New California Cleanup Bond Requirements Have Slowed Offloading Of Old Oil Wells To A Crawl
For years, large drillers in California sold unprofitable wells to smaller companies willing to wring the last drops of oil out of them. The process essentially kicked the cost of cleaning up oil fields — pumping concrete down well bores, removing tanks and pipelines — to operators with less ability to pay for the eventual cleanup.
Policymakers and advocates predicted that taxpayers — not the oil companies themselves — would ultimately have to pay billions for remediation once those oil and gas operations ran dry. Unplugged wells emit climate-warming methane and pose long-term hazards to soil and groundwater. But a new law may finally be slowing the so-called well shuffling, state data shows. Since the start of this year, companies have proposed selling 766 wells in the state. But before the wells can change hands, purchasers are now required to request an estimate for a bond to plug the wells from the California Geologic Energy Management Division (CalGEM), the agency that regulates drilling.
The requirement is part of a new law passed last year to ensure that someone — not taxpayers — is forced to put up the money to clean up the wells before they can be sold. The state quoted bond amounts totaling $80.5 million for those hundreds of wells. Most of that money was for a bond to eventually plug 729 wells in Kern County that Vaquero Energy Inc. wanted to buy from Aera Energy.
The remaining 37 wells are scattered across Santa Barbara, Orange, Kern, Fresno, and Los Angeles counties and are owned by two dozen companies. The majority of those wells were idle, and nearly all were marginal — producing less than 15 barrels of oil a day, enough to produce just 472 gallons of gas. But after the state determined how much it would cost to bond those wells, all 37 of the proposed sales fell through. The California Geologic Energy Management Division directed questions about the failed transactions to the involved companies. To Rob Schuwerk, the executive director of Carbon Tracker’s North American office, it means that the law is working as intended: Companies are no longer passing off marginal wells to operators who lack the financial means to plug them. “The law has stopped some of the bleeding,” Schuwerk wrote in an email to Capital & Main.
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https://grist.org/energy/theres-a-reason-oil-well-sales-are-collapsing-in-california-cleanup-costs/