California has passed a measure that would require oil companies to pay to seal and remediate aging oil wells to prevent taxpayers from having to foot the bill. The Abandoned Well Prevention Act, also known as Assembly Bill 1167, aims to address the problem of abandoned wells primarily in Los Angeles and the San Joaquin Valley, where methane leaks pose health risks to the public and the environment.
If Gov. Gavin Newsom signs the bill, it would ban the sale of an oil well unless the new owner can fully finance sealing and cleanup before “abandoning” it, or leaving it without a financially solvent operator. The bill faced opposition from the oil industry and criticism from the state Department of Finance, but narrowly passed the Senate and Assembly.
California has seen its oil industry decline over the years as major companies like Shell and ExxonMobil sold off their assets in the state. These sales often leave smaller companies liable for costly environmental cleanups, resulting in the state funding cleanup efforts or allowing wells to remain unsealed.
Abandoned wells can lead to harmful oil, water and methane leaks, particularly in residential areas. According to the Division of Geological Energy Management, California has already sealed about 1,400 wells since 1977, at a cost of $29.5 million. However, there are still around 5,540 abandoned wells that need to be rehabilitated, which could cost around $500 million.
A recent Carbon Tracker report suggests that if all future industry profits went toward decommissioning, state taxpayers would end up paying $6.9 billion in cleanup costs as the onshore oil drilling industry declines. The Western States Petroleum Association and other industry groups are arguing against House Bill 1167, saying it offers no meaningful solutions and could create obstacles for large companies that want to sell assets to smaller ones.
Supporters of the bill, including several environmental groups, believe it blames the oil industry for cleaning up inactive wells that pose a risk to communities. Although Governor Newsom has not commented on House Bill 1167, he has expressed a desire to end oil production in California by 2045.
