Cost Estimates for Abandonment of Wells and Decommissioning of Facilities
Public Resources Code section 3205.7 requires each operator of a well to submit a report to CalGEM estimating the cost to plug and abandon all its wells, decommission all attendant production facilities, and complete site remediation. The cost estimate reports provided by operators will provide a mechanism for CalGEM to assess the full costs associated with these activities.
The cost estimate reports must be prepared in accordance with criteria established by CalGEM. The criteria are described in the proposed regulations.
These reports will be considered by the Operator Financial Security Program in assessing the reasonable costs associated with the cost to plug and abandon an operator’s wells, decommission attendant production facilities, and complete site remediation. For more information on additional financial securities under PRC section 3205.3, please visit the Operator Financial Security Program page.
Public Comment for Proposed Cost Estimate Regulations for Oil & Gas Operations
On August 18, 2023, the Department of Conservation’s California Geologic Energy Management Division (CalGEM) released the Cost Estimate Regulations Oil & Gas Operations for official public comment under the Administrative Procedures Act.
The regulations provide requirements and methods for oil and gas operators to submit their cost estimates for plugging and abandonment of wells, decommissioning of facilities, and site remediation on a specified schedule. The release begins a public comment period which will end on October 4, 2023.
CalGEM has developed a set of criteria for operator cost estimates that will be promulgated via regulation. The initial reporting due dates for operators are listed below. The subsequent cost estimate reports will be required every 5 years after the initial report. The initial cost estimate reports would be required on the following schedule:
- Group 1: Operators who were assessed based upon production of less than an average of 3.5 total barrel equivalent per day per well for calendar year 2021. Operators who were not assessed due to lack of production will report with this group..
- Reporting date: No later than January 1, 2025
- Group 2: Operators who were assessed upon production of an average of more than 3.5 total barrel equivalent per day per well for calendar year 2021 and for operators assessed in accordance with Public Resources Code section 3403.5 for calendar year 2021.
- Reporting date: No later than July 1, 2026
- For offshore wells
Reporting date: No later than July 1, 2027