Bill Text: CA AB1057 | 2019-2020 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Oil and gas: Geologic Energy Management Division: wells and facilities: disposition and acquisition notices: indemnity bonds and remediation: additional security: civil penalty.

Spectrum: Partisan Bill (Democrat 5-0)

Status: (Passed) 2019-10-12 - Chaptered by Secretary of State - Chapter 771, Statutes of 2019. [AB1057 Detail]

Download: California-2019-AB1057-Amended.html

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Amended  IN  Senate  June 28, 2019

Amended  IN  Assembly  May 20, 2019

Amended  IN  Assembly  April 22, 2019

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill

No. 1057

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Introduced by Assembly Member Limón
(Principal coauthor: Senator Jackson)

February 21, 2019

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An act to amend Section Sections 3201, 3202, and 3236.5 of, to add Section 3205.3 to, and to repeal Section 3263 of, the Public Resources Code, relating to oil and gas.

LEGISLATIVE COUNSEL'S DIGEST

AB 1057, as amended, Limón. Oil and gas: wells and facilities: disposition and acquisition notices: indemnity bonds and remediation: additional security: civil penalty.

(1) Under existing law, the Division of Oil, Gas, and Geothermal Resources in the Department of Conservation regulates the drilling, operation, maintenance, and abandonment of oil and gas wells in the state. Existing law requires an operator who engages in the drilling, redrilling, deepening, or in any operation permanently altering the casing, of a well, or who acquires a well, to file with the State Oil and Gas Supervisor an individual indemnity bond for each well so drilled, redrilled, deepened, permanently altered, or acquired in specified amounts depending on the depth of the well. Existing law authorizes an operator who engages in the drilling, redrilling, deepening, or in any operation permanently altering the casing, of 20 or more wells at any time to file with the supervisor one blanket indemnity bond to cover all the operations in any of its wells in the state, in a specified amount depending on the total number of wells in the state, in lieu of the above-described requirement for an individual indemnity bond for each operation. Existing law provides that a person who fails to comply with these and other specific laws relating to the regulation of oil or gas operations is guilty of a misdemeanor.

This bill would authorize the supervisor division to require an operator filing an individual or blanket indemnity bond, as applicable, to provide an additional amount of security acceptable to the supervisor division in an amount not to exceed the division’s estimation of the reasonable costs of plugging and abandoning all of the operator’s wells and for remediating environmental damages caused by the wells. The bill would require the supervisor, in setting the amount of additional security, division, when making an estimation of the reasonable costs of plugging and abandoning an operator’s well or wells, to provide the operator with an opportunity to submit a cost estimate for consideration by the supervisor the operator’s own estimation and to consider, if applicable, consider specified factors. The bill would require the division’s determination of whether to require an operator to provide additional security to be based on the division’s evaluation of the risk that the operator will desert their well or wells and the potential threats the operator’s well or wells pose to life, health, property, and natural resources, and, in evaluating that risk, would require the division to consider specified factors. The bill would require the division to provide the operator with notice of the requirement to provide additional security, as specified, and would require the operator to provide the additional security within 180 days of service of notice. The bill would require the division to increase or decrease the amount of additional security required under these provisions to account for changed circumstances or new information. The bill would authorize the operator to, at any time, petition the division to reevaluate the division’s evaluation of the risk or cost estimates, and would require the division to respond to the petition in writing within 60 days of receipt of the petition. Because a violation of these provisions relating to providing an additional amount of security would be a crime, the bill would impose a state-mandated local program.

(2) Existing law requires the operator of a well or production facility to notify the supervisor or the district deputy, in writing, in the form that the supervisor or the district deputy may direct, of the sale, assignment, transfer, conveyance, exchange, or other disposition of the well or production facility by the operator of the well or production facility within a prescribed time period and requires that notice to contain specified information.

This bill would authorize the supervisor to also request additional information from the operator about the disposition. Because a violation of these provisions relating to providing additional information would be a crime, the bill would impose a state-mandated local program.

Existing law requires a person who acquires the right to operate a well or production facility, whether by purchase, transfer, assignment, conveyance, exchange, or other disposition, to notify the supervisor or the district deputy, in writing, of the person’s operation within a prescribed time period and requires that person to provide specified material.

