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In a split decision Thursday, the Ventura County Planning Commission advanced a proposal to require oil and gas companies to post substantially higher bond amounts for their operations.
The 3-2 vote is expected to send the proposed zoning amendments to the Board of Supervisors later this year. Planning commissioners also recommended supervisors consider potential costs, including what it could take to defend the measures against any lawsuits. Commission Chair W. Earl McPhail and Commissioner Scott Boydstun voted no.
“I feel strongly that we need to do something more regionally, more globally or nationally,” McPhail said during the hours-long meeting. “In my opinion, this doesn’t do it.”
For most companies, the proposed zoning amendments would require bonds ranging from $100,000 to $500,000 for surface restoration; $36,000 per well for plugging work; and $15,000 per well for those idle for 15 years or more. Those companies have 50 or fewer wells.
Catch up:Ventura County proposes steep increases in bond requirements for oil and gas operators
But three oil and gas operators – Aera Energy, Carbon California and CalNRG – have 400 or more wells each and could have to post more than $15 million in bonds.
The proposed changes are expected to better protect taxpayers and the environment when something goes wrong or if an operator abandons wells without properly plugging them. They also could significantly increase costs for the oil and gas industry that has repeatedly opposed other efforts to tighten restrictions.
A ‘company killer’
Since the early 1980s, the county has required a $10,000 bond from oil and gas companies regardless of the size of their oil fields or operations. That amount would leave the county government short-handed to plug the wells and restore the sites if operators deserted the facilities without doing the work. Taxpayers would likely foot the bill instead.
The state government also collects fees and bonds to protect against the potential liability, but the estimated costs of plugging wells greatly exceed available funds.
Carbon California Vice President Jane Farkas has said the deposits the company would owe under the proposal top $15 million. She doubted the company could obtain the much cheaper bonds.
The proposed amendments would take resources away from the company’s efforts to manage and plug its idle wells, said Farkas, one of dozens of speakers Thursday. The company would be happy to work with county staff on “a reasonable approach,” she said.
“The surety amounts in front of you today are a company killer for Carbon,” she told commissioners. “The staff report expresses concern about bankruptcies in our industry and then lacks awareness that the county itself is creating that problem.”
In November 2020, the Board of Supervisors directed planners to return with a series of proposals. They included increasing the $10,000 bond, boosting insurance and adding measures for permanently plugging and restoring wells idled for 15 or more years so taxpayers don’t bear the cost.
What happens next:Ventura County voters rejected two oil measures
Under the proposal discussed Thursday, bonds for the plugging work and long-term idle wells would be capped at $5 million for any single operator. Planners also recommended broader and steeper minimum insurance for operators and limiting the terms of new oil and gas permits to 15 years.
Companies likely would pay 2 to 4% of the bond amount, county officials said. For example, the surface restoration bond likely would cost roughly $2,000 to $4,000 a year for most companies, county planners said. The largest operators likely would pay $200,000 to $400,000 annually.
Those large companies’ estimated annual revenue ranges from $34 million to $211 million, the county reported.
Costs dwarf existing bonds
Commissioner Veronica Zimmerman Garcia called the proposed amendments prudent, praising efforts to see how the county could reasonably supplement surety and financial resources.
Under existing requirements, county records show just over $1 million in bonds for the area’s more than 3,500 active and idle wells.
But state officials estimate an average of $143,300 would be needed to properly seal a well, according to county planners. That accounts for just part of the cost to restore a site.
If the industry collectively fails to properly retire just 10% of the wells in the county, the public would be on the hook for over $56 million, Bryant Baker, conservation director for Los Padres ForestWatch, told commissioners.
“Simply put, these companies need to be held accountable so taxpayers aren’t left holding the bag when it comes time to clean up,” he said.
He cited a letter signed by more than a dozen local organizations in support of the amendments and some suggested changes, including cutting the length of the permits to 10 years instead of 15.
Stephanie Caldwell, president and CEO of the Ventura Chamber of Commerce, spoke against the recommendations moving forward Thursday, saying she heard oil and gas producers say they would be willing to work with county officials to come up with potential solutions.
“I’m concerned that policies like these continue to kind of pop up without any meaningful dialogue or engagement between the stakeholders and the county,” she said.
Cheri Carlson covers the environment for the Ventura County Star. Reach her at cheri.carlson@vcstar.com or 805-437-0260.
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