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<ns0:Id>20250AB__271698AMD</ns0:Id>
<ns0:VersionNum>98</ns0:VersionNum>
<ns0:History>
<ns0:Action>
<ns0:ActionText>INTRODUCED</ns0:ActionText>
<ns0:ActionDate>2026-02-20</ns0:ActionDate>
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<ns0:Action>
<ns0:ActionText>AMENDED_ASSEMBLY</ns0:ActionText>
<ns0:ActionDate>2026-03-25</ns0:ActionDate>
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<ns0:SessionYear>2025</ns0:SessionYear>
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<ns0:MeasureNum>2716</ns0:MeasureNum>
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<ns0:AuthorText authorType="LEAD_AUTHOR">Introduced by Assembly Member Ávila Farías</ns0:AuthorText>
<ns0:Authors>
<ns0:Legislator>
<ns0:Contribution>LEAD_AUTHOR</ns0:Contribution>
<ns0:House>ASSEMBLY</ns0:House>
<ns0:Name>Ávila Farías</ns0:Name>
</ns0:Legislator>
</ns0:Authors>
<ns0:Title> An act to amend Sections 3017 and 3205.8 of, and to add Section 3205.9 to, the Public Resources Code, relating to oil and gas. </ns0:Title>
<ns0:RelatingClause>oil and gas</ns0:RelatingClause>
<ns0:GeneralSubject>
<ns0:Subject>Oil and gas: bonding requirements.</ns0:Subject>
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<ns0:DigestText>
<html:p>Existing law authorizes the Geologic Energy Management Division in the Department of Conservation to require an operator of an oil and gas well to provide, in addition to specified types of required indemnity bonds, an additional amount of security acceptable to the division based on the division’s evaluation of the risk that the operator will desert its well or wells and the potential threats the operator’s well or wells pose to life, health, property, and natural resources, as provided. Existing law authorizes this additional amount of security to be an indemnity bond, specified forms of deposit, or any other means of equally effective financial assurance approved by the division, including a demonstration of self-insurance pursuant to a specified process.</html:p>
<html:p>Existing law requires a person who acquires the right to operate a well or production
facility to file with the State Oil and Gas Supervisor an individual indemnity bond or a blanket indemnity bond in an amount determined by the supervisor to be sufficient to cover, in full, all costs of plugging and abandonment, decommissioning the facility, and site restoration, as provided. Under existing law, an operator may, in lieu of this bonding requirement and with the written approval of the supervisor, provide the required security through an equally effective means of financial assurance, including specified types of deposits, an irrevocable letter of credit, or a fully funded trust fund, and excluding self-insurance or corporate guarantees, as provided. A person who violates or fails to comply with this provision, or any related law concerning oil and gas, is guilty of a crime.</html:p>
<html:p>This bill would repeal the exclusion of self-insurance or corporate guarantee, as described above. The bill would additionally authorize an operator to, in lieu of the bonding
requirement and with the written approval of the supervisor, provide the required security through a specified means of financial assurance, as provided.</html:p>
<html:p>This bill would exempt from the above-described requirement to file with the supervisor, upon acquiring the right to operate a well or production facility, an individual indemnity bond or a blanket indemnity bond sufficient to cover all costs of plugging and abandonment, decommissioning the facility, and site restoration, (1) operators who have provided additional security approved by the division, as provided, and (2) a person who has acquired the rights to a well or production facility for the sole purpose of plugging and abandoning that well or decommissioning the production
facility. The bill would explicitly state that a person who has acquired the rights to a well or production facility for the sole purpose of plugging and abandoning that well or decommissioning the production facility is subject to the state oil and gas laws as an operator, until a determination by the supervisor that the well has been properly plugged and abandoned or the production facilities have been decommissioned, or that additional work related to abandoning the well is not practical or would pose greater environmental or safety risk, as provided. Upon this determination by the supervisor, the bill would require the supervisor to release the bond, and would release the acquiring person from any further obligation or liability for the well or facility. The bill would require a person who, before an acquisition for the sole purpose of plugging and abandoning the well or decommissioning the production facility, was responsible as an owner or operator of the well or production facility and
subject to orders related to remediation issued by the supervisor to remain responsible for the well or production facility. The bill would prohibit the use of a well or production facility acquired for the sole purpose of plugging and abandoning the well or decommissioning the production facility from being used for oil or gas production or injection. By creating a new crime, the bill would impose a state-mandated local program.</html:p>
<html:p>The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that
reimbursement.</html:p>
<html:p>This bill would provide that no reimbursement is required by this act for a specified reason.</html:p>
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<ns0:FiscalCommittee>YES</ns0:FiscalCommittee>
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<ns0:Preamble>The people of the State of California do enact as follows:</ns0:Preamble>
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<ns0:Num>SECTION 1.</ns0:Num>
<ns0:Content>
<html:p>The Legislature finds and declares all of the following:</html:p>
<html:p>
(a)
<html:span class="EnSpace"/>
When signing Assembly Bill 1167 (AB 1167) of the 2023–24 Regular Session (Chapter 359 of the Statutes of 2023), the Governor cautioned that new financial assurances requirements for oil and gas well transfers may create a risk of current operators deserting hazardous wells, and stated his intent to work with the Legislature to enact revisions necessary to address that risk and to
align the statute with existing and developing programs administered by the Department of Conservation’s Geologic Energy Management Division (CalGEM).
