Amended in Assembly June 1, 2016

Amended in Assembly May 11, 2016

Amended in Assembly April 14, 2016

Amended in Assembly April 7, 2016

California Legislature—2015–16 Regular Session

Assembly Bill No. 2729

Introduced by Assembly Members begin delete Williams and end delete begin insert Williams, Salas, and end insert Thurmond

February 19, 2016

An act to amend Sections 3008, 3208.1, and 3238 of, to amend, repeal, and add Sections 3202, 3204, 3205, 3206, 3207, and 3208 of, and to add Sections 3016 and 3206.1 to, the Public Resources Code, relating to oil and gas, and making an appropriation therefor.

LEGISLATIVE COUNSEL’S DIGEST

AB 2729, as amended, Williams. Oil and gas: operations.

(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 the State Oil and Gas Supervisor to supervise the drilling, operation, maintenance, and abandonment of wells and the operation, maintenance, and removal or abandonment of tanks and facilities related to oil and gas production within an oil and gas field, so as to prevent damage to life, health, property, and natural resources, as provided; to permit owners and operators of wells to utilize all known methods and practices to increase the ultimate recovery of hydrocarbons; and to perform the supervisor’s duties in a manner that encourages the wise development of oil and gas resources to best meet oil and gas needs in this state. Existing law defines, among other things, “active observation well,” “idle well,” and “long-term idle well” for the purposes of these provisions. Existing law provides that an active observation well is not an idle well.

This bill would limit the definition of “active observation well,” and would expand the definitions of “idle well” and “long-term idle well” by no longer excluding active observation wells from their definitions. The bill would provide that the abandoned underground personal property, including a well, of an operator becomes the property of the mineral interest owner when the operator loses the right to remove the personal property under common law or under a lease or any other agreement that initially gave the operator the right to drill, operate, maintain, or control the well.

(2) Existing law establishes the Hazardous and Idle-Deserted Well Abatement Fund in the State Treasury. Existing law directs fee moneys collected from operators of idle wells to be deposited in the fund. The moneys in the fund are continuously appropriated to the department for expenditure without regard to fiscal year, to mitigate a hazardous or potentially hazardous condition by well plugging and abandonment.

This bill would instead provide that the moneys in the fund are continuously appropriated to the department for expenditure without regard to fiscal year to mitigate a hazardous or potentially hazardous condition, by well plugging and abandonment, decommissioning attendant production facilities, or both, at a well of a feepaying operator. Because the bill would provide for the deposit of additional moneys in a continuously appropriated fund by expanding the definition of an “idle well,” described above, and would change the purposes for which moneys in a continuously appropriated fund may be used, it would make an appropriation.

(3) Existing law provides that a well is properly abandoned when it has been shown, to the satisfaction of the supervisor, that all proper steps have been taken to isolate all oil-bearing or gas-bearing strata encountered in the well, and to protect underground or surface water suitable for irrigation or farm or domestic purposes from the infiltration or addition of any detrimental substance and to prevent subsequent damage to life, health, property, and other resources.

This bill would provide that proper steps include the plugging of the well, decommissioning the attendant production facilities of the well, or both, if determined necessary by the supervisor.

(4) Existing law authorizes the supervisor or district deputy to order the reabandonment of any previously abandoned well if the supervisor or the district deputy has reason to question the integrity of the previous abandonment. Existing law prescribes the circumstances in which the operator responsible for plugging and abandoning a deserted well is not responsible for the reabandonment of the well. Under existing law, a person who fails to comply with an order issued under these provisions and other requirements relating to the regulation of oil or gas operations is guilty of a misdemeanor.

This bill instead would authorize the supervisor or district deputy to order, or permit, the reabandonment of any previously abandoned well if the supervisor or the district deputy has reason to question the integrity of the previous abandonment, or if the well is not accessible or visible. The bill would revise the circumstances in which the operator responsible for plugging and abandoning a deserted well is not responsible for the reabandonment of the well, and would provide that being responsible for the reabandonment means that the responsible party or parties shall complete the reabandonment and be subject to certain requirements applicable to an operator of a well. Because a violation of an order issued under these provisions would be a crime, the bill would impose a state-mandated local program.

