Sacramento — Climate, environmenta;, consumer and labor groups celebrated a victory today after Governor Newsom signed AB 1167, the Orphan Well Prevention Act authored by Assemblymember Wendy Carrillo.
The act will require oil companies to take out full bonding to cover the clean up cost of idle and marginally-producing wells when they are transferred in ownership, helping to solve the growing orphan well crisis in California. according to a statement from a coalition of organizations.
The bill’s signing took place as oil production in California has declined in recent years as the once huge crude oil reserves are being depleted. The state has declined from being the number three producer of crude oil in the nation to the seventh largest.
“I am signing Assembly Bill 1167, which creates a process requiring the State Oil and Gas Supervisor to approve transfers of marginal oil and gas wells only once the full cost of well plugging and abandonment and site restoration is covered by a bond or other financial assurance mechanisms,” said Governor Newsom in his signing statement.
“I share the author's desire to minimize the risk that the state will be liable for costs of plugging and abandonment of orphaned and abandoned oil and gas wells where operators failed to provide sufficient financial assurances. This bill helps achieve this objective,” he stated.
However, Newson noted that increasing the financial assurances required for oil and gas well transfers “also potentially creates risk of current oil and gas well operators deserting these hazardous wells.”
“I look forward to working with the Legislature to enact legislation to make any necessary revisions to address this risk and otherwise align this law with programs that the Department of Conversation's Geologic Energy Management Division is already developing to address orp aned and abandoned wells,” he added.
Environment California last week released a new interactive map to show the breakdown of idle and orphan wells and the threats wells posed to groundwater in California by county, Senate and Assembly district, as well as estimated costs for clean up, the groups noted.
The groups said there are currently about 5,400 orphan wells in California — idle wells that owners have abandoned their responsibility to clean up — leaving them for California taxpayers to address.
“Current bonding rules only require oil companies to take out a minimal bond to cover the cost of cleaning up oil wells at the end of their life, sometimes amounting to as little as a few hundred dollars per well,” the groups stated. “However, the average cost statewide to clean up a well according to the California Council on Science and Technology is $68,000.”
With nearly 70,000 idle and marginally-producing wells across the state, many at high risk of becoming orphaned, taxpayers are vulnerable to pay exorbitant fees to clean up wells that rightfully should be paid by the companies responsible for the oil wells, the groups noted.
AB 1167 is specifically designed to address the prevalent practice of larger oil companies transferring their idle and marginally-producing wells to smaller and potentially less solvent companies, creating a risk that these smaller companies will lack the means to properly close the wells, the groups said.
“This in fact occurred several years ago when Greka Energy’s Rincon Island Limited Partnership (RILP) acquired a large set of offshore wells that had been drilled by a major oil company, but ultimately went bankrupt and left taxpayers to foot a bill of $27 million thus far to pay for the cleanup. A law was subsequently passed requiring full-cost bonding for offshore oil wells, but it did not apply to onshore wells. Other states, including Arkansas and Colorado, already have laws in place requiring full cost bonding for idle or marginally-producing wells,” the groups stated.
Groups are also celebrating Newsom’s veto of SB 842 (Bradford), a last minute push by the oil industry to undermine the Governor’s price gouging penalty law, SBX1-2, to establish a watchdog and increased oversight for the state's refiners.
SB 842 was opposed by over 55 organizations as it would have made it more cumbersome to assess and control price spikes consumers face at the pump during oil refinery maintenance periods. The only listed supporter of the bill was the Western States Petroleum Association.
Representatives of the groups lauded Governor Newsom for signing the two bills.
“The Governor took a strong stand against gouging at the pump by refusing to weaken his price gouging protections and vetoing this eleventh hour self-serving bill from the refiners,” said Jamie Court, President of Consumer Watchdog: “The state needs the power to keep refineries open if gas prices are going to be bought down. Oil drillers will now also rightfully need to post bonds in order to cover their clean up costs. It’s only fair. If they want to drill it they need to cover the cost of plugging it when the drilling is done to protect taxpayers from covering clean up costs.”
“We’re thrilled that Gov. Newsom took the next step in holding the oil industry accountable for its messes by making it put up enough funds to clean up the riskiest oil and gas wells,” stated Laura Deehan, Environment California’s state director. “It’s only fair for oil companies to foot the bill for the abandoned wells that endanger our neighborhoods -- not the residents who unfairly have had to live with the pollution from these wells.”