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
Since the enactment of AB 1167, oil and gas operators have, in nearly all cases, been unable to transfer producing or idle wells, resulting in a substantial reduction in the market value and liquidity of those assets, and adding to the risk cited by the Governor and the Department of Finance that the legislation could result in additional oil and gas well desertions.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
The impairment of well transferability has constrained many operators’ ability to access capital needed to maintain facilities, comply with
regulatory requirements, and responsibly plan for decommissioning and asset retirement obligations.
</html:p>
<html:p>
(d)
<html:span class="EnSpace"/>
The resulting reduction in asset value and access to capital has increased the risk that wells may remain with operators lacking the financial capacity to maintain or properly abandon them, thereby elevating the risk of well desertion identified by the Department of Finance analysis and by the Governor at the time AB 1167 was signed.
</html:p>
<html:p>
(e)
<html:span class="EnSpace"/>
At the time AB 1167 was enacted, Section 3237 of the Public Resources Code already provided that an operator transferring a well after January 1, 1996, remains liable for plugging and abandonment obligations if the acquiring operator
becomes insolvent or otherwise fails to meet those obligations.
</html:p>
<html:p>
(f)
<html:span class="EnSpace"/>
Existing law authorizes CalGEM to order responsible operators to plug and abandon wells and, if an operator fails to do so, to perform that work using industry fee revenue and to recover costs through reimbursement requirements, civil penalties, liens, and other enforcement mechanisms, through which the state has recovered more than $25,000,000 from responsible operators in the last few years alone.
</html:p>
<html:p>
(g)
<html:span class="EnSpace"/>
Pursuant to Section 3237 of the Public Resources Code, operators transferring wells have regularly required acquiring operators to establish sinking funds or similar financial arrangements to ensure
sufficient resources are available to meet future asset retirement obligations when wells are no longer economically productive.
</html:p>
<html:p>
(h)
<html:span class="EnSpace"/>
Using the authority established by Assembly Bill 1057 (AB 1057) of the 2019–20 Regular Session (Chapter 771 of the Statutes of 2019), CalGEM significantly strengthened California’s financial assurance framework and secured tens of millions of dollars in additional bonding and other financial assurance mechanisms to ensure that oil and gas operators’ decommissioning responsibilities are adequately funded at the end of the economic life of their facilities.
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
The State of California is eligible for $165,000,000 in federal funds from the
orphan well program authorized by the bipartisan Infrastructure Investment and Jobs Act (Public Law 117-58), of which over $25,000,000 has already been encumbered and spent to plug wells in California, with more to come.
</html:p>
<html:p>
(j)
<html:span class="EnSpace"/>
Assembly Bill 2729 (AB 2729) of the 2015–16 Regular Session (Chapter 272 of the Statutes of 2016) established a comprehensive framework for the management and remediation of idle wells, and subsequent legislation has built upon that framework to accelerate idle well remediation and reduce long-term risks associated with prolonged well inactivity.
