Deadlines loom as oil producers address idle wells | News – Bakersfield, California

Bakersfield, California 2021-07-17 20:01:00 –

The new slogan used by Maricopa’s oil company Chris Hall points in the direction that a small independent producer like him may be heading towards recent political trends. If it sounds fatalistic, it’s also conscientious.

“I’m working,” he says.

The hall means that we are working to close the wells, remove pipelines and related facilities and end operations as quickly as possible so as not to leave any environmental, health or safety risks.

Hall (71) says all dimes go to oilfield restoration. But he’s worried about running out of time as the state government is accelerating the phasing out of oil and gas production in the state.

Among the deadlines to keep him up late is January 1, 2027, a ban on diesel motors that operate his well-maintained equipment.

“I hope the state understands it correctly,” he said.

His challenge demonstrates the tricky balance of California’s campaign to regulate the existence of the state’s oil industry while addressing the threat of orphan wells.

Ongoing production funds oil companies’ well-abandoned work. Similarly, Sacramento’s efforts to prevent idle wells from becoming so-called isolated wells rely heavily on the financial health of oil producers.

Some people in the industry warn that draining the oil too soon can have unintended consequences.

Rock Zierman, CEO of the California Independent Petroleum Association, said in an email, “We have a viable operator who will continue to fulfill our obligations to ensure that this (sufficient plug-in and repair work) continues by the operator. Must be done. “

Go ahead

The state legislature has recently passed legislation to allow orphan wells to swell into unfunded debt, acknowledging previous rules. The solutions range from increasing binding requirements for oil producers to new rates for industry activities.

The immediate goal is to assess the amount of money individual producers have to pay to shut down and completely repair the site they operate.

“The risk assessment process has begun in earnest,” state oil and gas supervisor Uduak Joe Nutuk said in an email statement.

Meeting upcoming regulatory deadlines is less of a concern for large producers who adhere to state schedules. However, small independents may have a hard time getting things done in time for the state deadline.

Abandonment costs $ 25,000 to $ 250,000 per well, depending on the location, depth and condition of the well, Hall said. He undertakes most of the work, some done by his eight employees who attend 65 wells and currently produces about 100 barrels a day.

He believes it will take five to ten years to fulfill his obligations and return the lease to the owner in case he wants to use the land for other purposes due to the recent soaring prices.

Deadline pressure

The oil producer he’s talking about is worried about California’s proposed date of January 1, 2024, ending a well-finished technique known as hydraulic fracturing, he said. Free of charge, the 2045 deadline will completely end oil and gas production.

“As an industry, we are actively discussing those dates,” he said.

“We really need to focus on what we’re doing for abandonment and cleanup,” he added, especially for small independent producers.

CIPA’s Zierman said 2016 Parliamentary Bill 2729 requires oilfield operators to block and repair at least 4% to 6% of idle wells each year, with larger companies proportionally more. He said he had to abandon the well.

In fact, this means that the most frequently issued permit of the year by CalGEM, the California Geographical Energy Management Department, has been fully relinquished. Approximately 1,300, or nearly two-thirds of the permits issued by the institution by June 30.

Industry view

Bakersfield-based oil producer Aera Energy LLC has set a state requirement to reduce the inventory of idle wells annually so that it is safely managed and does not pose a risk to public health, safety or the environment. I said in an email that I am in compliance.

The company said Governor Gavin Newsom’s recent announcement on accelerating the phasing out of oil production in the state has not changed its idlewell management plan and will meet its obligations by March 31, 2025. Stated. As of April 1, 2019, all idle wells have been properly abandoned.

Chevron, a major oil company based in San Ramon, said in an email that it operates in a socially and environmentally responsible manner throughout the life of its assets. We promise to eliminate idle assets in accordance with applicable law, and our top priority is to protect the people and the environment of the communities in which it works.

“We plan to keep track of planned abandonment activities, regardless of the regulatory environment,” he added, adding that he has historically abandoned more wells than state regulations require.

CalGEM’s Ntuk said oilfield operators must submit compensation bonds when drilling, reworking, or acquiring wells. The deposit is intended to support the cost of closing a well that may be thrown away later.

New permissions

However, the amount of these bonds is generally in short supply, so CalGEM has been working in recent years to implement new authorities under various state laws to expand California’s bond program. The guiding principle is to ensure that sufficient deposits are available to cover the costs of blockages and decommissioning of oil facilities.

Ntuk’s authority to assess the risks associated with orphans and potential future orphan wells comes from Act of Parliament 1057 in 2019, which CalGEM needs to cover orphan well debt. He said he empowered CalGEM to come up with additional funds accordingly.

In addition, Senate Bill 551 of 2019 approved CalGEM to require operators to submit a report showing full liability related to costs associated with plug-in, abandonment, and site decommissioning operations. These reports, the first of which will expire in 2022 and 2024, will notify subsequent state actions and secure more funding for businesses to cover these costs. To force.

Currently, Ntuk states that the industry bears the cost of all plugins and abandonment. If the oil producer has a financial solution and manages the well responsibly, the work will be done as needed. However, when no responsible party is found and the well turns out to be idle and unmanned, the state intervenes with funds donated by other oil companies.

The money for the job will come from two funds. A pool operator’s valuation is capped at $ 3 million annually through fiscal year 2022-23. After that, the cap per company will drop to $ 1 million per year.

Another source of funding comes from the charges of operators with idle wells. Both can be spent on plugins and abandonment work that the state deems necessary.

“CalGEM could use these funds to block and abandon wells to mitigate dangerous or potentially dangerous situations,” Ntuk wrote.

Deadlines loom as oil producers address idle wells | News Source link Deadlines loom as oil producers address idle wells | News

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