Federal grant programs play a crucial role in addressing the issue of orphaned wells in the United States. The U.S. Department of the Interior (DOI) is taking significant steps to tackle this problem by empowering state agencies to take charge of well-plugging and reclamation efforts. Grant compliance is crucial for addressing the challenges posed by orphaned wells. Upholding accountability and prioritizing environmental protection can help state agencies effectively manage and utilize federal grants for well-plugging and site remediation.
To warrant effective, accountable, and efficient implementation of the Infrastructure Investment and Jobs Act’s (IIJA) historic investment in orphaned well cleanup, Interior Secretary Deb Haaland issued Secretary's Order 3409 on January 10, 2023, and the Orphaned Wells Program Office (OWPO) was created. Based on the DOI’s July 2023 guidance,1 this article outlines a few of the compliance requirements Phase 1 Formula grant awardees must adhere to.
How Much Funding Could States Receive Under Phase 1 Formula Funding?
- States could receive up to $25 million, or up to 25% of the state’s total formula eligibility, whichever of the two is greater as shown below.
- States with a total formula eligibility of less than $25 million could receive the total formula grant amount identified in the table below. The below table shows how much each state is eligible to receive in total Formula grants and Phase 1 grants.1
| State | State Reported Projected Cost (December 31, 2021) | # Orphaned Wells Reported (December 31, 2021) | Total Formula Grant Eligibility | Phase One Eligibility | |
|---|---|---|---|---|---|
| 1 | Alabama | $4,230,000 | 91 | $1,681,430 | $1,681,430 |
| 2 | Alaska | $42,616,250 | 12 | $28,336,497 | $25,000,000 |
| 3 | Arizona | $12,969,230 | 245 | $4,871,791 | $4,871,791 |
| 4 | Arkansas | $6,375,000 | 425 | $5,589,721 | $5,589,721 |
| 5 | California | $974,949,035 | 5,356 | $140,870,510 | $35,217,628 |
| 6 | Colorado | $47,343,791 | 625 | $54,064,506 | $25,000,000 |
| 7 | Illinois | $163,355,000 | 4,415 | $36,875,485 | $25,000,000 |
| 8 | Indiana | $77,688,521 | 1,459 | $14,076,668 | $14,076,668 |
| 9 | Kansas | $35,765,917 | 5,477 | $33,666,697 | $25,000,000 |
| 10 | Kentucky | $235,034,398 | 11,728 | $78,980,737 | $25,000,000 |
| 11 | Louisiana | $401,704,649 | 4,605 | $86,449,520 | $25,000,000 |
| 12 | Michigan | $31,861,500 | 439 | $5,873,295 | $5,873,295 |
| 13 | Mississippi | $1,120,000 | 14 | $6,830,345 | $6,830,345 |
| 14 | Missouri | $29,094,000 | 4,849 | $26,925,384 | $25,000,000 |
| 15 | Montana | $14,254,250 | 279 | $5,139,423 | $5,139,423 |
| 16 | Nebraska | $19,311,000 | 471 | $4,151,076 | $4,151,076 |
| 17 | New Mexico | $290,611,502 | 1,741 | $72,260,163 | $25,000,000 |
| 18 | New York | $248,062,500 | 4,897 | $44,672,162 | $25,000,000 |
| 19 | North Dakota | $38,758,000 | 186 | $55,266,234 | $25,000,000 |
| 20 | Ohio | $1,548,851,635 | 19,662 | $231,028,206 | $57,757,052 |
| 21 | Oklahoma | $501,876,011 | 17,865 | $205,226,972 | $51,306,743 |
| 22 | Pennsylvania | $1,831,573,744 | 26,908 | $305,625,896 | $76,406,474 |
| 23 | Texas | $481,800,000 | 7,396 | $318,695,029 | $79,673,757 |
| 24 | Utah | $1,534,852 | 41 | $5,229,389 | $5,229,389 |
| 25 | West Virginia | $991,000,000 | 6,309 | $116,932,226 | $29,233,057 |
| 26 | Wyoming | $19,927,595 | 1,311 | $40,680,639 | $25,000,000 |
| Total | $8,051,668,380 | 126,806 | $1,930,000,000 | $658,037,849 |
What Are the Permissible Uses of Formula Grant Funds?
The permissible uses for the grant funds under Phase 1 include:
- Plug, remediate, and restore orphan wells located on public or private land;
- Identify and describe undocumented orphan wells on public and private land;
- Rank orphaned wells based on factors such as public health and safety, potential environmental damage, and other land-use priorities;
- Provide information regarding the use of funds received on the public website;
- Measurement and monitoring
- Emissions of methane and other gases associated with orphan wells; and
- Contamination of groundwater or surface water associated with orphaned wells;
- Land remediation and restoration of native species habitats that have been degraded due to the presence of orphaned wells and associated pipelines, facilities, and infrastructure;
- Rehabilitate land near orphan wells and decommission or remove pipelines, facilities, and related infrastructure;
- Identify and address any disproportionate burden of adverse human health consequences or environmental impacts of orphanages on communities of color, low-income communities, tribal communities, and natives; and manage a program designed to perform the operations described in 1 to 7.
Grant awardees are required to comply with applicable federal procurement requirements, including, but not limited to, uniform administrative requirements, cost guidelines, and audit requirements for federal grants (2 CFR 200).
