Daily Kos – CA Resources Corporation Ploy To Buy Aera Energy Is Way To Avoid Plugging Idle Wells, Capture Carbon

By Dan Bacher, DAILY KOS


Los Angeles, CA— Oil companies and other big corporations base their operations on a model of privatizing the profits — and socializing the losses. 

That was definitely the case yesterday when the California Resources Corporation (CRC) announced the signing of a merger agreement to combine with Aera Energy, LLC in an all-stock transaction that would enable CRC to avoid plugging low producing wells and Aera to capture and store carbon: www.businesswire.com/…

“The transaction values Aera at approximately $2.1 billion, inclusive of Aera’s net debt and certain other obligations and is expected to be immediately accretive. At closing, Aera’s owners will receive 21.2 million shares of CRC’s common stock, equal to approximately 22.9% of CRC’s fully diluted shares,” CRC announced.

“This strategic transaction will create scale in our operations, generate significant free cash flow, accelerate cash returns to shareholders and expand our energy transition platform,” said Francisco Leon, CRC’s President and Chief Executive Officer, in a statement. “We remain committed to reducing emissions and this combination will advance our goal to permanently sequester 5 million metric tons per year of CO2 in our underground storage vaults.“

With no hint of irony, Erik Bartsch, Aera’s President and Chief Executive Officer, gushed: “Aera and CRC are two great companies with decades of experience and track records that will serve as a foundation for a strong combination. We are committed to continuing to deliver the energy Californians need today and working to deploy carbon capture at-scale.”

In response, Consumer Watchdog and FracTracker Alliance said California Resources Corporation’s purchase of Aera Energy for just half the price it fetched two years ago is a “ploy for Aera to avoid plugging very low producing wells” — and for California Resources to “take advantage of the state’s reliance on unproven carbon capture technology to extend the lives of oil producers,” 

The groups said the purchase of Aera brings CRC’s count of idle wells producing no oil from about 6,700 up to nearly 16,000 wells in California. The two companies avoid the costs of plugging them because the state charges very little in fines. 

“On average, these producers are pulling about 3 barrels of oil per day per well from unplugged wells as they scrape the bottom of the barrel of available oil,” the groups stated.

An oil well can be financially self-sustaining by producing 2 barrels per day. “The real play appears to be that CRC wants Aera’s oil fields as a potential site to store carbon from unproven carbon capture programs,” the groups argue.  

FracTracker Alliance: CRC a “sponge” for oil companies divesting low producing wells

“CRC has been a sponge for oil companies divesting low producing oil and gas wells in California and as a result the company has already undergone chapter 11 reorganization,” said Kyle Ferrar, Western Program Coordinator for FracTracker Alliance. “FracTracker research shows that average daily per well production for Aera is very low and it will be difficult for CRC to generate profit off of these wells to properly plug them, much less remediate the environmental contamination of Aera’s oil fields.” 

“CRC and Aera are rearranging the deck chairs on the Titanic,” Consumer Advocate Liza Tucker said. “Unfortunately, carbon capture and storage is a false solution to transitioning off of oil and gas. Compressed carbon injected into depleted wells and stored in underground reservoirs risks leaks into air and groundwater, and potentially catastrophic effects as well.  The technology is of limited value because of its high costs, energy intensiveness and technical challenges.”

In addition, under AB 1167 (Carrillo), a recently passed law, oil companies buying wells must post bonding up front to pay for the costs of plugging wells at the end of their lives, the groups noted.

“The state of California must immediately jump in before allowing this transaction to be final and require California Resources to put up the hundreds of millions of dollars in bonding needed to acquire Aera’s wells so that consumers are not left holding the bag on their eventual plugging,” said Tucker. “The fact that Aera just sold for less than half its previous sale price shows the company’s well plugging and remediation debts are likely much higher than previously considered.” 

 “It is vital that CalGEM requires proper bonding amounts to adequately cover all plugging and remediation costs associated with not just plugging each well, but also decommissioning of all oil field pipelines, storage tanks, and other infrastructure. The state of California also needs to avoid extending the lifespan of the toxic oil fields that California Resources plans to use for carbon storage,” said Ferrar.

According to the Department of Conservation and its California Geologic Energy Management Division, the cost to plug wells in various regions of the state vary from as low as $87,000 per onshore well to as much as $923,000 per well in Southern California, due to its highly urban environment and associated costs for operation. This does not include environmental remediation.

CRC launched its TerraVault in 2021, a service that offers the capture, transport, and storage of carbon dioxide for industrial customers to inject into depleted undergound oil reservoirs. 

Aera Energy was a joint venture between Exxon and Shell before the two majors offloaded the bad assets to IKAV, an international asset management group based in Europe and Canada Pension Plan Investment Board that purchased Aera for about double its current sale price, the groups noted.   

“At the time, the acquirers escaped having to put up the bonding to acquire the wells. The state never required the two oil giants to put up the money to cover full plugging and remediation of Aera’s wells,” the groups stated. 

2023 was a record year for oil and gas lobbying

Corporations like CRC and Aera are able to get away with what they do in the “’green” and “progressive” state of California and across the nation because they have captured the regulatory agencies and politicians for many decades.

The merger between CRC and Aera takes place at a time that lobbying spending by the oil industry has shattered records. Big Oil and Big Gas spent an all-time yearly record of $27,003,931 on lobbying in Sacramento in 2023. The lobbying expenditures for the last quarter alone were $4,983,305. 

You can see the oil and gas industry lobbying expenses, including those by Aera, here: https://cal-access.sos.ca.gov/Lobbying/Employers/list.aspx?view=category&fbclid=IwAR2wAaVwwH0_1yLppeqwZiGuvKrjjUoeJo_BCGZ6QZv0hOymlLsL9pHms64

In 2023, Aera Energy spent $627,892 in the first quarter, $111,403 in the second quarter, $788,192 in the third quarter, and $133,349 in the fourth quarter, a total of $1,660,836 for the year.


There are no lobbying expenses listed under lobbyist employers for California Resources Corporation on the Secretary of State’s website. However, the Western States Petroleum Association, the largest and most powerful lobbying group in California, lobbies for CRC.

The Western States Petroleum Association, the largest and most powerful corporate lobbying group in the state, finished second in oil industry lobbying expenditures with $6,935,428 spent on lobbying in 2023.  WSPA spent $2,380,275 in the first quarter, $1,561,555 in the second quarter, $1,381,995 in the third quarter and $1,611,603 in the third quarter: cal-access.sos.ca.gov/… 

Chevron topped all other oil corporations in lobbying spending in 2023 with a total of $11,196,342 for the year. That includes $4,924,088 spent in the first quarter, $1,204,139 in the second quarter, $3,866,296 in the third quarter and $1,201,819 in the fourth quarter.

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