An oil and gas state abandonment is the plugging and abandonment (permanent closure and sealing) of an orphan or deserted (or potentially deserted) oil and gas well through a state contract. Because the wells concerned are orphan or deserted, they do not have a financially solvent, responsible operator. Where there is a financially solvent, responsible operator, CalGEM will first pursue a plug and abandonment at the operator's expense.
Process for Safely Plugging and Abandoning Wells
A well is plugged by placing cement in the well-bore or casing at certain intervals, as specified in California laws or regulations. The purpose of the cement is to seal the wellbore or casing and prevent fluid from migrating between underground rock layers.
Cement plugs are required to be placed across the oil or gas reservoir (zone plug), across the base-of-fresh-water (BFW plug), and at the surface (surface plug). Other cement plugs may be required at the bottom of a string of open casing (shoe plug), on top of tools that may become stuck down hole (junk plug), on top of cut casing (stub plug), or anywhere else where a cement plug may be needed. Also, the hole is filled with drilling mud to help prevent the migration of fluids.
State Abandonment Funding
Funds used for state abandonments come from assessment fees and idle well fees paid to the State by operators.
- The Oil, Gas, and Geothermal Administrative Fund (OGGA) is primarily funded by operator assessment fees. Expenditures from this fund on orphan wells are capped to three million dollars for the 2018-19 fiscal year and continuing for each of the three fiscal years thereafter and one million dollars per fiscal year commencing with the 2022-23 fiscal year.
- The Hazardous and Idle-Deserted Well Abatement Fund (HIDWAF) is funded by idle well fees and continuously appropriated to CalGEM to plug and abandon wells to mitigate a hazardous or potentially hazardous condition. There are, however, limitations to spending from the HIDWAF – the well to be plugged and abandoned must be hazardous or idle-deserted and must be a “well of an operator subject to the requirements" of PRC section 3206.
State Abandonment Authority
The Public Resources Code (PRC) provides various presumptions and circumstances under which CalGEM may find that a well has been deserted. If CalGEM determines a well has been idle-deserted, then CalGEM may order the plugging and abandonment of the well. If an operator fails to rebut such presumptions and fails to commence the ordered work, then CalGEM may undertake the plugging and abandonment of the well. CalGEM's options for funding the plugging and abandonment differs depending upon the solvency of the operator.
- CalGEM may find a well to be deserted, and therefore order the well plugged and abandoned, based upon credible evidence. Credible evidence that a well has been deserted includes, but is not limited to, the operational history of the well, the response or lack of response from the operator to inquiries and requests from CalGEM, the extent of compliance by the operator, and other actions of the operator with regards to the well. If such evidence exists, CalGEM may order the plugging and abandonment of the well.
- CalGEM may order to be carried out or undertake the abandonment of a well CalGEM determines to be a hazardous or an idle-deserted well under PRC section 3255. A hazardous well is a “well that is a potential danger to life, health, or natural resources and for which there is no operator responsible for its plugging and abandonment." To order or undertake the abandonment of a well under PRC section 3255, a well must not only be deserted - it must also be orphan. CalGEM must assess the financial resources of the operator and determine there is no operator with the financial resources to fully cover the cost of plugging and abandoning the well.
- California's crude oil production has declined steadily in the last few decades, increasing the number of nonproductive, or “idle", wells throughout California.
- CalGEM maintains an idle well management regime that includes the most rigorous testing standards in the country and collects fees that can be used to fund the plugging and abandonment of deserted and orphan wells—wells that likely do not have a responsible, solvent operator to appropriately plug and abandon the well, leaving their proper abandonment to the State.
- Currently there are over 37,000 known idle wells in California, all of which will eventually come to their end of life, and their operators will be required to plug the wells and decommission associated production facilities.
- The state has also documented over 17,000 wells that have been idle for over 15 years and over 5,000 wells that are orphan, deserted, or potentially deserted wells. Left un-remediated, these wells and facilities can contaminate waterways and soil, serve as a source of climate and air pollutants, and can present physical hazards to people and wildlife.
- CalGEM may determine the status of a well as deserted based upon specific criteria laid out in the PRC. Evidence of desertion under the PRC includes, but is not limited to, failure to pay idle well fees, the operational history of the well or production facility, the response or lack of response of the operator to inquiries and requests from CalGEM, the extent of compliance by the operator with the requirements, and other actions.