Recently, I wrote about how private equity firms are buying health providers practices, including my gastroenterologist’s, and how they bleed money from the companies, then sell them for a big profit.

In 2021, some of the top industries for private equity investment include healthcare, technology, and consumer products. 

Now, a new report describes how private equity firms buying oil and gas wells is likely to be costly for taxpayers.

Investments by private equity firms in nearly 2,700 oil and gas wells on federal and tribal lands across the western United States could leave taxpayers with a cleanup bill of up to $380 million, according to a report by the Private Equity Stakeholder Project and Public Citizen.

Without changes in financial protections by the U.S. government, the drillers backed by private equity buyout firms on federal lands will only set aside $5.7 million to clean up after the wells are depleted, the study found, only 1.5 percent of the potential cleanup costs.

The study includes wells that have been drilled or are projected to be drilled based on federal drilling permits approved since 2017. The $380 million cleanup bill is only part of the cost of cleaning up from oil and gas drilling on public lands, which has been estimated to be at least $6 billion, and potentially more.

The involvement of private equity companies known for borrowing money to buy up assets and stripping their value should be of concern to government officials that oversee oil and gas drilling, said Alan Zibel, an oil and gas researcher with Public Citizen who is co-author of the report.

In July, the U.S. Bureau of Land Management released a proposal to strengthen oil and gas cleanup requirements for federal lands. These regulations, when final, will ensure that oil and gas drillers can’t evade the cost of cleanup. However, Zibel said, further legislation is needed to ensure that fossil fuel companies can’t use bankruptcy to ditch their responsibility to clean up oil and gas wells.

“If these companies declare bankruptcy and abandon these oil and gas wells, the public faces major costs, and buyout firms escape with their profit and zero consequences,” he said. 

Private equity firms have a history of buying up businesses in declining industries, taking profits, and then Filing for bankruptcy after the company’s assets become worthless, Zibel said.

The report lists 19 private equity firms – including Blackstone, Carlyle Group, Apollo Global Management, KKR, and Warburg Pincus – that have invested billions of dollars in fossil fuel companies in recent years. These firms have invested in 35 different oil and gas companies that received permits to drill on federal lands since 2017.

Colorado currently has the largest potential cleanup bill from private equity-backed oil and gas companies, the study found. The state could see potentially a significant shortfall of $161 million when the time comes to deal with abandoned wells on federal and tribal lands. More than 75 percent of Colorado’s wells on federal lands are on lands leased by private equity backed drillers.

It’s unfortunate that private equity firms are now taking over oil and gas drilling companies. They’re only interested in making big profits and unfortunately, the environment cleanup could be left to taxpayers.