(5) Existing law authorizes the supervisor to order certain operations to be carried out on any property in the vicinity of which, or on which, is located any well that the supervisor determines to be either a hazardous or idle-deserted well, as specified.

This bill would authorize a party to plug and abandon a well that the supervisor has determined to be either a hazardous or idle-deserted well by obtaining all necessary rights to the well, and would require that party to be subject to certain requirements applicable to an operator of a well, file with the supervisor the appropriate bond or deposit, and complete the abandonment, as specified. Because a violation of an order issued under these provisions or of certain requirements related to the regulation of oil and gas would be a crime, the bill would impose a state-mandated local program.

(6) Existing law prescribes requirements related to acquiring the right to operate a well or production facility, filing with the supervisor an individual indemnity bond for each well drilled, redrilled, deepened, or permanently altered, filing with the supervisor a blanket indemnity bond in lieu of individual indemnity bonds, operators of idle wells not covered under certain indemnity bonds, and the cancellation of an individual or blanket indemnity bond. Existing law directs fee moneys collected from operators of idle wells to be deposited in the Hazardous and Idle-Deserted Well Abatement Fund, a continuously appropriated fund.

Commencing January 1, 2018, this bill would revise and recast these provisions to, among other things, increase the amounts of the required blanket indemnity bonds, require a person acquiring the right to operate a well or production facility to file a specified individual or blanket indemnity bond for each well, increase the fees required to be filed for each idle well if the operator does not file a plan with the supervisor to provide for the management and elimination of all its long-term idle wells, eliminate the authorization for an operator to provide an escrow account or indemnity bond for each idle well in lieu of paying a fee or filing a plan, and revise the conditions for the cancellation of an individual or blanket indemnity bond. Because the bill would provide for the deposit of additional moneys in a continuously appropriated fund by increasing the amount of fees required to be filed for each idle well, it would make an appropriation. Because a violation of an order issued under these provisions or of certain requirements related to the regulation of oil and gas would be a crime, the bill would impose a state-mandated local program.

(7) This bill would require the division, by June 1, 2018, to review, evaluate, and update its regulations, including testing and management requirements, pertaining to idle wells, as specified.

(8) 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: yes. Fiscal committee: yes. State-mandated local program: yes.

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

SECTION 1.  

Section 3008 of the Public Resources Code is
amended to read:

3008.  

(a) “Well” means any oil or gas well or well for the
discovery of oil or gas; any well on lands producing or reasonably
presumed to contain oil or gas; any well drilled for the purpose of
injecting fluids or gas for stimulating oil or gas recovery,
repressuring or pressure maintenance of oil or gas reservoirs, or
disposing of waste fluids from an oil or gas field; any well used
to inject or withdraw gas from an underground storage facility; or
any well drilled within or adjacent to an oil or gas pool for the
purpose of obtaining water to be used in production stimulation
or repressuring operations.

(b) “Prospect well” or “exploratory well” means any well drilled
to extend a field or explore a new, potentially productive reservoir.

(c) “Active observation well” means a well being used for the
sole purpose of gathering reservoir data, such as pressure or
temperature in a reservoir being currently produced or injected by
the operator. For a well to be an active observation well, the
operator shall demonstrate to the division’s satisfaction that the
well fulfills a need for gathering reservoir data, and the operator
shall provide the division with a summary report begin delete on the gathered end delete
begin insert of the type of end insert data begin insert collected end insert at least annually or as requested by
the division.

(d) “Idle well” means any well that has had 24 consecutive
months of not begin insert either end insert producing oil or natural begin delete gas end delete begin insert gas, producing
water to be used in production stimulation, enhanced oil recovery,
or reservoir pressure management, end insert or being used for injection.
For the purpose of determining whether a well is an idle well,
production or injection is subject to verification by the begin delete division
and shall be more than a de minimis amount. end delete begin insert division. end insert An idle well
continues to be an idle well until it has been properly abandoned
in accordance with Section 3208 or it has been shown to the
division’s satisfaction that, since the well became an idle well, the
well has begin insert for a continuous six-month period either end insert maintained
production of oil or begin delete gas end delete begin insert natural gas, maintained production of
water used in production stimulation, enhanced oil recovery, or
reservoir pressure management, end insert or been used for begin delete injection for a
continuous six-month period. end delete begin insert injection. end insert

(e) “Long-term idle well” means any well that has been an idle
well for eight or more years.