</html:p>
<html:p>
(k)
<html:span class="EnSpace"/>
Following the enactment of AB 1167, the Legislature passed and the Governor signed Assembly Bill
1866 (AB 1866) of the 2023–24 Regular Session (Chapter 548 of the Statutes of 2024), which built upon the idle well framework established by AB 2729 by strengthening idle well management requirements and contributing to continued significant reductions in idle well inventories, resulting in the lowest proportion of idle wells in operator portfolios in decades.
</html:p>
<html:p>
(l)
<html:span class="EnSpace"/>
The cumulative effect of AB 2729, AB 1057, AB 1866, and related statutes demonstrates that California has made substantial progress in reducing idle and orphaned wells while strengthening financial assurance requirements for oil and gas operators. Operators have plugged over 12,000 idle wells in the last three years alone.
</html:p>
<html:p>
(m)
<html:span class="EnSpace"/>
Severely restricting the transferability of oil and gas assets has produced unintended consequences that undermine business valuations, reduce income, and impair the financial stability of remaining operators, without advancing the state’s existing idle well and decommissioning objectives.
</html:p>
<html:p>
(n)
<html:span class="EnSpace"/>
These unintended consequences demonstrated by more than two years of data are now evident and warrant legislative action.
</html:p>
<html:p>
(o)
<html:span class="EnSpace"/>
It is therefore necessary and appropriate to enact revisions consistent with the Governor’s October 7, 2023, signing message for AB 1167 in order to mitigate the risk of well desertion,
preserve responsible asset stewardship, and better align statutory requirements with existing regulatory programs administered by CalGEM.
</html:p>
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<ns0:Num>SEC. 2.</ns0:Num>
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Section 3017 of the
<ns0:DocName>Public Resources Code</ns0:DocName>
is amended to read:
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<ns0:Num>3017.</ns0:Num>
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<html:p>
(a)
<html:span class="EnSpace"/>
It is the intent of the Legislature that the oil and gas industry pay for all necessary costs of plugging and abandonment and site restoration of oil and gas wells.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
It is the intent of the legislature that, to minimize the risk that the state will be liable for costs of plugging and abandonment, no well be transferred to another owner until and unless adequate financial assurance to cover the full cost of plugging and abandonment and site
restoration has been provided, except when the well is being transferred for the sole purpose of plugging and abandoning the well or decommissioning the attendant production facility.
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<ns0:Num>SEC. 3.</ns0:Num>
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Section 3205.8 of the
<ns0:DocName>Public Resources Code</ns0:DocName>
is amended to read:
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<ns0:LawSection id="id_63929EB0-CAEE-40BA-8F2B-EB0E3FF62565">
<ns0:Num>3205.8.</ns0:Num>
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<ns0:Content>
<html:p>
(a)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
Notwithstanding any other provision of this chapter, a person who acquires the right to operate a well or production facility, by purchase, transfer, assignment, conveyance, exchange, or other disposition, except a well that has an average daily production level that exceeds 15 barrels of oil or 60,000 cubic feet of natural gas during the 12 months preceding the date of acquisition or a natural gas storage well, shall, as soon as possible, but not later than the date when the acquisition of the well or production facility becomes final, file with the supervisor an individual indemnity bond for the well or production facility, or a blanket indemnity bond for multiple wells or production facilities, in an amount
determined by the supervisor to be sufficient to cover, in full, all costs of plugging and abandonment, decommissioning of the facility, and site restoration pursuant to Section 3208 and regulations implementing this chapter.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
A person who acquires the right to operate more than one well or production facility, by purchase, transfer, assignment, conveyance, exchange, or other disposition, or who operates more than one well or production facility may file with the supervisor one blanket indemnity bond to cover all the operations in any of its wells in the state in lieu of an individual indemnity bond for each operation. The blanket indemnity bond shall be executed by the operator, as principal, and by an authorized surety company, as surety, and shall be in substantially the same language and upon the same conditions as provided in Section 3204,
except for the difference in the amount.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
A person who intends to acquire the right to operate a well or production facility, by purchase, transfer, assignment, conveyance, exchange, or other disposition, shall submit a request to the supervisor for a determination of the amount of the bond required pursuant to subdivision (a) before completing the acquisition and shall not complete the acquisition until the determination is received and the bond has been filed with the supervisor.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
The supervisor shall determine the amount of an individual indemnity bond required pursuant to subdivision (a) based on the supervisor’s determination of the full costs of plugging and abandonment, decommissioning the facility, and site restoration using any reasonable method,
including, but not limited to, consideration of the factors listed in subdivision (b) of Section 3205.3, or the cost estimation criteria described in subdivision (b) of Section 3205.7, or consultation with a contractor to obtain an estimate of the cost to plug and abandon the wells, decommission the facility, and complete site restoration. The supervisor shall determine the amount of a blanket indemnity bond required pursuant to subdivision (a) based on the sum total of combining the costs from the same determinations as individual indemnity bonds for each well or production facility covered by the blanket indemnity bond.
