How Much Will It Cost to Shut Oil Wells?

Senate Bill 551 – Senator Hannah Beth Jackson’s bill evaluating how much it would cost to shut down and clean up California’s oil and gas facilities – passed through the California Assembly and the Senate last week, and is now on its way to Governor Gavin Newsom’s desk.

The bill was first introduced by Jackson in February 2019; among other requirements, it moves the timeline back for the Department of Conservation to submit a report on the number of “hazardous wells, idle-deserted wells, deserted facilities, and hazardous facilities remaining” along with the possible costs and timelines of “abandoning or decommissioning those wells and facilities,” according to the bill’s text.

Existing law already requires the department to submit such a report; Jackson’s bill moves the report’s due date from October 1, 2020 to April 1, 2021.

In a press release sent out by Jackson’s office last week, Jackson emphasized the need for the public to know how much decommissioning these facilities can cost: “While many assume that oil and gas operators bear the ultimate financial responsibility for shutting down their wells, removing infrastructure, and remediating sites, in several cases so far, California taxpayers are bearing the costs,” the press release states.

Jackson further notes that Santa Barbara’s own Platform Holly, which became the state’s property afterits owner filed for bankruptcy in 2017, is estimated to cost upwards of $180 million on state funds to decommission. Venoco, which owned Holly before declaring bankruptcy in 2017 and then quit claiming the oilfield to the state, had posted a bond of $22 million in 1997 should the platform be abandoned.

“If we do not know or fully plan for these costs, the public will be more likely to be left unfairly holding the bag for this industry’s mess,” Jackson said in a press release. “The more we know, the better we can plan ahead.”