Why office software vendor Workday is paying to plug ‘orphaned’ oil and gas wells

Enterprise software company Workday is one of the first corporations buying emissions offsets that will be generated by projects to close orphaned oil and gas wells that could leak methane, a more potent greenhouse gas than carbon dioxide.

Workday’s contract with Tradewater, which got its start cleaning up hydrofluorcarbons associated with refrigerants, covers 200,000 metric tons of emissions reductions from capping wells. While that’s not a huge amount initially, the agreement will span four years, as Tradewater builds its practice related to orphaned oil and gas wells.

“Our dollars will go a long way to help stand up this nascent market,” said Eric Hansen, chief sustainability officer at Workday, the $7.3 billion human resources and financial software firm based in Pleasanton, California. 

It’s also a crucial short-term win, the earth’s warming accelerates. “You’ve got to address one of the elephants in the room, which is methane,” Hansen said.   

Mitigate ‘superpollutants’ for short-term wins

The Workday-Tradewater deal is another signal of growing corporate interest in credits linked to industrial gases, including black carbon, methane and nitrous oxide.

These greenhouse gases are considered “superpollutants.” Their release warms the atmosphere more quickly than carbon dioxide but the gases themselves are shorter-lived. Methane, for example, is considered 80 times more potent than CO₂ over two decades. It accounts for an estimated 20-30 percent of warming, and preventing its release could help corporations with short-term wins when it comes to greenhouse gas reductions.

“If you want to slow warming faster now, you have to broaden the lens of projects that you look at,” said Kiff Gallager, executive director at the Global Heat Reduction Initiative, which is part of consulting and certification firm SCS Global Services.

Global Heat Reduction Initiative has developed methodologies for measuring methane reductions from agricultural sources, such as manure from dairy cows or pigs or rice production; and from human-caused sources, such as decaying food and other organic matter in landfills. Having a way to properly calculate these projects is crucial, Gallagher said. 

‘An emergency brake’

Oil and gas wells are the largest source of industrial methane emissions, and at least half of that comes from sites that are low-producing or orphaned. Since 1860, close to 5 million oil and gas wells have been drilled across the U.S. About 1 million still produce but millions more have been “orphaned” by their owners, which means there’s no one responsible for cleaning them up, even though 4.5 million people live within one mile of them.

These wells emit an estimated 280,000 metric tons of methane each, according to estimates by the U.S. Environmental Protection Agency. The American Carbon Registry started working on a verification methodology for calculating offsets related to clean-up projects in September 2021. 

“These are not going to be plugged absent of creating some form of carbon credit,” said Hansen. He described this work as “an emergency brake on climate.”

Tradewater is developing a pipeline of potential projects focused on orphaned wells starting in the Midwest, said Kirsten Love, the company’s chief marketing officer. The Workday contract will jumpstart that work. “Having offtakes in advance helps us scale the work and do it more quickly,” Love said.

No upfront payment from Workday

Tradewater is working with financial institutions to develop financing mechanisms that make multi-year commitments more attractive for corporations. For the Workday deal, it worked with Morgan Stanley, which is holding the credits until the software company needs them for its carbon neutrality strategy. 

Workday achieved net-zero status for its offices, public cloud operations (it software is hosted with both Amazon Web Services and Google), data centers and business travel in its fiscal year 2024 ended Jan. 31. It uses a combination of renewable energy procurement contracts and environmental attribute certificates, like the ones it will receive from Tradewater, to make these claims. Workday is also part of Frontier, a buyers group promising future offtakes for emerging carbon removal approaches.

Tradewater is hoping to build a similar consortium of potential customers for non-CO₂ removal projects, along with a financing structure it has informally dubbed a “climate mitigation bank” to make purchases simpler. “The idea is that the bank would hold a number of credits that would be available” as needed, Love said.

A burgeoning industry

It took Workday about nine months to negotiate this first contract, because of the relative immaturity of this concept, but Hansen said he expects the timeline to shrink in the future. Workday will use its first methane-related credits in its current fiscal year, which ends Jan. 31. The projects themselves can be completed in five to eight months from the first blueprint to well-plugging and land remediation. Tradewater is responsible for monitoring the site after completion to measure for potential leakage.

Tradewater isn’t the only company offering services to mitigate emissions from oil and gas wells. The Bipartisan Infrastructure Law set aside $250 million for states to fund clean-up. Other companies developing similar products include:

• CarbonPath and ZeroSix, which are targeting midsize oil companies as potential clients.
• Zefiro Methane, which is working on its first projects in Oklahoma.
• ClimateWells, which is seeking to help small producers unload wells nearing the end of their productivity.  

Aside from environmental benefits, these projects can create high-paying jobs for out-of-work oil and gas workers, said ClimateWells CEO Reid Calhoon. “There are projects we can do in all 50 states,” he said.