TDFP Exclusive: Inspector General Questioned $24 Million in Oklahoma's Federal Orphaned-Well Spending; Interior Decided to Allow All of It
The Interior Department's inspector general questioned $24,152,000 that Oklahoma spent from a federal Infrastructure Act grant to plug orphaned oil and gas wells, finding the state "did not fully comply with Federal regulations and grant terms." Interior's own Orphaned Wells Program Office then reviewed the questioned costs and decided to allow them, according to the audit.
The report, No. 2025-ER-006, dated Sept. 25, 2026, found that the Oklahoma Corporation Commission (OCC), the state agency that plugs orphaned wells, had no competitive bidding policy for its well-plugging contracts and signed contracts after a federal deadline to commit the money had passed.
"Without a written competitive bidding policy, Oklahoma and DOI may have overpaid for well-plugging services while also increasing the risk of fraud, corruption, collusion, and favoritism," the inspector general wrote. The report also says, "Although no overpayment was found in this instance, the lack of competitive procurements increases the chance that they may have overpaid for the work."
What the Inspector General Found on Oklahoma Orphaned Wells
Oklahoma received a $25 million initial grant in August 2022 under the 2021 Infrastructure Investment and Jobs Act, which gave the Interior Department $4.7 billion for orphaned-well cleanup, according to the report. The OCC plugged 1,123 of an estimated 1,196 orphaned wells with the money as of March 2026, "about 94 percent," the inspector general found.
But the audit says the state's contracting process did not seek competing bids. In the second phase of the process, "OCC presented an offer to one contractor from the first phase to plug a certain number of wells. The price in that offer was provided by OCC, not solicited from the contractor. There was no solicitation of bids from other contractors," the report says. The inspector general questioned all $23,865,670 in well-plugging contract costs on that basis.
The audit also found that 142 contracts, totaling $13,460,159, "were not awarded before the October 1, 2023 deadline" set by the Infrastructure Act for committing initial grant money. According to OCC data cited in the report, those contracts were awarded from October 2023 through November 2024, and the funds "should have been returned to DOI." The inspector general also questioned $271,294 in OCC payroll costs and a $15,036 administrative contract for the same reason.
Because some dollars failed more than one rule, the inspector general counted them once, for a total of $24,152,000 in questioned costs.
Unreported Income and a Missed Deadline
The report says the OCC "failed to report $703,936 in earned program income," money from salvaged pipe pulled out of the wells. Instead of paying for the pipe, the pluggers reduced their invoices by its estimated value, and in all five financial reports the OCC filed during the audit period, it "reported no program income related to the grant," according to the inspector general.
The OCC believed a grant extension through Sept. 30, 2026, also extended the deadline to commit the money, the report says. The Interior Business Center, part of the Interior Department, told auditors the amendment "did not include any changes to the terms of the grant, including the deadline for obligating funds."
The inspector general also noted that a lack of competitive bidding in Oklahoma's procurement process had been flagged in the state's 2022 and 2023 single audits by the Oklahoma State Auditor and Inspector.
Oklahoma has since been awarded a $102,613,486 formula grant to plug an estimated 1,048 more orphaned wells, according to the report. "With over $102 million in formula grant funding awarded to OCC, it is critical that OCC correct these deficiencies," the inspector general wrote.
What Interior and Oklahoma Said
The Orphaned Wells Program Office concurred with all 12 recommendations, the report says. But on the money, it decided the costs were allowable. The office said the $13,460,159 in late-awarded contracts "are associated with allowable well-plugging contract costs for documented orphaned wells completed within the scope and period of performance of the grant following the OCC's established internal policies and processes."
The inspector general wrote that the office "decided to allow them because it determined that the questioned costs occurred during the grant's period of performance and complied with award terms and conditions, despite not being obligated during the period required by statute." For the $23,865,670 in contracts, the inspector general said Interior allowed the costs because OCC used its established process, "although OCC's established policy and processes were not consistent with Federal procurement requirements for competitive bidding."
The inspector general marked three recommendations as "significant" and said it will report them to Congress in its semiannual report.
According to the report, the OCC told auditors that the finding "made clear that its procurement process was not sufficient in fully demonstrating compliance with Federal procurement standards." The OCC said it will move to a process in which contractors bid on individual wells or groups of wells, and "noted that no more wells will be plugged with Federal funds until the competitive bid process is compliant," the report says.
TDFP has asked the Oklahoma Corporation Commission for comment and will update this story.
Sources: U.S. Department of the Interior Office of Inspector General, "The Orphaned Wells Program Office and State of Oklahoma Should Improve the Oversight and Spending of Infrastructure Investment and Jobs Act Orphaned Wells Funding," Report No. 2025-ER-006, Sept. 25, 2026: https://www.doioig.gov/reports/audit/orphaned-wells-program-office-and-state-oklahoma-should-improve-oversight-and (PDF: https://www.doioig.gov/sites/default/files/2021-migration/Final-Audit_Orphaned-Wells-Program-Office--State-of-Oklahoma-Should-Improve-Oversight--Spending-of-IIJA-Money.pdf)
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