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

California Assembly Bill 1057 (Prior Session Legislation)

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

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

Amended IN Assembly April 22, 2019

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill

No. 1057

Introduced by Assembly Member Limón

February 21, 2019

An act to amend Sections ~~3204 and 3205~~ 3204, 3205, and 3236.5 of, ~~and~~ 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: indemnity bonds and ~~remediation.~~ remediation: additional security: civil penalty.

~~Under~~

(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,~~ 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 double the amounts specified for individual and blanket indemnity bonds under those provisions. The bill would authorize the supervisor to require an operator filing an individual or blanket indemnity bond, as applicable, to provide an additional amount of security acceptable to the supervisor in an amount not to exceed 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, to provide the operator with an opportunity to submit a cost estimate for consideration by the supervisor and to consider, if applicable, specified factors. 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. The bill also would make technical changes to these provisions.

(2) 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 be deposited in the Oil and Gas Environmental Remediation Account.
~~The~~

(3) 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.

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

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

SECTION 1.

Section 3204 of the Public Resources Code is amended to read:

3204.

(a) An operator who, on or after January 1, 2018, engages in the drilling, redrilling, deepening, or in any operation permanently altering the casing, of a well, or who acquires a well, shall file with the supervisor an individual indemnity bond for each well so drilled, redrilled, deepened, or permanently altered, or acquired in the following amount:

(1) Fifty thousand dollars ($50,000) for each well that is less than 10,000 feet deep.

(2) Eighty thousand dollars ($80,000) for each well that is 10,000 or more feet deep.

(b) The bond shall be filed with the supervisor at the time of the filing of the notice of intention to perform work on the well, as provided in Section 3203, or at the time of acquisition of the well, as provided in Section 3202. The bond shall be executed by the operator, as principal, and by an authorized surety company, as surety, on the condition that the principal named in the bond shall faithfully comply with all the provisions of this ~~chapter,~~ chapter in drilling, redrilling, deepening, or permanently altering the casing in any well or wells covered by the bond, and shall secure the state against all losses, charges, and expenses incurred by it to obtain the compliance by the principal named in the bond.

(c) The conditions of the bond shall be stated in substantially the following language: “If the ____, the above bounden principal, shall well and truly comply with all the provisions of Division 3 (commencing with Section 3000) of the Public Resources Code and shall obey all lawful orders of the State Oil and Gas Supervisor or the district deputy or deputies, subject to subsequent appeal as provided in that division, and shall pay all charges, costs, and expenses incurred by the supervisor or the district deputy or deputies in respect of the well or wells or the property or properties of the principal, or assessed against the well or wells or the property or properties of the principal, in pursuance of the provisions of that division, then this obligation shall be void; otherwise, it shall remain in full force and effect.”

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

SEC. 2.

Section 3205 of the Public Resources Code is amended to read:

3205.

~~(a)~~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,~~ time may file with the supervisor one blanket indemnity bond to cover all the operations in any of its wells in the state in lieu of an individual indemnity bond for each operation as required by Section 3204. The bond shall be executed by the operator, as principal, and by an authorized surety company, as surety, and shall be in substantially the same language and upon the same conditions as provided in Section 3204, except as to the difference in the amount. The bond shall be provided in one of the following amounts, as applicable:

~~(1)~~

(a) The sum of four hundred thousand dollars ($400,000), for an operator having 50 or fewer wells in the state, exclusive of properly abandoned wells.

~~(2)~~

(b) The sum of eight hundred thousand dollars ($800,000), for any operator having more than 50, but no more than 500, wells in the state, exclusive of properly abandoned wells.

~~(3)~~

(c) The sum of four million dollars ($4,000,000), for any operator having more than 500, but no more than 10,000, wells in the state, exclusive of properly abandoned wells.

~~(4)~~

(d) The sum of six million dollars ($6,000,000), for any operator having more than 10,000 wells in the state, exclusive of properly abandoned wells.

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

SEC. 3.

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

3205.3.

(a) The supervisor 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 in an amount not to exceed the reasonable costs of plugging and abandoning all of the operator’s wells and for remediating environmental damages caused by the well.

(b) In setting the amount of additional security pursuant to subdivision (a), the supervisor shall provide the operator with an opportunity to submit a cost estimate for consideration by the supervisor and shall consider, if applicable, 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.

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) 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) 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) 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 established~~ Account, created pursuant to Section 3261, until January 1, 2021. Commencing January 1, 2021, any amount collected under this section that is not allocated for a supplemental environmental project shall be deposited into the Oil, Gas, and Geothermal Administrative Fund. 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. 5.

Section 3263 of the Public Resources Code is repealed.

3263.
~~This article shall remain in effect only until January 1, 2021, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2021, deletes or extends that date.~~

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.