This bill would authorize the supervisor to also request additional information from the new operator about the person’s operation. The bill would require the new operator, after notice of operations and until another person acquires the well or production facility, to notify the supervisor, in writing and by July 1 every other year, whether any of the rights have changed, and would require the new operator to also notify the supervisor within 30 days of any quitclaim of a well or production facility. Because a violation of these provisions relating to providing additional information and notice would be a crime, the bill would impose a state-mandated local program.

(2)

(3) Existing law provides that a person who violates certain requirements related to the regulation of oil and gas is subject to specified civil penalties. Existing law authorizes the supervisor to allow a supplemental environmental project in lieu of a portion of the civil penalty amount. Existing law, until January 1, 2021, requires the portion of the civil penalty amount that is not allocated for a supplemental environmental project be deposited in the Oil and Gas Environmental Remediation Account and, after January 1, 2021, in the Oil, Gas, and Geothermal Administrative Fund. Existing law, until January 1, 2021, creates that account in the Oil, Gas, and Geothermal Administrative Fund to be administered and managed by the division, and requires that the moneys in the account be used, upon appropriation by the Legislature, to plug and abandon oil and gas wells, decommission attendant facilities, or otherwise remediate sites that the supervisor determines could pose a danger to life, health, water quality, wildlife, or natural resources if there is no operator determined by the supervisor to be responsible for remediation or who is able to respond.

This bill would indefinitely create the Oil and Gas Environmental Remediation Account as well as the requirements of how the moneys in the account are to be used, upon appropriation by the Legislature. The bill would indefinitely require the portion of the civil penalty amount that is not allocated for a supplemental environmental project to be deposited in the Oil and Gas Environmental Remediation Account.

(3)

(4) 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.

Digest Key

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

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Bill Text

The people of the State of California do enact as follows:

SECTION 1.

 Section 3201 of the Public Resources Code is amended to read:

3201.

 (a) The operator of a well or production facility shall notify the supervisor or the district deputy, in writing, in such the form as that the supervisor or the district deputy may direct, of the sale, assignment, transfer, conveyance, exchange, or other disposition of the well or production facility by the operator of the well or production facility as soon as is reasonably possible, but in no event later than the date that the sale, assignment, transfer, conveyance, exchange, or other disposition becomes final. The operator shall not be relieved of responsibility for the well or production facility until the supervisor or the district deputy acknowledges the sale, assignment, transfer, conveyance, exchange, or other disposition, in writing, and the person acquiring the well or production facility is in compliance with Section 3202. The operator’s notice shall contain all of the following: following information:

(a)

(1) The name and address of the person to whom the well or production facility was or will be sold, assigned, transferred, conveyed, exchanged, or otherwise disposed.

(b)

(2) The name and location of the well or production facility, and a description of the land upon which the well or production facility is situated.

(c)

(3) The date that the sale, assignment, transfer, conveyance, exchange, or other disposition becomes final.

(d)

(4) The date when possession was or will be relinquished by the operator as a result of that disposition.

(b) The supervisor may also request additional information from the operator about the disposition, including any of the following:

(1) All current lease agreements for the specified wells or production facilities.

(2) Evidence of the sale, assignment, transfer, conveyance, exchange, or other disposition of the well or production facility.

SEC. 2.

 Section 3202 of the Public Resources Code is amended to read:

3202.

 (a) A person who acquires the right to operate a well or production facility, whether by purchase, transfer, assignment, conveyance, exchange, or other disposition, shall, as soon as it is reasonably possible, but not later than the date when the acquisition of the well or production facility becomes final, notify the supervisor or the district deputy, in writing, of the person’s operation. The acquisition of a well or production facility shall not be recognized as complete by the supervisor or the district deputy until the new operator provides all of the following material:

(1) The name and address of the person from whom the well or production facility was acquired.

(2) The name and location of the well or production facility, and a description of the land upon which the well or production facility is situated.

(3) The date when the acquisition becomes final.

(4) The date when possession was or will be acquired.

(5) An indemnity bond for each well as required under Section 3204 or 3205.

