ACTION: **Tell the Governor you **don’t want any delays in retiring unsafe inactive oil and gas wells in our communities or in testing active wells for safety. Ask him to restore funding for 53 additional oil and gas monitors in CalGEM’s budget.
CONTACT: Governor Newsom by June 10 (Budget negotiations with the State Legislature are in process. The Legislature must approve the 2020-2021 budget by June 15.)
Email here. Fill out your name and email address and pick “Budget Proposal 2020-2021” from the list of selected subjects then click on comment.
**Suggested Script: **If you want to send a shorter email just send paragraphs 1-2 or 2-3 which contain the main requests of the action. Please paraphrase or personalize your message.
Dear Governor Newsom,
Please restore to the 2020-2021 budget the 53 new monitoring staff positions for CalGEM that were eliminated from your revised budget in May. Since CalGEM’s budget is paid for by an annual assessment on oil and gas producers these 53 engineers, analysts and geologists will create no additional expense for the state and could encourage oil and gas producers to retain workers to improve well safety and speed up the scheduled retirement of unsafe inactive wells. Should CalGEM get its increased staff it might provide more technical assistance to companies retiring idle wells on schedule and by so doing reduce their well retirement costs.
**More than 350,000 Californians live within 600 feet, and more than 2 million live within 2500 feet of an old inactive oil or gas well that has not been properly retired. **These wells frequently emit toxic gases and methane and can contaminate local drinking water sources. Minority communities are especially at risk from these leaking wells. Sticking to CalGEM’s initial schedule for completing integrity testing on all idle wells by 4/1/25 is important for determining which wells need to be retired first and how to retire them safely. The number of idle wells in the state may increase substantially because the current global glut of oil and gas is predicted to continue for some time. Retiring idle wells within 2500 feet of residences, schools and parks should be a priority during the current respiratory pandemic.
Any request to CalGEM for emergency relief from the burden of regulatory compliance due to the pandemic should be considered on a case-by-case basis. Blanket extensions of deadlines for paying fees, performing integrity testing of wells, completing mitigation or reporting on the cost of retiring a well are not appropriate. The large oil and gas producing companies like Chevron and Aera Energy (owned by Exxon Mobil and Royal Dutch Shell) should not be granted relief at least during the upcoming fiscal year. By the end of this month Chevron, Exxon Mobil and Royal Dutch Shell will have paid out almost 20 billion dollars in dividends this year. These companies should not be extended any relief at least over the next fiscal year. They can reduce their dividends, tap their financial reserves or borrow at very low interest rates.
If it is a burden for the small/marginal producers to pay an increased assessment then the large producers like Chevron and Aera Energy should increase their share. Other industries and individuals have been working heroically to protect people’s health during the pandemic. The major oil and gas producers claim they want to support their local communities and make fossil fuels clean and safe. Now is the time for them to step up.
CalGEM’s website indicates that one condition for eligibility for delay in complying with regulations is the ability to show that a delay would have no negative consequences for the environment yet it is not possible for oil and gas producers to show this. The connection between the production of oil and gas and its negative effect on our health and the environment has been established.
We understand that you are dealing with many crises as you prepare the 2020-2021 budget: black injustice, the climate crisis, the corona virus pandemic, a nature crisis and an economic crisis. Improving California’s air and water quality provides a way to address all these problems. **The oil and gas industry is known for its predominately white workforce while the communities suffering from the pollution it creates are known to be predominantly black and minority **yet another indication that the oil and gas industry needs to take more responsibility for protecting us all from their pollution.
The following section is only for those interested in delving more deeply into issues of oil and gas well safety.
Oil and gas wells are classified as “idle” if they have been inactive (not pumped any oil or gas) for at least the last 24 months. They are classified as “long-term” idle wells if they have been inactive for at least the last 8 years. If future use is not anticipated idle wells need to be retired, i.e. “plugged and abandoned” to prevent leaks. The process of plugging and abandoning a well includes cleaning, separating the well from oil and gas strata and any underground or surface water sources, removing reusable equipment such as tubing and casing, verifying the mechanical integrity of the well including remediation if necessary and finally plugging the well usually with cement plugs at various depths to prevent any future flows.The final stage of abandonment involves sealing and venting a well, removing supporting surface infrastructure and returning the site as close as possible to its original condition. Abandoned wells remain the responsibility of their last owner. The owner may be required to repair any future leaks.
Oil and gas operators are now required to purchase bonds when drilling, reworking, or acquiring a well to support the cost of plugging a well should it be deserted. A bond is supposed to give the state sufficient funds to cover the cost of retiring a well should the owner become insolvent. In practice the bond amount is a small percentage of this cost.