SEC. 2.  

Section 3016 is added to the Public Resources Code,
to read:

3016.  

For purposes of this chapter, abandoned underground
personal property, including a well, of an operator shall become
the property of the mineral interest owner when the operator loses
the right to remove the personal property under common law or
under a lease or any other agreement that initially gave the operator
the right to drill, operate, maintain, or control the well. In that case,
in accordance with paragraph (3) of subdivision (c) of Section
3237, the mineral interest owner shall be held jointly liable for the
well if, in the lease or other conveyance, the mineral interest owner
retained a right to control the well operations that exceeds the
scope of an interest customarily reserved in a lease or other
conveyance in the event of default.

SEC. 3.  

Section 3202 of the Public Resources Code is amended
to read:

3202.  

(a) A person who acquires the right to operate a well or
production facility, whether by purchase, transfer, assignment,
conveyance, exchange, or other disposition, shall, as soon as it is
reasonably possible, but not later than the date when the acquisition
of the well or production facility becomes final, notify the
supervisor or the district deputy, in writing, of the person’s
operation. The acquisition of a well or production facility shall not
be recognized as complete by the supervisor or the district deputy
until the new operator provides all of the following material:

(1) The name and address of the person from whom the well or
production facility was acquired.

(2) The name and location of the well or production facility,
and a description of the land upon which the well or production
facility is situated.

(3) The date when the acquisition becomes final.

(4) The date when possession was or will be acquired.

(5) An indemnity bond for each idle well. The bond shall be in
an amount as provided in Section 3204 or 3205. The conditions
of the bond shall be the same as the conditions stated in Section
3204. An operator that has provided an individual bond required
by this subdivision in an amount as provided in Section 3204 shall
not be required additionally to comply with the requirements of
Section 3206. An operator who has provided a blanket indemnity
bond in the minimum amount required in subdivision (a) or (b) of
Section 3205 shall additionally comply with Section 3206 for any
idle wells not covered by a bond provided under Section 3204.

(b) This section shall remain in effect only until January 1, 2018,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2018, deletes or extends that date.

SEC. 4.  

Section 3202 is added to the Public Resources Code,
to read:

3202.  

(a) A person who acquires the right to operate a well or
production facility, whether by purchase, transfer, assignment,
conveyance, exchange, or other disposition, shall, as soon as it is
reasonably possible, but not later than the date when the acquisition
of the well or production facility becomes final, notify the
supervisor or the district deputy, in writing, of the person’s
operation. The acquisition of a well or production facility shall not
be recognized as complete by the supervisor or the district deputy
until the new operator provides all of the following material:

(1) The name and address of the person from whom the well or
production facility was acquired.

(2) The name and location of the well or production facility,
and a description of the land upon which the well or production
facility is situated.

(3) The date when the acquisition becomes final.

(4) The date when possession was or will be acquired.

(5) An indemnity bond for each well as required under Section
3204 or 3205.

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

SEC. 5.  

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

3204.  

(a) An operator who, on or after January 1, 2014,
engages in the drilling, redrilling, deepening, or in any operation
permanently altering the casing, of a well shall file with the
supervisor an individual indemnity bond for each well so drilled,
redrilled, deepened, or permanently altered, in the following
amount:

(1) Twenty-five thousand dollars ($25,000) for each well that
is less than 10,000 feet deep.

(2) Forty thousand dollars ($40,000) 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. 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, 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 remain in effect only until January 1, 2018,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2018, deletes or extends that date.

SEC. 6.  

Section 3204 is added to the Public Resources Code,
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) Twenty-five thousand dollars ($25,000) for each well that
is less than 10,000 feet deep.

