Operator Financial Responsibility Program

Cost Estimates for Plugging & Abandonment of Wells, Decommissioning of Production Facilities, and Site Remediation

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 Cost Estimate Regulations for Oil and Gas Operations, which were approved by the Office of Administrative Law on June 21, 2024 and take effect October 1. 2024. For the complete rulemaking package please visit CalGEM’s Rulemaking page.

For questions regarding the Operator Financial Responsibility Program, please contact the program staff at calgemcostestimates@conservation.ca.gov.

A list of the intial determinations made in accordance with Assembly Bill 1167 are listed below:

Aera Energy LLC (PDF) -- (attachments)
B5 Holdings (PDF) -- (attachments)
Berry Petroleum (PDF) -- (attachments)
BRR Natural Resources (PDF) -- (attachments)
Hathaway LLC (PDF) --(attachments)
Signal Hill Disposal (PDF) -- (attachments)
Thompson Oil Company (PDF) -- (attachments)
Vaquero Partners (PDF) -- ( attachments)

Cost Estimate Regulations

Initial reporting due dates for operators are listed below. Subsequent cost estimate reports will be required every 5 years after the initial report. 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
- Please see the list of Group 1 Operators whose cost estimate reports are due 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

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.

Cost Estimate Methodology

The Cost Estimate Regulations for Oil and Gas Operations allow for the use of two methods for the calculation of operator cost estimates. For the purposes of these methods, plugging and abandonment means plugging and abandonment in accordance with Public Resources Code section 3208.

The default method (Method 1) prescribes a cost methodology based on average cost data from state contracts for well abandonment, facility decommissioning, and site remediation that is applied to the site-specific characteristics to determine the cost associated with a specific well or facility.
The optional method (Method 2) require operators submit a cost estimate reflecting the estimated costs for a third party to do the required work and provide documentation supporting the validity of the values used to calculate the cost estimate.

Operators are encouraged to enter their Cost Estimate Report, and any required supporting documentation, via the WellSTAR database. Instructions for the use of WellSTAR to complete this report can be found at the bottom of the page.

Well Abandonment Cost Estimates

To generate a Well Abandonment Cost Estimate, the well plugging and abandonment activities will include the work required to permanently abandon and plug the well by cement in accordance with Public Resources Code section 3208. For purposes of the Well Abandonment Cost Estimate, the well plugging and abandonment activities end when the well surface has been secured per California Code of Regulations, title 14, section 1723.5 for onshore wells and section 1745.5 for offshore wells.

Two methods have been developed for operators to generate their Well Abandonment Cost Estimates.

Method 1 – Allows the operator to develop their Well Abandonment Cost Estimates using a prescribed cost methodology applied to the specific characteristics of the well. An excel workbook template has been developed to serve as a resource for the operators in developing their estimate using this method.
Method 2 – Allows the operator to generate their Well Abandonment Cost Estimates based on the estimated costs for a third party to do the required work and provide documentation supporting the validity of the values used to calculate the cost estimate.

Production Facility Decommissioning Cost Estimates

Production facility decommissioning involves the safe removal of all onshore surface and offshore production facility equipment. Site remediation for the production facility follows the production facility decommissioning activities.

Two methods have been developed for operators to generate their Production Facility Decommissioning cost estimates.

Method 1 – Allows the operator to develop their Production Facility Decommissioning Cost Estimates using a prescribed cost methodology applied to the specific characteristics of the production facility. An excel workbook template has been developed to serve as a resource for the operators in developing their estimate using this method.
Method 2 – Allows the operator to generate their Production Facility Decommissioning Cost Estimates based upon the estimated costs for a third party to do the required work and provide documentation supporting the validity of the values used to calculate the cost estimate.

Site Remediation Cost Estimates

Site remediation includes all site remediation and restoration activities at any given production facility, lease, or location around a well following plugging and abandonment activities. The production facility, lease, or location is to be restored back to its natural state as near as practicable as per title 14, section 1776 of the California Code of Regulations.

Two methods have been developed for operators to generate their Site Remediation Cost Estimates.

Method 1 – Allows the operator to develop their Site Remediation Cost Estimates using a prescribed cost methodology applied to the specific characteristics of the well site or production facility site. An excel workbook template has been developed to serve as a resource for the operators in developing their estimate using this method.
Method 2 – Allows the operator to generate their Site Remediation Cost Estimates based upon the estimated costs for a third party to do the required work and provide documentation supporting the validity of the values used to calculate the cost estimate.

Available documents related to cost estimates

For additional details regarding these methods and how they would apply to specific wells and production facilities, please review the sections above.

WellSTAR - Operator Total Liability Form Input Instructions

CalGEM recommends that operators submit their Cost Estimate Report directly to the WellSTAR database using the instructions provided below.

Following the schedule provided in the Cost Estimate Regulations for Oil and Gas Operations, an operator would submit the WellSTAR Operator Total Liability Form detailing their total liability and the specific cost estimates generated for plugging and abandoning all wells, decommissioning all production facilities, and performing site remediation of all well, facility, and lease locations. Operator cost estimates would be submitted via the Electronic Data Deliverable Template that is downloaded directly from the Operator Total Liability Form.

Operator Financial Responsibility Program

​​​​​​​​​​​​​​​​Cost Estim​ates for Plugging & Abandon​​ment of Wells, Decommissioning of Production Facilities, and Site Remediation

​​Cost Estimate Regulations​

Cost Estimate Methodology​