Kyle Ferrar, Western Program Coordinator at Fractracker Alliance argued, “Big Oil will no longer worm out of their responsibility to clean up their mess in California. Governor Newsom has taken the first step to preventing all of California's unplugged oil wells so not to end up orphaned and the responsibility of California tax payers to clean up."
Fatima Iqbal-Zubair, Legislative Affairs Manager for California Environmental Voters, stated, “We applaud the Governor for showing leadership in holding Big Oil accountable by signing AB 1167. This is a huge win for environmental justice communities who have struggled for far too long living on or near toxic orphan wells. With the passage of this bill, we have saved the pockets of taxpayers and have ensured that polluters will pay to clean up orphan wells. We look forward to the Governor signing more bold legislation during this critical time."
“By signing AB 1167, Governor Newsom has catapulted California into a position of leadership on the growing national crisis of orphan wells and made good on his continuing commitment to hold the oil industry accountable,” said Ann Alexander, senior attorney with NRDC (Natural Resources Defense Council). “Finally, communities and taxpayers in California have a measure of protection from the efforts of the oil industry to run away from its obligation to clean up after itself.”
Kassie Siegel, director of the Center for Biological Diversity’s Climate Law Institute, commented on both AB 1167 and SB 842:
”AB 1167 gives Californians an important new protection against oil companies seeking to evade their cleanup obligations by selling wells to companies that have no intention of remediating them,” she said. “This bill’s success shows that the governor and legislature are ready to hold the industry accountable for its orphan well crisis and protect our health, environment and climate from these dangerous leaky wells. Lawmakers should build on this momentum and pass a bill that attacks the root of the problem by forcing the oil industry to clean up all its wells instead of pushing that burden onto California taxpayers or allowing wells to leak dangerous air pollution for decades.”
Regarding SB 842. “Big thanks go to Gov. Newsom for rightly rejecting this bill, which would have slowed down the state's important efforts to stop Big Oil from price gouging and profiteering at the pump,” she noted.
“Taxpayers shouldn’t be responsible for the oil and gas industry’s mess,” said Ryan Schleeter, Communications Director for The Climate Center: “We are grateful to Governor Newsom for signing AB 1167, the Orphan Well Bonding Requirements Act, into law today. With his recent lawsuit against Big Oil and the signing of this important bill, the governor is showing he has what it takes to hold corporate polluters accountable and begin building a California beyond fossil fuels.”
“Big Oil will now be held accountable for the messes they have created. We commend Governor Newsom for signing AB 1167,” said Nicolas Gardner-Serna, Hub Coordinator for the Sunrise Movement Los Angeles. “This is a huge step forward in ensuring that no more communities suffer from the impacts of orphan oil wells. The impact of this crucial legislation will be measured in lives saved and communities spared. There is more work to do. We will never stop fighting for those living near orphan wells; to end the harm and heal the hurt.”
Danny Luna, Community Leader with Vista Hermosa Community Group, commented, “California does not want irresponsible drilling to continue! I’m writing from a Community where this inhumane, irresponsible, inequitable, and outright careless practice is our daily fight. It starts with the oil companies who cashed in on the ground beneath our homes, schools, and kids' playgrounds but left open and improperly capped oil wells.”
“Oil companies have never done their fair share of the clean-up. But today we held Big Oil accountable. There is nothing fairer than requiring oil companies to clean up the mess they have profited from to ensure the basic safety of others. Governor Newsom, signing this bill is the correct step in the right direction,” he added.
“Elected Officials to Protect America applauds the Legislature for passing, and Governor Newsom for signing Assemblymember Carillo’s AB 1167,” observed Meghan Sahli-Wells, California Director for Elected Officials to Protect America and former Culver City Mayor: “This bill continues the bold climate leadership Californians need to hold Big Oil accountable for cleaning up its own mess, and ensuring our health and safety is protected.”
Veronica Wilson, California Organizer with the Labor Network for Sustainability, pointed out, “Signing the Orphan Well Prevention Act is the right move. We know how easy it is for companies to walk away from a mess — leaving stranded oil drilling assets and stiffing workers of pay in the process. Thankfully, California is leading the way to make sure companies plan ahead, cover the costs to protect communities from leaking methane and respect workers who want to do the right thing for the people and the planet.”
The Western States Petroleum Association, the largest and most powerful corporate lobbying group in California, slammed the passage of AB 1167.
“What we’re saying is if we’re going to address this issue, this bill is not the way,” WSPA spokesman Kevin Slagle told Ari Plachta of the Sacramento Bee. “This is another piece of legislation that ignores the facts on the ground when it comes to the financial obligations our industry provides to the state, and we believe this will do more harm than good.”