(2) Forty thousand dollars ($40,000) 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, 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. 7.  

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, 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) The sum of four hundred thousand dollars ($400,000), which
does not include the bond or fee required in Section 3206.

(2) The sum of two hundred thousand dollars ($200,000), which
does not include the bond or fee required in Section 3206, for any
operator having 50 or fewer wells in the state, exclusive of properly
abandoned wells.

(3) The sum of two million dollars ($2,000,000), which does
include the bond or fee required in Section 3206.

(b) A blanket cash bond or blanket surety bond provided prior
to January 1, 2014, shall be increased to comply with this section
on or before January 1, 2016.

(c) This section shall remain in effect only until January 1, 2018,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2018, deletes or extends that date.

SEC. 8.  

Section 3205 is added to the Public Resources Code,
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, 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) The sum of two hundred thousand dollars ($200,000), for
an operator having 50 or fewer wells in the state, exclusive of
properly abandoned wells.

(2) The sum of four hundred thousand dollars ($400,000), for
any operator having more than 50, but no more than begin delete 250, end delete begin insert 500, end insert
wells in the state, exclusive of properly abandoned wells.

(3) The sum of two million dollars ($2,000,000), for any
operator having more than begin delete 250 end delete begin insert 500, but no more than 1,500, end insert wells
in the state, exclusive of properly abandoned wells.

begin insert

(4) The sum of three million dollars ($3,000,000), for any
operator having more than 1,500 wells in the state, exclusive of
properly abandoned wells.

end insert

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

SEC. 9.  

Section 3206 of the Public Resources Code is amended
to read:

3206.  

(a) The operator of any idle well not covered by an
indemnity bond provided under Section 3204, paragraph (3) of
subdivision (a) of Section 3205, or subdivision (a) of Section
3205.2 shall do one of the following:

(1) File with the supervisor an annual fee for each idle well
equal to the sum of the following amounts:

(A) One hundred dollars ($100) for each idle well that has been
idle for less than 10 years.

(B) Two hundred fifty dollars ($250) for each idle well that has
been idle for 10 years or longer, but less than 15 years.

(C) Five hundred dollars ($500) for each idle well that has been
idle for 15 years or longer.

(2) Provide an escrow account in a federally insured bank that
does business in, and has an office in, the State of California, by
depositing the amount of five thousand dollars ($5,000) for each
idle well, in the following manner:

(A) The escrow account shall be accessible only by the
supervisor and the money shall be retained in the escrow account
exclusively for use by the supervisor for plugging and abandoning
the operator’s idle wells that become deserted pursuant to Section
3237.

(B) The money in the escrow account may be released only by
the supervisor and only in amounts covering any idle well that has
properly been plugged and abandoned, returned to production or
injection or converted to an active observation well, if that money
remaining in the escrow account is sufficient to fully fund the
required deposits for all of the operator’s remaining idle wells.

(C) The required deposit for each idle well shall be funded
completely within 10 years of the date the well becomes idle, or
10 years from January 1, 1999, for any well that is idle as of
January 1, 1999.

(D) The operator shall fund the escrow account at the rate of at
least five hundred dollars ($500) per well per year.

(E) Failure of an operator in any year to provide the minimum
funding for any idle well shall result in the institution of the annual
fees required by paragraph (1) for that idle well, and all money
already on deposit for that idle well shall be treated as previously
paid annual fees and shall be deposited into the Hazardous and
Idle-Deserted Well Abatement Fund specified in subdivision (b)
for expenditure pursuant to that subdivision.

(3) File with the supervisor an indemnity bond that provides
the sum of five thousand dollars ($5,000) for each idle well. The
bond shall be subject to the conditions provided in Section 3204.

(4) On or before July 1, 1999, file a plan with the supervisor to
provide for the management and elimination of all long-term idle
wells not covered under paragraph (1), (2), or (3).

(A) For the purposes of the plan required by this paragraph,
elimination of an idle well shall be accomplished when the well
meets the requirements of Section 3208.

