trending Market Intelligence /marketintelligence/en/news-insights/trending/x4LD11UZE043i7ulQ7e8XA2 content esgSubNav
In This List

California cracks down on idle oil, gas well safety


Japan M&A By the Numbers: Q4 2023


See the Big Picture: Energy Transition in 2024


IR in Focus | Episode 10: Capital Markets Outlook


Infographic: The Big Picture 2024 – Energy Transition Outlook

California cracks down on idle oil, gas well safety

California oil and gas developers will have to adopt more stringent safety practices for idle wells in light of newly adopted state regulations.

"Idle wells that are not properly maintained pose a threat to the environment and surrounding communities, including potential contamination of groundwater," David Bunn, the California Department of Conservation's director, said in a March 21 statement accompanying the rules' release. "These new regulations make the industry more accountable, both environmentally and financially."

The rules set requirements for long-term well-management plans, well-testing programs to prevent leaks and engineering analysis for any well idled 15 years or longer to determine if it is viable for future use, among other things. The rules will go into effect April 1.

Almost 30,000 wells are idle — those that have not been used in at least two years but have not been sealed — in California, half of which have not been used in at least 15 years, according to the Department of Conservation. Neglecting unused wells can result in infrastructure deterioration and lead to pollutants seeping into underground sources of drinking water or into the atmosphere, the department said.

Part of the impetus for the long-term planning requirements included among the new rules is a history of operators going out of business without appropriately tending to their wells. When no operator or other entity can be held responsible for properly sealing idle wells, the state has to do it.

The Conservation Department's Division of Oil, Gas and Geothermal Resources has spent $29.5 million since 1977 to permanently seal about 1,400 abandoned wells. This work is funded by money the state collects from producers, but there tends to be a "significant gap" between the number of abandoned wells that need to be sealed and the funding the division has to do the work, the department said.

State legislation from 2016 increased the fees associated with well idling to help the division cover the costs of sealing abandoned wells, tying the fee total to how long the well has been idle. More than 1,000 idle wells were permanently sealed in 2018, although only 476 of those were in compliance with an idle well management plan, the department said.

The state has increasingly cracked down on well-related practices in the oil and gas sector after the multimonth gas leak at the Aliso Canyon underground storage facility. In that instance, corrosion along a well's casing caused a 19-inch-long split hundreds of feet below the surface. The state has tightened restrictions on underground gas storage infrastructure in the wake of that incident.

"We utilize the best science available and strive for transparency in our regulatory efforts," Bunn said. "Our emphasis is making sure that the industry's legacy does not leave damaging footprints on the land or in state waters."