In response to concerns related to orphan wells and liabilities for plugging, decommissioning, and remediation of oil and gas sites,
Public Resources Code (PRC) section 3205.3, codified in 2018 by
AB 1057, provides CalGEM the authority to require an operator subject to CalGEM’s indemnity bond requirements, to provide an additional security, acceptable to CalGEM, based on CalGEM’s evaluation of the risk that the operator will desert its wells and the potential threats the operator’s wells pose to life, health, property, and natural resources.
The required amount of additional security may not exceed $30 million or CalGEM’s estimation of the reasonable costs of properly plugging and abandoning all the operator’s wells and decommissioning any attendant production facilities in accordance with
PRC section 3208, whichever is lesser.
At any time, an operator may petition CalGEM to reevaluate CalGEM’s evaluation of the risk or cost estimate.
The Operator Financial Security Program assesses the risk an operator will desert its wells; the reasonable costs to plug and abandon an operator’s wells, decommission attendant production facilities, and complete site remediation; and oversees the issuance of Notices of Additional Security pursuant to PRC section 3205.3.
For information on how reasonable costs for the pugging and abandonment of wells and the decommissioning of production facilities are calculated, please review the methodologies currently in development by the
Operator Financial Responsibility Program.