</html:p>
<html:p>
(d)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
In lieu of the bond required to be provided pursuant to subdivision (a), the operator may, with the written approval of the supervisor, provide the required security through an equally effective
means of financial assurance, which includes a deposit pursuant to Section 3205.5, an irrevocable letter of credit, a fully funded trust fund,
a means of financial assurance listed in subdivision (f) of Section 3205.3, or any other equally effective means of financial assurance that has been approved by the division as described in paragraph (2). The required financial assurance may be obtained or funded by the transferor of the covered well.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
The division may approve equally effective means of financial assurance in the same manner as described in paragraphs (1) and (2) of subdivision (f) of Section 3205.3.
</html:p>
<html:p>
(e)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
This section does not apply to a person who acquires the rights to a well or production facility for the sole purpose of plugging and abandoning that well or decommissioning that production
facility.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
This subdivision does not affect any other requirement of this chapter, nor does it relieve a person of any other responsibility pursuant to this chapter.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
A person shall not use a well or production facility acquired for the sole purpose of plugging and abandoning that well or decommissioning that production facility for oil or gas production or injection.
</html:p>
<html:p>
(f)
<html:span class="EnSpace"/>
This section shall not apply to operators with additional security approved by the division pursuant to Section 3205.3. As applied to any additional wells acquired by the operator with preexisting additional security pursuant to Section 3205.3, the operator shall update the additional security pursuant to
subdivision (e) or (f) of Section 3205.3.
</html:p>
<html:p>
(g)
<html:span class="EnSpace"/>
The department shall post on its internet website the information on all indemnity bond determinations made by the supervisor, and shall include for each determination the bond amount and calculations used.
</html:p>
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<ns0:Num>SEC. 4.</ns0:Num>
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Section 3205.9 is added to the
<ns0:DocName>Public Resources Code</ns0:DocName>
, to read:
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<ns0:Num>3205.9.</ns0:Num>
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<html:p>
(a)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
A person who has acquired the rights to a well or production facility for the sole purpose of plugging and abandoning that well or decommissioning the production facility shall not be subject to any of the requirements of Section 3205.8, but shall file a bond as required under Section 3204, 3205, 3205.1, or 3205.2, as applicable.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
A person described in paragraph (1) shall be subject to the requirements of this chapter as an operator of the well or production facility, until either of the following occur:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
The supervisor determines that the well has been properly plugged and abandoned and the production facilities have been decommissioned in
accordance with Section 3208.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
As applied to work conducted in accordance with the approvals given by the supervisor under Section 3229, the supervisor subsequently determines that additional work is not practical or would pose greater environmental or safety risk.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
Upon a determination by the supervisor pursuant to subparagraph (A) or (B) of paragraph (2), the supervisor shall release the bond, and the acquiring person shall have no further obligation or liability for the well or facility.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
Notwithstanding subdivision (a), a person who was responsible, under Section 3226 or 3237, as an owner or operator of the well or production facility before an acquisition described under subdivision (a), shall remain responsible for the well or production facility.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
Use of a well or production facility acquired under this section for purposes of oil or gas production or injection is prohibited.
</html:p>
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<ns0:Num>SEC. 5.</ns0:Num>
<ns0:Content>
<html:p>
No reimbursement is required by this act pursuant to Section 6 of Article XIII
<html:span class="ThinSpace"/>
B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII
<html:span class="ThinSpace"/>
B of the California Constitution.
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