(B) A plan filed pursuant to this paragraph shall meet all of the
following requirements and conditions:

(i) The plan shall cover a time period of no more than 10 years
and may be renewed annually thereafter, subject to approval by
the supervisor.

(ii) The plan shall be reviewed for performance annually by the
supervisor, and be subject to amendment with the approval of the
supervisor.

(iii) The required rate of long-term idle well elimination shall
be based upon the number of idle wells under the control of an
operator on January 1 of each year, as specified in clause (iv). The
supervisor may require additional well testing requirements as part
of the plan.

(iv) The plan shall require that operators with 10 or fewer idle
wells eliminate at least one long-term idle well every two years;
operators with 11 to 20, inclusive, idle wells eliminate at least one
long-term idle well each year; operators with 21 to 50, inclusive,
idle wells eliminate at least two long-term idle wells each year;
operators with 51 to 100, inclusive, idle wells eliminate at least
five long-term idle wells each year; operators with 101 to 250,
inclusive, idle wells eliminate at least 10 long-term wells each
year; and operators with more than 250 idle wells eliminate at least
4 percent of their long-term idle wells each year.

(v) An operator who complies with the plan is exempt from any
increased idle well bond or fee requirements.

(vi) An operator who fails to comply with the plan, as
determined by the supervisor after the annual performance review,
is not eligible to use the requirements of this paragraph, for
purposes of compliance with this section, for any of its idle wells.
That operator shall immediately provide one of the alternatives in
paragraph (1), (2), or (3) for its idle wells and may not propose a
new idle well plan for the next five years. An operator may appeal
to the director pursuant to Article 6 (commencing with Section
3350) regarding the supervisor’s rejection of a plan and plan
amendments and the supervisor’s determinations of the operator’s
failure to comply with a plan.

(b) All fees received under this section shall be deposited in the
Hazardous and Idle-Deserted Well Abatement Fund, which is
hereby created in the State Treasury. Notwithstanding Section
13340 of the Government Code, the moneys in the Hazardous and
Idle-Deserted Well Abatement Fund are hereby continuously
appropriated to the department for expenditure without regard to
fiscal year, to mitigate a hazardous or potentially hazardous
condition, by well plugging and abandonment, decommissioning
the attendant production facilities, or both, at a well of an operator
subject to the requirements of this section.

(c) Failure to file, for any well, the bond or fee required under
this section shall be conclusive evidence of desertion of the well,
permitting the supervisor to order the well abandoned.

(d) Nothing in this section prohibits a local agency from
collecting a fee for regulation of wells.

(e) This section shall remain in effect only until January 1, 2018,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2018, deletes or extends that date.

SEC. 10.  

Section 3206 is added to the Public Resources Code,
to read:

3206.  

(a) The operator of any idle well shall do either of the
following:

(1) No later than January 31 of each year, for each idle well that
was an idle well at any time in the last calendar year, file with the
supervisor an annual fee equal to the sum of the following amounts:

(A)  begin delete Three end delete begin insert One end insert hundred begin insert fifty end insert dollars begin delete ($300) end delete begin insert ($1 end insert begin insert 50) end insert for each idle
well that has been begin insert an end insert idle begin insert well end insert for begin insert three years or longer, but end insert less
than eight years.

(B)  begin delete Seven end delete begin insert Three end insert hundred begin delete fifty end delete dollars begin delete ($750) end delete begin insert ($300) end insert for each
idle well that has been begin insert an end insert idle begin insert well end insert for eight years or longer, but
less than 15 years.

(C)  begin delete One thousand five end delete begin insert Seven end insert hundred begin insert fifty end insert dollars begin delete ($1,500) end delete
begin insert ($750) end insert for each idle well that has been begin insert an end insert idle begin insert well end insert for 15 years or
longer, but less than begin delete 25 end delete begin insert 20 end insert years.

(D)  begin delete Three end delete begin insert One end insert thousand begin insert five hundred end insert dollars begin delete ($3,000) end delete begin insert ($1,500) end insert
for each idle well that has been begin insert an end insert idle begin insert well end insert for begin delete 25 end delete begin insert 20 end insert years or
longer.

