Oil & Gas News

Governor Signs Bill Increasing Financial Responsibilities of Oil & Gas Operators

Governor, California

By: KEYT – Governor Newsom signed Assembly Bill 1167, the Orphaned Well Prevention Act, into law on Saturday expanding the financial responsibilities required of companies in the state before they abandon oil wells.

The California Council on Science and Technology estimates that there are currently 5,540 oil wells without a viable operator and a potential 69,425 economically marginal and idle wells that could be abandoned in the future.

Assembly Bill 1167 (AB 1167), would require that oil wells changing ownership to file a request with the State Oil and Gas Supervisor to determine the cost of an individual or blanket indemnity bond instead of a predetermined price.

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The bill details that the cost of the indemnity bond would need to be sufficient to cover all costs of plugging and abandonment, decommissioning of the facility, and site restoration as necessary.

Additionally, the bill would authorize the supervisor to approve other means of financial assurance in lieu of the individual or blanket indemnity bond as well as require the Department of Conservation to publicly post all indemnity bond calculations, decisions, and ownership transfers.

California Council on Science and Technology analysis of well ownership transfers in 2020 demonstrates that the vast majority of transferred oil and gas wells in the state were transferred to smaller operators and at the end of the well’s productive lifespan increasing the likelihood that the cost of both plugging and clearing sites as well as maintaining plugged wells would be passed to the state as wells are abandoned.

An interactive map of idle and abandoned wells across the state can be found here.

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