandra: Can you tell me a bit more about, how do you actually plug this well, and how many projects are out there that address this problem?

Oliver: So in terms of how many projects, as I understand it right now, there's been about 100 or just under 100 of these wells plugged to produce carbon credits.

Alexandra: So this is out of 2 million existing.

Oliver: Out of 2 million. Now, there's good and bad things to the 2 million number. What's good is that not all 2 million of them are leaking huge amounts of methane. What's bad is that a significant number of them are. The reason why it makes it a little bit more complicated is you are on a bit of a treasure hunt while you're out there with your survey team, because you could check 50 wells before you find the significant leak. But the leaks that we do find are substantial and are bigger than we had expected before we went out into the field.

Alexandra: In regards to your pipeline, how many projects are you looking to list currently, and what registries are actually in the market for orphan well plugging?

Oliver: Actually, I realized I didn't answer your question about what do we actually do there. So, in the end, what we are is we are licensed and bonded oil and gas producer in the state of Oklahoma right now. And the reason why we have to be that, the same as if we're a producing well, is that we are essentially a reverse oil drilling company. So almost all the steps that you would do to drill a well, we do those in reverse to plug it. So first, we'll pull all the pipe out or at least a very significant amount of pipe. In our first project, that was about 8,000 feet of pipe. We'll then put in mechanical plugs. In our first project, I believe, there were three. And then on top of that, we will pump in thousands of feet of concrete. So, by the time we're done, the land should be returned to the way it looked before the oil industry had ever gotten there, which is significant to the farmers whose fields those are normally in, because they end up regaining a couple of acres of land, which can be productive for them.

Now, in terms of our projects, we founded the company in mid-2023 and plugged our first oil well in Oklahoma in August of 2025. Currently, I don't want to say how big our pipeline is, but we have many more wells that we have carbon contract transfer agreements in place for and are ready to plug kind of at the rate of probably about two a month when the new methodologies from either ACR, Verra, or Isometric are released. We're currently going to issue the credits from the well that we plugged in August 2025 on OCP, Open Carbon Protocol, which we also think is a wonderful program. And they're the only registry that is currently available that has applied for ICVCM status. And we're waiting to hear back on that, and we're excited by that. That's important to us and our clients.

Alexandra: Is ICVCM in the CCP's registration? For listeners who are not aware, the ICVCM's Core Carbon Principles label is a high-integrity kind of qualification that credits can receive if they are issued under a methodology that is considered to meet the standards by the Integrity Council for the Voluntary Carbon Market. So, is this something that buyers are interested in in your credits?

Oliver: It's been really, really cool working in quite a nascent part of the sustainability industry and figuring things out as we go along. But that does come with challenges in terms of education. And I think that things like the ICVCM accreditation allow buyers and project developers to really level set amongst themselves and be sure that a ton that a buyer is buying is the same as what the seller thinks a ton is.

Alexandra: Regarding the OCP and the Open Carbon Protocol, what I understand is that there are several other registries developing methodologies for orphan well plugging. Do you have any insight into the consultation process on these registries?

Oliver: I think that kind of dovetails in with the last question in that we don't want to, in any way, influence what methodology is coalesced around in terms of the entire industry. And given that this thing is so young, I think it's natural for there to be many solutions provided for this. I don't think that it's realistic that all of them are going to survive and provide real liquidity and demand for these credits. Our personal view is that fugitive emissions are worth more than potential fugitive emissions somewhere down the line. So we believe that whatever methodology comes out that allows project developers to value the actual emissions occurring today the most, that will be viewed as the most additional to buyers and, thus, create the most demand and the most liquidity.

Alexandra: You mentioned fugitive versus potential fugitive emissions. Can you explain to the listener what that is, and which types of emissions does your project tackle?

Oliver: Absolutely. So we do know the thing that differentiates us versus the top big four project developers that are pushing this space right now is that we have committed to only measuring the actual emissions of wells as we find them completely untampered by us. So what this means is that some of our competitors would argue, and I think that there are sound bases for these arguments, that if a well is leaking at all on a binary basis, is it leaking or not? That means that that casing or that the enclosure device that is keeping the gas in the ground has been ruptured, and it is likely to continue to get worse. So what some project developers will do is they will go and they will set up what's called a flaring rig as if they were actually producing natural gas or oil from that well, and they will see what the potential flow rate of that well could be if it was completely vented to atmosphere.

Now, that is a reasonable approach given that these wells will degrade at some rate. Our opinion differs slightly in that we don't necessarily want to assume that the wells degrade at any rate because we have not been able to find solid evidence that supports a certain degradation rate of these wells. And second, we believe that if these wells were leaking at that rate, it would be so loud and so obvious that the state who...in the case of Oklahoma, Oklahoma has 18,000 orphan oil and gas wells, that number grows every year, but they plug about 150 with state money. If you were getting production quantities out of an orphan well, that would be one of the first wells the state comes to plug. It might even be done within a couple of weeks. So if that is the case, it then begs the question as to, okay, is it right then to offer a 20-year crediting period on that well? Is it truly additional if you could assume that the state or the federal government, depending on which land it's on, would actually plug that well on its own?