(2) File a plan with the supervisor to provide for the management
and elimination of all long-term idle wells.

(A) For the purposes of the plan required by this paragraph,
elimination of an idle well shall be accomplished when the well
has been properly abandoned in accordance with Section 3208, or
it has been shown to the division’s satisfaction that, since the well
became an idle well, the well has maintained production of oil or
gas or been used for injection for a continuous six-month period.

(B) A plan filed pursuant to this paragraph shall meet all of the
following requirements and conditions:

(i) The plan shall specify the time period that it covers. The plan
and any renewal of the plan shall cover a time period of no more
than five years and shall be subject to approval by the supervisor
who may prioritize the order in which idle wells are addressed.

(ii) The plan shall be reviewed for performance annually by the
supervisor, and be subject to amendment by the supervisor, or by
the operator with the approval of the supervisor.

(iii) The required rate of long-term idle well elimination shall
be based upon the number of idle wells under the control of an
operator on January 1 of each year, as specified in clause (iv). The
supervisor may require additional well testing requirements as part
of the plan.

(iv) Unless and until the operator has no long-term idle wells,
the plan shall require that operators with begin delete 10 end delete begin insert 250 end insert or fewer idle wells
eliminate at least begin delete one end delete begin insert 4 percent of their end insert long-term idle begin delete well end delete begin insert wells end insert
each begin delete year; end delete begin insert year, and, in no case, less than one long-term idle well; end insert
operators with begin delete 11 to 20, end delete begin insert 251 to 1,000, end insert inclusive, idle wells eliminate
at least begin delete two end delete begin insert 5 percent of their end insert long-term idle wells each begin delete year; end delete begin insert year,
and, in no case, less than one long-term idle well; and end insert operators
with begin delete 21 to 50, end delete begin insert end insert begin insert more than 1,000 end insert begin delete inclusive, end delete idle wells eliminate at
least begin delete four end delete begin insert 6 percent of their end insert long-term idle wells each begin delete year;
operators with 51 to 100, inclusive, idle wells eliminate at least
10 long-term idle wells each year; operators with 101 to 250,
inclusive, idle wells eliminate at least 20 long-term wells each
year; and operators with more than 250 idle wells eliminate at least
15 percent of their long-term idle wells each year. end delete begin insert year end insert begin insert , and, in
no case, less than one long-term idle well. end insert

(v) An operator who fails to comply with the plan, as determined
by the supervisor after the annual performance review, is not
eligible to use the requirements of this paragraph, for purposes of
compliance with this section, for any of its idle wells. That operator
may not propose a new idle well plan for the next five years. An
operator may appeal to the director pursuant to Article 6
(commencing with Section 3350) regarding the supervisor’s
rejection of a plan and plan amendments and the supervisor’s
determination of the operator’s failure to comply with a plan. If
the supervisor’s determination that the operator failed to comply
with the plan is not timely appealed, or if the director upholds the
supervisor’s determination upon appeal, then the operator shall
immediately file the fees required under paragraph (1) for each
year that the operator failed to comply with the plan.

(b) All fees received under this section shall be deposited in the
Hazardous and Idle-Deserted Well Abatement Fund, which is
hereby created in the State Treasury. Notwithstanding Section
13340 of the Government Code, the moneys in the Hazardous and
Idle-Deserted Well Abatement Fund are hereby continuously
appropriated to the department for expenditure without regard to
fiscal year, to mitigate a hazardous or potentially hazardous
condition, by well plugging and abandonment, decommissioning
the attendant production facilities, or both, at a well of an operator
subject to the requirements of this section.

(c) Failure to file, for any well, the fee required under this
section shall be conclusive evidence of desertion of the well,
permitting the supervisor to order the well abandoned pursuant to
Section 3237.

(d) Nothing in this section prohibits a local agency from
collecting a fee for regulation of wells.

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

SEC. 11.  

Section 3206.1 is added to the Public Resources Code,
to read:

3206.1.  