Equipment & Supplies
Under 2 CFR 200.439, Equipment, title to equipment acquired by a recipient with DOI funds shall vest in the recipient. The equipment and supplies will be used for authorized purposes if they are needed, whether the project or program continues to be supported by federal funds.
The recipient shall take a physical inventory of equipment and reconcile the results with the equipment records at least once every two years.
Equipment records shall be maintained accurately and shall include the following information:
- A description of the equipment;
- Manufacturer’s serial number;
- Model number, or other identification number;
- Source of the equipment, including the award number;
- Whether title vests in the recipient or the federal government;
- Acquisition date and cost;
- Information from which one can calculate the percentage of the DOI’s share in the cost of the equipment;
- Location and condition of the equipment;
- Date the information was reported;
- Unit acquisition cost; and
- Ultimate disposition data, including date of disposal and sale price, or, when a recipient compensates the DOI awarding agency for its share, the method used to determine current fair market value.
The recipient shall use that property for the originally authorized purpose, and the recipient shall not encumber the property without the approval of the DOI awarding agency.
The equipment or supplies may not be encumbered without the approval of the awarding agency.
When the recipient no longer needs the equipment, it may use it for other activities as per agency procedures or dispose of it upon approval from the awarding agency.
Davis-Bacon Act Requirements
All laborers and mechanics employed by the applicant, subrecipients, contractors, or subcontractors in the performance of construction, alteration, or repair work on an award or project of more than $2,000 funded directly by or assisted in whole or in part by funds made available under Formula grants shall be paid wages at rates not less than those prevailing on similar projects in the locality, as determined by the Secretary of Labor by Subchapter IV of Chapter 31 of Title 40, United States Code, commonly referred to as the Davis-Bacon Act (DBA).1
Applicants shall provide written assurance acknowledging the DBA requirements for the award or project and confirming that all laborers and mechanics performing construction, alteration, or repair work on projects of more than $2,000 funded directly by or assisted in whole or in part by and through funding under the award are paid or will be paid wages at rates not less than those prevailing on projects of a similar character in the locality as determined by the Secretary of Labor by Subchapter IV of Chapter 31 of Title 40, United States Code.
Funding recipients also will be required to undergo DBA compliance training and maintain competency in DBA compliance.
Buy America Domestic Procurement Preference
As required by Section 70914 of the Bipartisan Infrastructure Law, on or after May 14, 2022, none of the funds under a federal award that is part of the federal financial assistance program for infrastructure may be obligated for a project unless all of the iron, steel, manufactured products, and construction materials used in the project are produced in the U.S., unless subject to an approved waiver.
Recipients of an award of federal financial assistance are hereby notified that none of the funds provided under this award may be used for a project for infrastructure unless:
- All iron and steel used in the project are produced in the U.S.; this means all manufacturing processes, from the initial melting stage through the application of coatings, occurred in the United States.
- All manufactured products used in the project are produced in the U.S.—this means the manufactured product was manufactured in the U.S.; and the cost of the components of the manufactured product that are mined, produced, or manufactured in the U.S. is greater than 55% of the total cost of all components of the manufactured product, unless another standard for determining the minimum amount of domestic content of the manufactured product has been established under applicable law or regulation; and
- All construction materials are manufactured in the U.S., which means that all manufacturing processes for the construction materials occur in the United States.
The Buy America preference only applies to articles, materials, and supplies that are consumed in, incorporated into, or affixed to an infrastructure project. As such, it does not apply to tools, equipment, and supplies, such as temporary scaffolding, brought to the construction site and removed at or before the completion of the infrastructure project. Nor does a Buy America preference apply to equipment and furnishings, such as movable chairs, desks, and portable computer equipment, that are used at or within the finished infrastructure project but are not an integral part of the structure or permanently affixed to the infrastructure project.2
Waivers
When necessary, recipients may apply for—and the DOI may grant—a waiver from these requirements, subject to review by the Made in America Office. The DOI may waive the application of the domestic content procurement preference in any case in which it is determined that one of the following circumstances applies:
- Non-Availability Waiver: The types of iron, steel, manufactured products, or construction materials are not produced in the U.S. in sufficient and reasonably available quantities or of a satisfactory quality;
- Unreasonable Cost Waiver: The inclusion of iron, steel, manufactured products, or construction materials produced in the U.S. will increase the cost of the overall project by more than 25%; or
- Public Interest Waiver: Applying the domestic content procurement preference would be inconsistent with the public interest.
If a general applicability waiver does not already apply and a recipient believes that one of the above circumstances applies to an award, a request to waive the application of the domestic content procurement preference may be submitted in writing to the financial assistance awarding officer.
In summary, we’ve included a few compliance requirements that orphaned or abandoned wells federal grantees need to follow. There are additional reporting requirements and standards for plugging, workforce, and remediation that awardees would need to adhere to. Additional requirements can be found in the DOI’s July 2023 guidance document.1 The implications of not being in compliance with the DOI’s requirements would subject companies or subrecipients to costly clawback procedures when not afforded proper attention.
FORVIS Can Help
When planning for federal awards, there are certain things you will need to prepare for and be ready to implement. Our dedicated Grants Management Services professionals at FORVIS have experience with grants and helping clients navigate the full grant life cycle. If you have questions or need assistance, please submit the Contact Us form below.