California Governor Gavin Newsom signed the Abandoned Well Prevention Act, which will prevent the sale of oil and gas wells unless the new owner covers the cost of cleaning and sealing the well. This measure aims to prevent wells from becoming “orphans” and becoming a danger to nearby communities and the environment. The signing of this law marks a victory for environmentalists and communities living near aging oil fields.
Proponents of the legislation argue that the shrinking oil industry should be held accountable for cleaning up inactive wells that leak oil, brine and methane into vulnerable communities. The bill requires oil companies to provide sufficient funds for the cleanup of high-risk oil and gas wells, shifting financial responsibility from residents to companies that cause pollution.
The bill faced opposition from the oil industry and criticism from the Department of Finance. The Western States Petroleum Association expressed concern that the law would create barriers for large companies to sell assets to smaller entities and argued that it would not contribute to meaningful provisions aimed at preventing orphans from well
California has seen its oil industry decline in recent years, falling from the nation’s third-largest oil-producing state to seventh. As major oil companies, such as Shell and ExxonMobil, sell their assets to the state, smaller companies are often left with the responsibilities and costs of environmental cleanup. In some cases, these small companies have even filed for bankruptcy, leaving the state responsible for cleaning up or abandoning the wells.
Orphan wells pose significant risks, including oil spills, contaminated water and methane emissions, especially in residential areas. According to the Geological Energy Management Division, since 1977 more than 1,400 wells have been sealed at a cost of $29.5 million. California is estimated to have more than 5,500 abandoned wells and their cleanup could cost the state nearly $500 million.
The current system requires oil producers to post bonds as security collateral, promising to carry out cleanups. However, environmental groups argue that there is a significant gap between the bond amounts and the actual cost of sealing the wells.
This new law aims to address these environmental and financial challenges by ensuring that oil companies are responsible for cleaning up abandoned wells. By banning the sale of wells unless the new owner can clean them up, California is taking a step toward holding the oil industry accountable for its impact on the environment.