October 22, 2020 - SACRAMENTO, Calif.— A new report by the Center for Biological Diversity reveals that California’s largest oil producers have set aside only a miniscule fraction of the money that would be required to properly plug their oil and gas wells.

The report, “Undercover Risks: How Big Oil’s ‘Blanket Bonds’ Jeopardize the Environment and State Budgets,” uses public records from the state regulator to examine the bonding levels of California’s ten largest oil and gas producers. The results show that the largest companies reserve as little as $80 per well for cleanup in state bonds.

The California Council on Science and Technology estimates that the average cost of plugging an onshore well is $68,000 and may be much higher. An offshore well would cost about $1.5 million to plug. The Council estimates the cost to plug all of California’s 107,000 oil and gas wells could exceed $9.2 billion.

“Allowing oil companies to all but ignore their cleanup costs is a reckless stance that could leave state taxpayers on the hook for billions of dollars,” said Hollin Kretzmann, an attorney at the Center’s Climate Law Institute. “Not only is Gov. Newsom turning a blind eye to potential fiscal catastrophe, he’s still issuing permits left and right to drill dangerous and costly new wells.”

The low cleanup reserves are made possible by state laws permitting so-called “blanket bonds,” which allow an operator to submit a single bond to cover all its wells.

Aera Energy, which operates close to 25,000 new, active and idle wells, has a single $2 million bond filed with the state, amounting to $80 per well. According to state records, Aera’s current blanket bond amount of $2 million does not meet the state’s current legal minimum. In 2018, the state’s blanket bond requirement increased to $3 million for operators with over 10,000 wells. Chevron submitted two blanket bonds totaling $3 million to cover nearly 28,000 wells, equal to just $109 per well. California Resources Corporation and its affiliates, which filed for bankruptcy this year, collectively operate 18,661 wells and filed bonds totaling $17 million to the state, or $924 per well.

The state’s oil and gas regulator, the California Geologic Energy Management Division (CalGEM), can require up to $30 million for bonding to reflect the actual costs of well remediation, but the records do not show any active bonds more than $2 million.

Although operators are legally required to plug their oil and gas wells, most wells producing little or no oil are left unplugged and idle. Operators can pay a nominal fee to avoid plugging these wells. But by leaving idle wells unplugged, operators create dangers to public health and safety. Idle wells corrode over time and can act as pathways for gas and contaminants to migrate to the surface, causing leaks, spills and even explosions.

The oil industry is facing a wave of bankruptcies, raising the question of whether operators will have enough money to meet their legal obligation to plug and clean up oil and gas wells. Venoco, for example, filed for bankruptcy and walked away from its obligation to clean up wells in Southern California. A municipality and school district were left to pay tens of millions in cleanup costs.

“Gov. Newsom has to stop issuing drilling and fracking permits immediately and force companies to start plugging these dangerous wells,” Kretzmann said. “He has an opportunity to create thousands of jobs plugging California wells as part of our just transition away from dirty fossil fuel production.”

The Center for Biological Diversity is a national, nonprofit conservation organization with more than 1.7 million members and online activists dedicated to the protection of endangered species and wild places.
Source: Center for Biological Diversity