(a) By June 1, 2018, the division shall review, evaluate,
and update its regulations pertaining to idle wells. The update shall
include idle well testing and management requirements that, at a
minimum, begin delete shall require end delete begin insert include end insert all of the following:

(1)  begin delete Testing end delete begin insert Appropriate testing, as determined by the supervisor, end insert
to determine whether the fluid level is above the base of an
underground source of drinking water.

(2)  begin delete Testing end delete begin insert Appropriate testing, as determined by the supervisor, end insert
to verify the mechanical integrity of the well.

(3)  begin delete Remediation end delete begin insert Appropriate remediation, as determined by
the supervisor, end insert of idle wells if there is an indication of a lack of
mechanical integrity.

(4) For a well that has been an idle well for 15 years or more,
an engineering analysis demonstrating to the division’s satisfaction
that it is begin delete economically end delete viable to return the idle well to operation
in the future.

(b) If the operator demonstrates to the division’s satisfaction
that the well is not within one-half mile of an underground source
of drinking water, testing required under the regulations
implementing this section shall not be required until at least two
years after the well becomes an idle well. This subdivision shall
not be construed to prohibit or limit any other testing required
under this chapter.

(c) At the discretion of the supervisor, the regulations
implementing this section may provide an option for temporary
or partial well abandonment in lieu of compliance with the
requirements of the regulations implementing this section.

(d) If the operator does not remediate an idle well as required
by the regulations implementing this section, or the operator does
not demonstrate that an idle well is economically viable as required
by the regulations implementing this section, then the operator
shall plug and abandon the idle well in accordance with Section
3208.

(e) Failure to file to comply with the requirements of the
regulations implementing this section shall be conclusive evidence
of desertion of the well, permitting the supervisor to order the well
abandoned pursuant to Section 3237.

(f) For purposes of this section, an “underground source of
drinking water” has the same meaning as in the federal Safe
Drinking Water Act (42 U.S.C. Sec. 300f).

SEC. 12.  

Section 3207 of the Public Resources Code is
amended to read:

3207.  

(a) Any individual or blanket indemnity bond issued in
compliance with this chapter may be terminated and canceled and
the surety be relieved of all obligations thereunder when the well
or wells covered by such bond have been properly completed or
abandoned or another valid bond has been substituted therefor.
Should the person who has filed a blanket bond properly complete
or abandon a portion of his or her wells covered by the bond, the
bond may be terminated and canceled and the surety be relieved
of all obligations thereunder upon the filing by such person of an
individual bond for each well which is still not producing or which
he or she is still engaged in drilling, redrilling, deepening, or
permanently altering the casing. Liability as to individual wells
that have been completed or drilled and abandoned under a blanket
bond may also be terminated.

(b) This section shall remain in effect only until January 1, 2018,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2018, deletes or extends that date.

SEC. 13.  

Section 3207 is added to the Public Resources Code,
to read:

3207.  

(a) Any individual or blanket indemnity bond issued in
compliance with this chapter may be terminated and canceled and
the surety relieved of all obligations thereunder when the well or
wells covered by such bond have been properly abandoned pursuant
to Section 3208, or another valid bond has been substituted
therefor. Should the person who has filed a blanket bond properly
abandon a portion of his or her wells covered by the bond, the
bond may be terminated and canceled and the surety relieved of
all obligations thereunder upon the filing by such person of an
individual bond for each well that is still not abandoned. Liability
as to individual wells that have been properly abandoned under a
blanket bond may also be terminated.

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

SEC. 14.  

Section 3208 of the Public Resources Code is
amended to read:

3208.  

(a) For the purposes of Section 3207, a well is properly
completed when it has been shown, to the satisfaction of the
supervisor, that the manner of producing oil or gas or injecting
fluids into the well is satisfactory and that the well has maintained
production of oil or gas or injection for a continuous six-month
period. A well is properly abandoned when it has been shown, to
the satisfaction of the supervisor, that all proper steps have been
taken to isolate all oil-bearing or gas-bearing strata encountered
in the well, and to protect underground or surface water suitable
for irrigation or farm or domestic purposes from the infiltration or
addition of any detrimental substance and to prevent subsequent
damage to life, health, property, and other resources. For purposes
of this subdivision, proper steps include the plugging of the well,
decommissioning the attendant production facilities of the well,
or both, if determined necessary by the supervisor.