Usually as a well ages or becomes less productive it is sold to a smaller, more marginal producer who may not be able to afford the cost of decommissioning. Many, especially older, idle wells in California have no viable operator who can be held accountable. If previous owners sold after 1996 they may still be partially liable but it is often expensive or time consuming to track them down. These deserted wells, known as “orphan” wells, become the state’s responsibility.
The Division of Oil, Gas and Geothermal Resources (now the California Geologic Energy Management Division or CalGEM) under the California Department of Conservation requested the California Council on Science and Technology (CCST) to report on the number of orphan wells in California and the potential cost to the state of properly retiring them. CCST’s report “Orphan Wells in California, An Initial Assessment of the State’s Potential Liabilities to Plug and Decommission Orphan Oil and Gas Wells” was completed in November 2018 and included the following estimates for 2017:
Likely Orphan Wells 2565 High Risk of Becoming Orphan Wells 2975 Other Idle and Marginal Wells 69,425 Higher-Producing Wells. 31,722
Wells Plugged before modern requirements 41,390 Wells Plugged after modern requirements. 80,571 Total oil and gas wells in California 228,648
The same CCST report estimated that the cost of plugging and abandoning the 5540 probably orphan wells was $500 million while the cost of plugging and abandoning all of the state’s 106,687 active and idle oil and gas wells was $9.1 billion. Total bonds held by the state for covering this cost should an owner become insolvent amounted to only $110 million. The average cost of properly retiring an on shore oil or gas well was estimated at $68,000 but the cost was highly variable depending on its location (rural or urban, north or south). Retiring an idle well in densely populated Los Angeles was estimated to cost more than $150,000. Decommissioning an off shore well (only 2% of all wells) runs in the $millions, but most idle wells in the state are onshore. In practice the cost of plugging and abandoning a well also depends on its mechanical integrity but that is not known unless an integrity test is performed.
Other data of interest from the CCST report:
Median Daily Production (BOE) 2.7 Median Year of First Production 1989 \% of Wells Offshore 2.3 \% of Production Offshore 5.3 Operators with Active or Idle Wells 1,454 Operators with only Idle Wells 1,099 \% of Idle Wells Belonging to Operators with some Active Wells 91.
The Center for Public Integrity and the Los Angelos Times announced the results of a joint study of idle oil and gas wells in California in February 2020. By matching census data with the CCST maps of idle wells they determined that 350,000 Californians lived within 600 feet and 2 million Californians lived within 2500 feet of an unplugged idle oil or gas well. One million of these people lived in Los Angeles. Idle wells can release toxic emissions ( e.g the carcinogens benezine and formaldehyde) and flammable gases (methane) from both their casings and the pipes that connect to the wells. These wells also may contaminate drinking water sources.
Recently passed legislation is intended to ensure that idle wells do not become a major health hazard or financial burden for the state by identifying the requirements and costs of safely retiring all wells and developing a prioritized schedule for plugging and abandoning idle wells. This is important for transitioning the state away from fossil fuels.
—AB2729 which requires the development of a plan for idle well testing to determine mechanical integrity or appropriate remediation, well separation from drinking water sources and an engineering analysis for wells idle more than 15 years to determine if they are still useable.
—SB 551 which requires oil and gas well operators to provide estimates of the cost of plugging and abandoning each of its wells and attending facilities by 4/1/21 so they can purchase bonds sufficient to cover this cost and CalGEM can prioritize idle wells for decommissioning.
—AB 1328 which requires oil and gas well operators to submit integrity testing data conducted on idle and abandoned wells for publication on CalGEM’s website by 1/1/22. —SB 463 which requires natural gas storage well owners to improve reporting on the chemical content of leaks from these storage wells by 7/1/21.
Presently oil and gas producers can choose to either pay annual fees on their idle wells (from $150 per well (if idle 3-7 years) to $1500 per well (if idle more than 20 years) or file a plan for managing these wells including a schedule for plugging and abandoning all long-term idle wells. Fees from the idle well program are deposited into the Hazardous and Idle-Deserted Well Abatement Fund (HIDWAF) to support the decommissioning of hazardous or orphaned wells. CalGEM also currently has $3 million per fiscal year from its operating budget for this purpose.
CalGEM is required to develop criteria for plugging and decommissioning hazardous or orphan (idle-deserted) wells and facilities. It is not clear whether the following deadlines still apply: — October 1, 2020, the DOC is required to report to the Legislature the number of hazardous and orphan wells and surface infrastructure remaining and the estimated costs and timeline for plugging and decommissioning them. —October 1, 2023, the DOC must provide an update on actual costs, average costs per well and facility, the number of wells plugged and abandoned, the number of facilities decommissioned, the total projects completed, and any additional wells identified for plugging and decommissioning.
