By Staff Writers, KALLANISH ENERGY
May 26, 2020
A consumer group wants California Gov. Gavin Newsom to sign an executive order to block oil companies from getting state approval for new wells without full bonding for their cleanup, Kallanish Energy reports.
That request was made last week by Consumer Watchdog.
The state could be at risk for billions of dollars cleaning up abandoned wells due to the impending bankruptcy of oil drillers in the coming months after commodity prices have plummeted, the group said in a letter to Newsom.
“Given the state’s grave deficit, it’s imperative that no new wells be approved without full bonding for their cleanup and a requirement to plug a certain number of idle wells in exchange for a new permit,” the group said.
Under state law, oil companies must put up bonds in exchange for permits to drill or rework wells as financial assurance that the wells will be plugged and cleaned up.
California has about 107,000 active wells of which 35,000 are idle and another 35,000 are barely producing.
Consumer Watchdog said the state’s seven largest drillers controlling 75% of all wells have posted bonds averaging $230 per well while the cost of decommissioning a well in California is about $86,000.
Companies owe the state about $9.2 billon to plug and close wells, but have only put up about $110 million in bonding, it said.
It said that California has been lax in requiring appropriate bond amounts from energy companies.