(b)This section shall become operative on January 1, 2018.

(b) The supervisor may also request additional information from the new operator about the person’s operation, including any of the following:

(1) All current lease agreements for the specified wells or production facilities.

(2) Evidence of the sale, assignment, transfer, conveyance, exchange, or other disposition of the well or production facility.

(c) After notice is given pursuant to subdivision (a) and until another person acquires the well or production facility, the new operator shall notify the supervisor whether any of the rights have changed. That notification shall be in writing and occur every other year by July 1.

(d) The new operator shall also notify the supervisor within 30 days of any quitclaim of a well or production facility.

SECTION 1.SEC. 3.

 Section 3205.3 is added to the Public Resources Code, to read:

3205.3.

 (a) The supervisor division may require an operator filing an individual indemnity bond pursuant to Section 3204 or a blanket indemnity bond pursuant to Section 3205, as applicable, to provide an additional amount of security acceptable to the supervisor division in an amount not to exceed the division’s estimation of the reasonable costs of plugging and abandoning all of the operator’s wells and for remediating environmental damages caused by the well. wells.

(b) In setting the amount of additional security pursuant to subdivision (a), the supervisor When making an estimation of the reasonable costs of plugging and abandoning an operator’s well or wells, the division shall provide the operator with an opportunity to submit a cost estimate for consideration by the supervisor the operator’s own estimation and shall consider, if applicable, consider all of the following:

(1) The depth of the well or wells.

(2)The level of production from the well or wells.

(3)The likely cost for full remediation and plugging and abandoning of the well or wells.

(4)(A)If the well or wells are near sensitive community sites.

(B)For purposes of this paragraph, a well is “near sensitive community sites” if the well is located within 2,500 feet of an occupied building.

(5)The financial status of the operator and the likelihood of the state bearing the cost of cleanup.

(6)The past record of compliance by the operator with this division.

(7)The number of idle wells to be covered by the indemnity bond.

(8)Any other relevant and reasonable factor, as determined by the supervisor.

(2) The accessibility and surroundings of the well or wells.

(3) Available information about the condition of the well or wells.

(4) Available information about the cost to plug and abandon a comparable well or wells.

(5) The operator’s cost estimates, if provided.

(6) Any other information that the division determines to be relevant to the estimation of cost.

(c) The division’s determination of whether to require an operator to provide additional security under subdivision (a) shall be based on the division’s evaluation of the risk that the operator will desert their well or wells and the potential threats the operator’s well or wells pose to life, health, property, and natural resources. The division’s evaluation of the risk shall consider all of the following:

(1) The difference between the estimation of reasonable costs of plugging and abandonment under subdivision (a) and the total amount of indemnity bonds or other financial assurances in place to ensure funding of the plugging and abandonment of the operator’s well or wells.

(2) The level of current production from the well or wells.

(3) Available information regarding estimated reserves remaining in place associated with the well or wells.

(4) Whether the well or wells are “critical,” are “environmentally sensitive,” or are in an “urban area,” as those terms are defined by the division in regulation.

(5) To the extent that relevant information is available to the division, the financial status of the operator and the operator’s financial capacity to plug and abandon all of the operator’s wells.

(6) The past record of compliance by the operator with the division.

(7) The number of idle wells to be covered by the indemnity bond and the operator’s record of compliance with the requirements of Section 3206 and the division’s regulations related to the management of idle wells.

(8) Whether the operator’s well or wells are subject to any bonding or financial assurance requirements by a local government.

(9) Whether the operator’s well or wells are already subject to additional bond coverage by the division pursuant to Section 3270.4.

(10) Any other information that the division determines to be relevant to the evaluation of the risk.

(d) The division shall provide the operator with notice of the requirement to provide additional security, and the notice shall be served by personal service or certified mail. The operator shall provide the additional security within 180 days of service of notice. The notice shall include an explanation of the division’s estimation of the reasonable costs to plug and abandon the operator’s well or wells and of the basis for the decision to require the operator to provide additional security. The requirements of this subdivision shall also apply to any subsequent increase in the amount of additional security required under subdivision (e).

