Oil and gas operators call Ventura County proposal to increase bonds a company killer

The Ventura County Planning Commission has voted against a plan to raise decades-old bond amounts for oil and gas operators.

For 40 years, oil companies have been able to post a single $10,000 local bond for all of their operations in the county – an amount that would cover little of the cost to plug wells and restore sites if operators deserted the facilities. Without remediation, the wells can pose health and safety hazards, cause soil and water contamination and release harmful air emissions.

The proposal commissioners considered this week would raise bonds for plugging wells to $43,000 per well. That represents about 25% of the state’s current cost estimate for the work – a percentage planning officials called a fair balance. The proposal also included a bond of $15,000 per well for those idle for 15 years or more.

Commissioners voted 3-2 Thursday to recommend the board reject the proposal. The motion also recommended additional analysis, including a feasibility study. Commissioners Veronica Zimmerman Garcia and Scott Boydstun voted against the motion.

Before the vote, commissioners heard from several community members in favor the changes, which they said would help protect local communities. Most of the two dozen speakers represented the oil and gas industry who called the proposed changes too costly and unnecessary.

Commissioner Maggie Kestly suggested sending the plan back for more work but was told the commission's role was to make a recommendation to the Board of Supervisors. She made the motion to recommend against its approval.

"I can't in good conscience feel comfortable with speculation and likeliness when we may put an industry out of business that actually feeds so many in our county," she said.

County lowers proposed bond amounts

Garcia said the proposed changes would help the county control its future and protect the health and safety of the public.

"I think there's been a lot of discussion. I know we've been really focused on availability of insurance, availability of surety," she said Thursday. "But we haven't really spent very much time at all today talking about what are the health and safety impacts of doing nothing."

The proposed changes came at the direction of the Board of Supervisors in November 2020 and were expected to better protect taxpayers and the environment if something went wrong or an operator walked away without properly decommissioning wells. But they also would have significantly increased the costs for the local oil and gas industry.

Last summer, the planning commission voted unanimously to recommend higher bond amounts and beefed-up insurance requirements. But commissioners at the time also asked for staff to hold a public session with oil and gas operators, environmental groups and others.

Based in part on oil and gas operators’ concerns, county planners said they made changes – ones that reduced the amount of the proposed bonds and insurance requirements as well as required the matter to return to the commission. Under the new plan, operators with the fewest wells saw the biggest decreases in bond amounts. In most cases, insurance coverage dropped at least 50%, county officials said.

But oil operators and their employees again said the proposed amounts would be company killers. Jane Farkas, of Carbon California, said the company would have to put up 100% cash collateral for the bonds. Without the financial resources to do so, the company would be forced out of business, she said.

State reports thousands of orphaned wells

Critics of the proposal said the state is already addressing problems with idle wells. The state government also collects fees and bonds from operators to protect against the potential liability of deserted wells. But the estimated costs of plugging those wells greatly exceed available funds.

Earlier this summer, California’s Geologic Energy Management Division, or CalGEM, reported it had identified thousands of wells considered orphaned or likely orphaned statewide. That list includes deserted wells or those without a financially viable and compliant operator. Countywide, the state is tracking 438 orphaned and likely orphaned wells.

Under the county's proposal, operators also had an option to get their local bond amounts reduced or eliminated if their state bonds meet or exceed the full estimated cost to plug its wells. The proposed amendments also would limit the terms of new oil and gas permits to 15 years.

Boydstun, who voiced concerns about the bond proposal, supported that limit.

"I would have voted for the recommendation if it included approving the 15-year (permit) period," he said after the meeting. "Without that, I couldn't support any motion."

County planning officials said the proposal likely would go to the Board of Supervisors early next year.

Cheri Carlson covers the environment and county government for the Ventura County Star. Reach her at cheri.carlson@vcstar.com or 805-437-0260.

This article originally appeared on Ventura County Star: Planning Commission votes against plan to increase oil and gas bonds