04/26/2024 | News release | Distributed by Public on 04/26/2024 15:17
Latest Update
November 30, 2023: The submission period for qualified firms to apply for oil well plug and abandonment and various related services within the counties of Los Angeles, Orange, San Bernadino, Riverside, San Diego, Inyo, and Imperialhas ended.
CalGEM released its State Abandonment Draft Expenditure Plan on Tuesday, July 18, 2023, at 5:30 p.m. during a virtual public meeting. The draft plan includes the Department's initial list of orphan wells it proposes to permanently plug and seal using state and federal funds. The release began a 45-day public comment period that ended on October 4, 2023. All comments received will be considered for incorporation into the regulations..
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.
A well is plugged by placing cement in the wellbore or casing at certain intervals, as specified in California laws or regulations. The purpose of the cement is to seal the well-bore 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.
There are four sources of funds used for state abandonments:
The Oil, Gas, and Geothermal Administrative Fund (OGGA) is funded by operator assessment fees. Starting with the 2021/2022 fiscal year, expenditures from this fund to plug and abandon wells are capped at $5 million per year.
The Hazardous and Idle-Deserted Well Abatement Fund (HIDWAF) is funded by operator 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 (idle well regulations).
In fiscal years 2022/2023 and 2023/2024, $50 million in California state General Fund dollars are appropriated to CalGEM to plug and abandon orphan and deserted wells - for a total of $100 million dollars over the two years.
In August 2022, California was awarded $25 million in initial grant funding from the federal government's orphan well program authorized in the bipartisan Infrastructure Investment and Jobs Act. California is eligible for potentially an additional $140 million in future grants.
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.