Existing law authorizes the Geologic Energy Management Division in the Department of Conservation to require an operator of an oil and gas well to provide, in addition to specified types of required indemnity bonds, an additional amount of security acceptable to the division based on the division's evaluation of the risk that the operator will desert its well or wells and the potential threats the operator's well or wells pose to life, health, property, and natural resources, as provided. Existing law requires the division to consider specified factors in evaluating the risks that the operator will desert its well or wells and the potential threats the operator's well or wells pose to life, health, property, and natural resources. Existing law prohibits this additional security from exceeding the lesser of the division's estimation of the reasonable costs of properly plugging and abandoning all of the operator's wells and decommissioning any attendant production facilities, or $30,000,000. A person who violates or fails to comply with this provision, or any related law concerning oil and gas, is guilty of a crime.

This bill would instead prohibit this additional security from exceeding the lesser of the division's estimation of the reasonable costs of properly plugging and abandoning all of the operator's wells and decommissioning any attendant production facilities, or a maximum amount of additional security based on the total number of active and idle wells under the control of the operator pursuant to a specified schedule, as provided. The bill would prohibit the division from increasing the amount of additional security required of an operator that had an additional security agreement approved by the division as of January 1, 2027, until 5 years after the effective date of the agreement, as provided.

Existing law authorizes the above-described additional amount of security to be an indemnity bond, specified forms of deposit, or any other means of equally effective financial assurance approved by the division, including a demonstration of self-insurance pursuant to a specified process.

This bill would, as a condition of obtaining division approval of self-insurance or a corporate guarantee, require an additional security agreement between the operator and the division that includes, among other things, an enforceable schedule for the plugging and abandonment of wells and decommissioning of production facilities consistent with an operator's idle well management plan, as provided. The bill would also require the operator, as part of that additional security agreement, to immediately notify the division if the operator is unable to satisfy the financial criteria, and would make a failure to make this notification a violation subject to civil and criminal penalties, as provided. By expanding the scope of a crime, the bill would impose a state-mandated local program. The bill would also require the division to reevaluate whether self-insurance or a corporate guarantee continues to constitute an equally effective means of financial assurance at least once every 3 years, or upon a material change in the financial condition of the operator or guarantor entity, whichever occurs first.

Existing law also requires a person who acquires the right to operate a well or production facility to file with the State Oil and Gas Supervisor an individual indemnity bond or a blanket indemnity bond in an amount determined by the supervisor to be sufficient to cover, in full, all costs of plugging and abandonment, decommissioning the facility, and site restoration, as provided. Under existing law, an operator may, in lieu of this bonding requirement and with the written approval of the supervisor, provide the required security through an equally effective means of financial assurance, including specified types of deposits, an irrevocable letter of credit, or a fully funded trust fund, and excluding self-insurance or corporate guarantees, as provided.

This bill would repeal the exclusion of self-insurance or corporate guarantee, as described above. The bill would additionally authorize an operator to, in lieu of the bonding requirement and with the written approval of the supervisor, provide the required security through specified means of financial assurance, including pursuant to the above-described process for obtaining division approval for self-insurance or a corporate guarantee applicable to existing operators, as provided.

This bill would exempt from the above-described requirement to file with the supervisor, upon acquiring the right to operate a well or production facility, an individual indemnity bond or a blanket indemnity bond sufficient to cover all costs of plugging and abandonment, decommissioning the facility, and site restoration, (1) an operator who has provided additional security approved by the division, as provided, and (2) a person who has acquired the rights to a well or production facility for the sole purpose of plugging and abandoning that well or decommissioning the production facility. The bill would explicitly state that a person who has acquired the rights to a well or production facility for the sole purpose of plugging and abandoning that well or decommissioning the production facility is subject to the state oil and gas laws as an operator, until a determination by the supervisor that the well has been properly plugged and abandoned or the production facilities have been decommissioned, or that additional work related to abandoning the well is not practical or would pose greater environmental or safety risk, as provided. Upon this determination by the supervisor, the bill would require the supervisor to release the bond, and would release the acquiring person from any further obligation or liability for the well or facility. The bill would require a person who, before an acquisition for the sole purpose of plugging and abandoning the well or decommissioning the production facility, was responsible as an owner or operator of the well or production facility and subject to orders related to remediation issued by the supervisor to remain responsible for the well or production facility and any unfunded costs associated with plugging and abandonment of the well or decommissioning of the facility, as provided. The bill would prohibit the use of a well or production facility acquired for the sole purpose of plugging and abandoning the well or decommissioning the production facility from being used for oil or gas production or injection. By creating a new crime, the bill would impose a state-mandated local program.

This bill would require a person acquiring the rights to a well or production facility for the sole purpose of plugging and abandoning that well or decommissioning the production facility, before completing the acquisition, to submit to the supervisor a declaration, under penalty of perjury, that the acquisition is for the sole purpose of plugging and abandoning the well or decommissioning the production facility, and a plugging and abandoning work plan, as provided. By expanding the scope of the crime of perjury, the bill would impose a state-mandated local program. The bill would require an acquiring person who submits the declaration to commence plugging and abandonment or decommissioning operations within 24 months of the date of acquisition, unless the supervisor determines that a longer period is warranted, as provided. The bill would authorize the supervisor to require an acquiring person who fails to commence operations within 24 months to file financial assurance, as provided.

This bill would, on and after January 1, 2028, require the division to include, as part of its annual report to the Legislature related to well transfer activity and financial assurance, specified information related to well transfers, wells and production facilities acquired for the sole purpose of plugging and abandoning or decommissioning, and a description of wells located in or within one mile of a disadvantaged community.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

This bill would make the operation of its provisions contingent upon the enactment of AB 2461 of the 2025–26 Regular Session.