Amendments to California’s SB 1012 could shift oil well cleanup costs to taxpayers

  • Published on September 1st, 2020

California environmentalists today, the final day of the legislative session, have been tweeting, emailing and calling legislators in a last minute attempt to stop the Assembly from approving Senate Bill SB 1012, an amended bill that they say could stop state government from holding oil companies accountable for paying to clean up their wells.

Critics Say Oil Industry Amendments to California SB 1012 Could Shift Oil Well Cleanup Costs to Taxpayers
(Photo courtesy of 350.org)

By Dan Bacher

The tweet storm today follows an action on Friday in Fair Oaks, a suburb of Sacramento,  where climate justice and environmental activists erected a simulated field of “oil rigs” less than 2,500 feet from the home of Gavin Newsom in Fair Oaks overlooking the American River.

“How does it feel Gavin?” Matt Leonard of 350.org asked in a tweet.

“This is the reality for over 5 million Californians. We demand action NOW on a 2500 ft setback to protect public health,” he stated.

The display dramatized that California, despite it’s supposedly “green” image, is the only major oil-producing state besides Alaska that has no state health and safety setbacks whatsoever on the proximity of oil wells to people. Unlike “green” California, Texas, Colorado, Pennsylvania, Maryland, North Dakota and other oil and gas producing states all have health and safety setbacks.

A weakened bill to address setbacks failed in the Legislature on August 5 when Senate Majority Leader Bob Hertzberg, Senator Anna Caballero and Senator Ben Hueso joined Republican Senators Andrea Borgeas and Brian Jones to defeat the legislation in a 5 to 4 vote in a Senate Natural Resources and Water Committee hearing.

The three California Senate Democrats who voted with Republicans against AB 345, a bill that would require the establishment of an environmental justice program at the California Natural Resources Agency, received $142,206 in donations from oil and gas corporations: The 3 CA Senate Dems who voted against drilling setbacks bill took big bucks from big oil

The Last Chance Alliance, a coalition of climate, environmental justice, conservation and other groups, today tweeted how if SB 1012 passes tonight and is later signed by the Governor, it could leave the taxpayers financially liable for the clean up of abandoned oil and gas wells across the state:

“Current CA law: Big Oil is financially responsible for the clean-up of their oil wells. Period. CA law if #SB1012 passes: Oil companies may shirk their responsibilities & leave the cost of oil well clean-up on taxpayers. Which are you voting for @AssemblyDems #NOonSB1012.” 

Likewise, 350.org tweeted:

“Big Oil snuck an amendment into #SB1012 to make it difficult to hold oil companies accountable for their mess. They want California taxpayers to pay billions to clean-up their wells. Not on our watch.”  

The amendments to SB 1012 by the oil industry, along with the failure of the setbacks bill, demonstrate the enormous power of the oil industry in California. Since Gavin Newsom became governor in January 2019, his administration has approved a total of 7474 oil and gas drilling permits, including over 1500 permits and 48 fracking permit this year to date.

Senator Hurtado, the author of the bill, wrote in an editorial earlier this year that the purpose of the bill was to address the clean up of abandoned and orphan wells in the Central Valley.

“In January of this year, I listened to local leaders’ frustration about the inequity in receiving resources for the clean-up of abandoned and idled oil and gas wells compared to Coastal California,” Hurtado wrote.  “There are thousands of oil wells that sit unplugged and abandoned all around California, most of which are in our region. These toxic hazards are our silent neighbors. Every day they go unplugged, they release poisonous fumes that aggravate health disparities locally like Asthma, Valley Fever, and COVID. And to make things worse, Central Valley taxpayers are on the hook for paying for the clean-up with no state resources.”

However, Hollin Kretzmann, a senior attorney at the Center for Biological Diversity, said that last-minute amendments to the bill by the oil  industry, the most powerful corporate lobby in Sacramento, “threaten to shift massive oil-industry well-cleanup costs to taxpayers.”

He said S.B. 1012 could make changes to the California Public Resources Code that “could make it harder for the state to recoup well-remediation costs from oil companies.”

“Oil companies are trying to rewrite state rules behind closed doors to stick California taxpayers with the bill for cleaning up their mess,” said Kretzmann. “It’s grotesque that they’re trying to sneak these changes through while our state is being ravaged by wildfires, heat waves and the pandemic. State senators should reject this bill and make sure oil companies don’t walk away from their cleanup costs.”