The wells that we're looking for are leaking significant amounts, and they're audible. Around the office, we call them screamers. But they're not to the point where the state would be able to see that there's something wrong from 300 meters away on the road or something like that. And the state itself does not even own methane testing equipment, so they're not prioritizing plugging wells that are leaking methane. They're prioritizing stuff that's closer to schools, that's closer to hospitals, that's closer to communities, stuff like that, and then the real obvious ones, like, if it was completely vented to the atmosphere with a lot of pressure behind it. So I think that kind of answers both the methodology question and what differentiates us, because we have taken our time and money and gone and explored and found sites that are actually leaking.

So we did plug our first well as a pilot to show the market that we were capable technically of doing that. But now we're at the point where we have all these leaky well sites, we're publicly commenting on the pending methodologies that are coming out, and we're trying to take signals from the market as to what the market actually values in these credits. And we've taken this approach because we're not then left in the situation where we have to go and justify the methodology or methods that were used to derive the amount of credits produced from wells that we've already plugged.

So a simple way of saying that is, had we gone and spent our money and plugged a significant number of wells, we wouldn't be able to go test them again today, right? We wouldn't be able to do any more experimentation on how much are they leaking, what time of year, over multiple months, and stuff like that. And if we weren't able to do that, or if we had plugged them, we would be retroactively having to justify our methods. Whereas this way, we can work with the buyers, we can work with the stakeholders to make sure that everybody agrees on the additionality of the wells before we go and plug them. And that way, we're not playing catch-up in terms of the veracity of them later.

Alexandra: Has the market priced a premium in for this insured additionality of your projects? So, are buyers looking to pay more for oil plugging projects that just tackle fugitive emissions as opposed to so-called inflated emissions?

Oliver: We believe so. As you know, a lot of these deals, unfortunately, you don't get a lot of public price discovery out of them. But what I can say is that, of the projects that have been rated by a company like, say, BeZero, we've noticed that there's a significant difference in the ratings when there's a focus on fugitive emissions towards the positive side.

Alexandra: Can you give us any kind of insight into a number, perhaps?

Oliver: We've seen entire letter grade jumps in ratings from companies like BeZero when there is an obvious focus on fugitive emissions. And in the end, kind of the sum total of the differences in measurement styles of the methane emissions, we end up crediting sometimes as little as 10% as that of our competitors on a per-well basis. So when we're talking about price premiums, if you are going to work on purely fugitive projects, there absolutely will need to be a price premium to be able to finance those wells.

Alexandra: Just as a kind of last question, and because, you know, as a PRA, we're very careful on making sure we report accurate and up-to-date prices on the market. One of these nascent markets, like orphan oil well plugging, would be very interesting to get some insight on. So, can you tell us about how much do these prices transact for offtakes or spots?

Oliver: I think, right now, the best estimates that I have right now are between $15 and $30 per ton. That's a pretty wide berth, the obvious being that the higher the rating, the better the price.

Alexandra: The higher the BeZero rating, you mean?

Oliver: The BeZero rating, yep. Yeah, basically.

Alexandra: So, in buyers, is this something they explicitly ask for?

Oliver: It depends. The more volume that the buyer is interested in, the more important the rating becomes. We do view it as a useful tool, absolutely.

Alexandra: And where does demand come from for your credits? Who is most interested in buying?

Oliver: So we've been really encouraged over the past few months, like New York Climate Week and Carbon Forward in London. We've seen the obvious large corporates take a lot more interest, specifically in super pollutants, specifically in methane. So that's your Googles, your Salesforces, your Microsofts. They're sending carbon emission offset procurement officers to these big super-pollutant meetings. We believe that the aggregate demand, just like a lot of these other projects when they're in their infancy, is going to come from those large corporates, with sterling sustainability programs already embedded. We think that as those buyers kind of groove out the industry more and more every day, we are now starting to see less sophisticated clients come to us or become more receptive to us with super-pollutant-specific questions.

That being said, another note is we think that these are very compelling candidates to, at some point, be entered into the compliance markets, given that our impact is very easy to understand, extremely tangible, measurable, and repeatable, which is kind of what you're looking for in terms of industrial offsets, especially in compliance markets. We'd like to see these credits included in things like CORSIA, and we've had comments that people think that they would be quite appropriate for that. So I think that's where the demand is coming from, which is that these are perfect for companies that really cannot cut their emissions in a significant way and need to use offsets, like airlines and stuff, because it is such a direct swap.

Alexandra: Yeah, that's super interesting. I mean, if they can find a future demand avenue in a compliance scheme, that would also mirror much of the VCM in this regard. Yeah, I mean, thanks, Oliver. That was super interesting, and I think the ending wraps it up really nicely in a little outlook for the orphan well plugging market and where it could lead in the future years. So, thanks so much for coming. I hope this was interesting for you as well. And for everyone, please stay tuned for the next "Carbon" episode. And if you want to subscribe to the Argus carbon service, you can find it on the Argus Media website. So, thanks a lot, Oliver.

Oliver: Thank you so much for having me, Alexandra.