Oil and gas: bonding requirements.

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. 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. 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. This bill would exempt 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 from the above-described bonding and financial assurance requirements. The bill would prohibit the use of that well or production facility for oil or gas production or injection. By creating a new crime, the bill would impose a state-mandated local program. 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. This bill would provide that no reimbursement is required by this act for a specified reason.