He said the latest amendments — made without any committee hearing and entirely out of public view — would add “ambiguous language” requiring the state oil and gas supervisor to make undefined “reasonable efforts” to collect remediation money from a current operator of a well before seeking compensation from a prior operator. The supervisor already has authority to obtain funds from prior owners, so the new language “only adds ambiguity for oil companies to exploit,” noted Kreutzmann.

In addition, he said a provision that would have clarified that the California State Lands Commission is not an “operator” was removed without explanation.

“That agency only leases state tidelands to oil companies. It has commonly been understood that the oil companies that drill and produce oil are responsible for cleanup,” he stated.

Kretzmann said each of these changes could hamper the state’s ability to collect cleanup money from oil companies, which may shift the cost to taxpayers.

The legislation comes at a critical time for addressing abandoned oil and gas wells in California. A report by the California Council on Science & Technology released this January reveals that California taxpayers could be on the hook for more than $500 million to plug thousands of “orphan” wells already drilled and abandoned by oil and gas companies.

The study, “Orphan Wells in California: An Initial Assessment of the State’s Potential Liabilities to Plug and Decommission Orphan Oil and Gas Wells,” was conducted at the request of the Division of Oil, Gas, and Geothermal Resources (DOGGR), now called the California Geologic Energy Management Division (CalGEM), under the California Department of Conservation.

“An initial analysis of readily available information suggests that 5,540 wells in California are, as defined, likely orphan wells or are at high risk of becoming orphan wells in the near future,” the report states. “The State’s potential net liability (subtracting available bonds held by CalGEM) for these wells is estimated to be about $500 million.”

In addition, the report documented a total of approximately 107,000 active and idle oil and gas wells in California. Plugging all of these eventually would cost more than $9 billion, the report finds.   

“At some point, each well will end its productive life and the operator of the well will be required to carefully plug the well with cement (‘plug and abandon’) and decommission the production facilities,” the report states.

The vote tonight comes at a time when major oil and gas companies have filed for bankruptcy, unable to meet their financial obligations.

“California’s largest oil and gas producer, California Resources Corporation, filed for bankruptcy last month. That company and its affiliates have nine active leases from the State Lands Commission, the most of any operator. The commission also allowed CRC to defer $1.8 million in royalty payments to the state from 2016 to 2018,” said Kretzmann.

Bill opponents are at this time contacting Assembly Members to vote against SB 1012, fearing that the oil companies will end up leaving the cost of oil well clean up and plugging to the California taxpayers if the bill is passed and then signed by the governor.

I will report on the final outcome of this bill tomorrow.

Background: Big Oil exerts enormous influence over California politicians and regulators

Last year the Western States Petroleum Association, the single most powerful lobbying organization in the state, pumped more money into lobbying than any other organization in California, spending a total of $8.8 million. The San Ramon-based Chevron pumped the third most money into lobbying, a total of $5.9 million. The lobbying expenses of the two oil industry giants came to a total of $14.7 million.

During the first quarter of 2020, at the same time that the Newsom Administration approved 1,623 total oil drilling permits, the Western States Petroleum Association (WSPA) spent $1,089,702 lobbying state officials.

Chevron spent even more: $1,638,497 in the first quarter of 2020 to influence legislators, the Governor’s Office and other state officials. The two oil industry giants combined to spend a total of $2,728,199 lobbying from January 1-March 31.

In the second quarter of 2020, WSPA spent $1,220,986 while Chevron spent $974,322 on lobbying in California, a total of $2,195,308.

Big Oil’s tentacles extend far and wide in California politics. Lobbying is just one of the methods that Big Oil uses in California to exercise inordinate influence over California regulators. WSPA and Big Oil wield their power in 6 major ways: through (1) lobbying; (2) campaign spending; (3) serving on and putting shills on regulatory panels; (4) creating Astroturf groups; (5) working in collaboration with media; (6) creating alliances with labor unions; and (6) contributing to non profit organizations.

A classic example of deep regulatory capture in California is how Catherine Reheis-Boyd, the President of the Western States Petroleum Association, chaired the Marine Life Protection Act (MLPA) Initiative Blue Ribbon Task Force to create “marine protected areas” in Southern California at the same time that she was lobbying for new oil drilling off the West Coast.

About the Author

Dan Bacher is an environmental journalist in Sacramento who focuses on California's water issues, a healthy environment for the salmon fishery of the Northwest, and the attempts by big agriculture and big oil to hog all the water.

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