Plugging the gap: As rising number of inactive wells grows, New Mexico cost cleanups soar
Key Takeaways:
The number of orphan wells in New Mexico is growing faster than the state can plug them.
Well-plugging costs are rising rapidly, with one 2025 estimate putting the low end of liabilities at $700 million.
The annual average number of wells falling into inactive status—where last production took place more than a year prior to classification change—quadrupled between 2016 and 2025.
Slightly more than 1 in 5 of the 576 New Mexico registered owners had only inactive wells in 2025.
September 24, 2026 (IEEFA) – A combination of a growing number of orphan wells and high costs to plug them is leaving New Mexico with an expensive problem, according to the latest Institute for Energy Economics and Financial Analysis (IEEFA) report. As the pace of likely orphan wells increases, New Mexico should revisit its system to ensure that timely well plugging by operators is feasible.
The costs of well plugging, remediation, and reclamation have steadily risen per well in recent years. Additionally, the annual average number of wells entering inactive status—in which the last production occurred more than a year prior to the classification change—quadrupled between 2016 and 2025. The skyrocketing cost of plugging and remediating orphan wells compounds the problem. Costs have risen more than 750% since 2020, even though the number of approved orphan wells has remained roughly constant.
“The agency division tasked with managing, plugging, and remediating these sites is much smaller than other oil and gas -producing states,” said Trey Cowan, IEEFA energy finance analyst and author of the report. “Given that more than 300 wells were added to the state’s inactive list in 2025, the pace of likely orphan wells is growing three times faster than New Mexico’s well-plugging program.”
The state has detailed the perfect storm headed for the oil fields in the coming years. It is time to get a better handle on plugging and remediation costs so that the Oil Conservation Division can be better prepared for new orphan wells coming online and ensure operators plug wells in a timely fashion.
