Lawmakers want to put oil industry on the hook to plug old wells. Will Gavin Newsom sign it?

California may put oil companies on the financial hook to plug and clean aging oil fields after lawmakers approved a measure meant to prevent taxpayers from footing the bill for orphaned wells.

In a year that has been relatively quiet for climate legislation, the passage of Assembly Bill 1167 on Thursday night marked a win for environmentalists and communities mainly around Los Angeles and the San Joaquin Valley facing methane leaks from aging oil wells that require costly cleanup.

If signed by Gov. Gavin Newsom, the Orphaned Well Prevention Act would prohibit the sale of an oil well unless the new owner can pay to plug and remediate it in full before it the well is left “orphaned” or without a financially solvent operator.

The bill overcame opposition by the oil industry and criticism from the state Department of Finance when it narrowly passed the Senate on Wednesday ahead of a final vote in the Assembly.

“These wells pose serious threats to public health, safety and the environment,” said Assemblywoman Wendy Carrillo, D-Los Angeles, the bill’s author. “It has been easy for the oil industry to neglect capping orphaned oil wells and pass on the costs to taxpayers, but not anymore and not on my watch. Enough is enough.”

California is seeing a long-term decline of its oil industry, falling from the country’s third-largest oil-producing state to seventh in five years. Some of the world’s largest oil companies including Shell and ExxonMobil have begun to sell their California assets.

Industry experts and environmentalists say those sales have often left liabilities for smaller companies — who in some cases have declared bankruptcy — to perform expensive environmental cleanups, leaving the state to sponsor cleanups or leave wells unplugged.

Orphaned wells, as they’re called, risk harmful leaks of oil, polluted water and methane often near residential areas. According to the Geologic Energy Management Division, known as CalGEM, California has plugged about 1,400 wells since 1977 at a cost of $29.5 million.

The nonprofit California Council on Science and Technology estimates that of more than 100,000 active and idle oil wells in the state, some 5,540 are orphaned — cleanups for the state that could amount to an estimated $500 million.

As the onshore oil drilling industry further wanes, a recent Carbon Tracker report found that state taxpayers could be on the hook for a much higher $6.9 billion in cleanup even if all future industry profits — an estimated $6.3 billion — were redirected to decommissioning.

The Western States Petroleum Association and other industry groups argued that AB 1167 would not meaningfully add to existing processes intended to avoid orphaned wells and could create hurdles for large companies who want to sell assets to smaller ones.

“What we’re saying is if we’re going to address this issue, this bill is not the way,” WSPA spokesman Kevin Slagle said. “This is another piece of legislation that ignores the facts on the ground when it comes to the financial obligations our industry provides to the state, and we believe this will do more harm than good.”

A bill analysis from the Department of Finance also opposed the measure, saying that the legislation could backfire by creating a new bonding system and imposing additional costs for larger companies, making them less likely to purchase wells from smaller outfits.

The state’s current system to prevent orphaned wells mandates that oil producers put up bonds, which act as a security deposit on the promise they will perform cleanups. Yet environmental groups cite a troublesome gap between bond amounts and the actual costs to plug wells.

In the days leading up to the final votes, the department’s analysis was used by WSPA to lobby lawmakers against the bill in part by calling it opposition from Newsom’s administration. The governor has called for an end to all oil extraction in California by 2045, but his office has not taken a position on AB 1167.

Supporters of the measure — a broad swath of California’s environmental organizations — say the legislation would begin to hold the waning oil industry accountable to plug and clean idle wells at risk of leaking oil, brine and methane into vulnerable communities.

Ann Alexander, a senior attorney at the Natural Resources Defense Council, celebrated the bill’s passage Thursday as a first step to stopping “the slow-moving catastrophe of orphan wells.”

“The California Legislature has been courageous and decisive today in the face of fierce opposition by Big Oil,” she said. “We need the governor to show the same courage as this bill heads for his desk.”

The governor has until Oct. 14 to sign bills into law.