Governor Newsom’s proposed 2020-2021 budget issued on January 10, 2020 included $24 million for 53 new staff positions (mostly engineers, analysts and geologists) at CalGEM to enable implementation of the new programs mentioned above. These 53 positions were part of a three year program to add 128 new staff positions. The additional staff was also expected to improve inspection of the environmentally risky extraction procedures of fracking and cyclic steam injection. California’s largest oil spill in decades occurred in the Cymric Oil Field in Kern County on 7/24/19 and was attributed to the steam injection method being used at one well while a near-by idle well was being reabandoned. Most testing requires the presence of a CalGEM employee (witnessing).
Oil and gas producers have lobbied to decrease their idle and active well integrity testing requirements claiming hardship due to the corona virus pandemic: —A letter dated 3/30/20 from the California Independent Petroleum Association (CIPA) to Secretary Crowfoot who heads the Natural Resource Agency that includes CalGEM requested that work on bonding requirements not be included in the 2020-2021 budget. The letter supported adding only 9 of the planned 53 new staff positions for 2020-2021, 5 of which were intended to focus on orphaned wells. —A letter dated 4/3/20 from CIPA to Supervisor Ntuk who heads CalGEM requested accross the board delays in meeting integrity testing requirements for active and idle wells. This included extending the deadline for testing all idle wells for mechanical integrity from 4/1/25 to 4/1/29 and extending this year’s deadline for plugging and abandoning the required minimum number of idle wells for a full year. Other requests included increasing exemptions and weakening standards. A 3-5 year delay for integrity tests of UIC (Underground Injection Control) wells whose deadline is 4/1/21 was requested as was the ability to substitute cheaper types of integrity tests for UIC wells and longer periods for required remediation of UIC wells.
On May 1 CalGEM posted a notice on its website that it would be possible to postpone the deadline for oil and gas producers to pay idle well fees and submit plans to manage thousands of idle oil wells by 2 months (7/1/20) if they could show that the coronavirus crisis created a hardship for their businesses and any relief they were seeking wouldn’t lead to environmental harm.
A few companies operate a large share of all active and idle oil and gas wells in California. Chevron owns many wells in California as does Aera Energy (jointly owned by Exxon and Shell).
On 4/29/20 Chevron announced a second quarter dividend of $1.29 per share payable on 6/10/20. This was the same as its first quarter dividend (though that increased 8.4% from the 4th quarter 2019). Chevron will pay its stockholders $2.41 billion on 6/10/20. Exxon Mobil is also keeping its quarterly dividend of 87 cents per share for this second quarter and will pay its stockholders $3.68 billion on 6/10/20. Shell did cut its first quarter dividend by 66% though there was no further reduction for the 2nd quarter 2020. Royal Dutch Shell will pay out $3.5 billion in 2nd quarter dividends. While Exxon Mobil experienced a big loss ($610 million) during the first quarter of 2020 it was able to borrow $9.5 billion on 4/13/20 (at very low interest rates) because of the Fed’s recent commitment to buy corporate debt.
Meeting existing idle well requirements and schedules is even more important now that the number of idle wells is bound to increase because of the ongoing glut of oil and natural gas. The oil and gas companies should meet the deadlines outlined in SB 551, AB 1328 and SB 463 as well as existing regulations regarding idle wells.
It is past time for the large oil and gas companies to help protect the nation’s health by obeying environmental regulations and schedules regarding the production, refining and transport of their products.
Beam, A, “California’s budget cuts threaten environmental spending”, seattletimes.com ,5/15/20.
California Council on Science and Technology, “Orphan Wells in California, An Initial Assessment of the State’s Potential Liabilities to Plug and Decommission Orphan Oil and Gas Wells”, ccst.us, November 2018.
Center for Public Integrity, “California’s Multibillion Dollar Problem: The Toxic Legacy of Old Oil Wells”, publicintegrity.org, 2/6/20.
Goldberg, T, “California Oil Producers Fighting Newsom Proposal for Stronger Industry Oversight”, kqed.org, 4/29/20.
Goldberg, T, “With Oil Industry in a Slump California Offers a Break on some Well Regulations”, kqed.org, 5/14/20.
Neuhauser, A, “Oil Boom a Bust for Blacks”, usnews.com, 8/24/18.
Ntuk, U, “Notice to Operators, NTO 2020-04, Covid-19 Pandemic Guidance”, conservation.ca.gov, 5/1/20.
Zierman, R, CIPA, Letter to Secretary of Natural Resources Agency, 3/30/20.
Zierman, R, CIPA, Letter to Uduak-Joe Ntuk, State Oil and Gas Supervisor, CalGEM, 4/3/20.