(e) The division shall increase or decrease the amount of additional security required under this section to account for changed circumstances or new information. The operator may, at any time, petition the division to reevaluate the division’s evaluation of the risk or cost estimates, and the division shall respond to the petition in writing within 60 days of receipt of the petition.

(f) An operator shall provide additional security required under this section in the form of an indemnity bond, a form of deposit described in Section 995.710 of the Code of Civil Procedure, or any other equally effective means of financial assurance approved by the division.

SEC. 2.SEC. 4.

 Section 3236.5 of the Public Resources Code is amended to read:

3236.5.

 (a) A person who violates this chapter or a regulation implementing this chapter is, at the supervisor’s discretion, subject to a civil penalty as described in subdivision (b) for each violation. An act of God and an act of vandalism beyond the reasonable control of the operator shall not be considered a violation. The civil penalty shall be imposed by an order of the supervisor pursuant to Section 3225 upon a determination that a violation has been committed by the person charged. The imposition of a civil penalty under this section shall be in addition to any other penalty provided by law for the violation. When establishing the amount of the civil penalty pursuant to this section, the supervisor shall consider, in addition to other relevant circumstances, all of the following:

(1) The extent of harm caused by the violation.

(2) The persistence of the violation.

(3) The pervasiveness of the violation.

(4) The number of prior violations by the same violator.

(5) The degree of culpability of the violator.

(6) Any economic benefit to the violator resulting from the violation.

(7) The violator’s ability to pay the civil penalty amount, as determined based on information publicly available to the division.

(8) The supervisor’s prosecution costs.

(b) (1) (A) For purposes of this section, a “well stimulation violation” is a violation of Article 3 (commencing with Section 3150) or the regulations implementing that article.

(B) The civil penalty amount for a well stimulation violation shall be not less than ten thousand dollars ($10,000) per day per violation and not more than twenty-five thousand dollars ($25,000) per day per violation.

(2) (A) For purposes of this section, a “major violation” is a violation that is not a well stimulation violation and that is one or more of the following:

(i) A violation that results in harm to persons or property or presents a significant threat to human health or the environment.

(ii) A knowing, willful, or intentional violation.

(iii) A chronic violation or one that is committed by a recalcitrant violator. In determining whether a violation is chronic or a violator is recalcitrant, the supervisor shall consider whether there is evidence indicating that the violator has engaged in a pattern of neglect or disregard with respect to applicable requirements.

(iv) A violation where the violator derived significant economic benefit, either by significantly reduced costs or a significant competitive advantage.

(B) The civil penalty amount for a major violation shall be not less than two thousand five hundred dollars ($2,500) per violation and not more than twenty-five thousand dollars ($25,000) per violation.

(3) (A) For purposes of this section, a “minor violation” is a violation that is neither a well stimulation violation nor a major violation.

(B) The civil penalty amount for a minor violation shall be not more than two thousand five hundred dollars ($2,500) per violation.

(4) At the supervisor’s discretion, each day a major or minor violation continues or is not cured may be treated as a separate violation.

(c) An order of the supervisor imposing a civil penalty shall be reviewable pursuant to Article 6 (commencing with Section 3350). When the order of the supervisor has become final and the penalty has not been paid, the supervisor may apply to the appropriate superior court for an order directing payment of the civil penalty. The supervisor may also seek from the court an order directing that production from the well or use of the production facility that is the subject of the civil penalty order be discontinued until the violation has been remedied to the satisfaction of the supervisor and the civil penalty has been paid.

(d) The supervisor may allow a supplemental environmental project in lieu of a portion of the civil penalty amount. The supplemental environmental project may not be more than 50 percent of the total civil penalty amount. Any amount collected under this section that is not allocated for a supplemental environmental project shall be deposited in the Oil and Gas Environmental Remediation Account, created pursuant to Section 3261.

(e) “Supplemental environmental project” means an environmentally beneficial project that a person, subject to an order of the supervisor imposing a civil penalty, voluntarily agrees to undertake in settlement of the action and to offset a portion of a civil penalty.

SEC. 3.SEC. 5.

 Section 3263 of the Public Resources Code is repealed.

SEC. 4.SEC. 6.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII 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 B of the California Constitution.