(b) This section shall remain in effect only until January 1, 2018,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2018, deletes or extends that date.

SEC. 15.  

Section 3208 is added to the Public Resources Code,
to read:

3208.  

(a) For the purposes of Sections 3206 and 3207, a well
is properly abandoned when it has been shown, to the satisfaction
of the supervisor, that all proper steps have been taken to isolate
all oil-bearing or gas-bearing strata encountered in the well, and
to protect underground or surface water suitable for irrigation or
farm or domestic purposes from the infiltration or addition of any
detrimental substance and to prevent subsequent damage to life,
health, property, and other resources. For purposes of this
subdivision, proper steps include the plugging of the well,
decommissioning the attendant production facilities of the well,
or both, if determined necessary by the supervisor.

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

SEC. 16.  

Section 3208.1 of the Public Resources Code is
amended to read:

3208.1.  

(a) To prevent, as far as possible, damage to life,
health, and property, the supervisor or district deputy may order,
or permit, the reabandonment of any previously abandoned well
if the supervisor or the district deputy has reason to question the
integrity of the previous abandonment, or if the well is not
accessible or visible.

(b) The operator responsible for plugging and abandoning
deserted wells under Section 3237 shall be responsible for the
reabandonment except in the following situations:

(1) The supervisor finds that the operator plugged and
abandoned the well in conformity with the requirements of this
division in effect at the time of the plugging and abandonment and
that the well in its current condition presents no immediate danger
to life, health, and property but requires additional work solely
because the owner of the property on which the well is located
proposes construction on the property that would prevent or impede
access to the well for purposes of remedying a currently perceived
future problem. In this situation, the owner of the property on
which the well is located shall obtain all rights necessary to
reabandon the well and be responsible for the reabandonment.

(2) The supervisor finds that the operator plugged and
abandoned the well in conformity with the requirements of this
division in effect at the time of the plugging and abandonment and
that construction over or near the well preventing or impeding
access to it was begun on or after January 1, 1988, and the property
owner, developer, or local agency permitting the construction
failed either to obtain an opinion from the supervisor or district
deputy as to whether the previously abandoned well is required to
be reabandoned or to follow the advice of the supervisor or district
deputy not to undertake the construction. In this situation, the
person or entity causing the construction over or near the well shall
be responsible for the reabandonment.

(3) The supervisor finds that the operator plugged and
abandoned the well in conformity with the requirements of this
division in effect at the time of the plugging and abandonment and
after that time someone other than the operator or an affiliate of
the operator disturbed the integrity of the abandonment in the
course of developing the property, and the supervisor is able to
determine based on credible evidence, including circumstantial
evidence, the party or parties responsible for disturbing the integrity
of the abandonment. In this situation, the party or parties
responsible for disturbing the integrity of the abandonment shall
be responsible for the reabandonment.

(c) For purposes of this section, being responsible for the
reabandonment means that the responsible party or parties shall
complete the reabandonment and be subject to the requirements
of this chapter as an operator of the well. The responsible party or
parties shall file with the supervisor the appropriate bond or
security in an amount specified in Section 3204, 3205, or 3205.1.
If the reabandonment is not completed, the supervisor may act
under Section 3226 to complete the work.

(d) Except for the situations listed in paragraphs (1), (2), and
(3) of subdivision (b), nothing in this section precludes the
application of Article 4.2 (commencing with Section 3250) when
its application would be appropriate.

SEC. 17.  

Section 3238 of the Public Resources Code is
amended to read:

3238.  

(a) For oil and gas produced in this state from a well
that qualifies under Section 3251 or that has been inactive for a
period of at least the preceding five consecutive years, the rate of
the charges imposed pursuant to Sections 3402 and 3403 shall be
reduced to zero for a period of 10 years. The supervisor or district
deputy shall not permit an operator to undertake any work on wells
qualifying under Section 3251 unless the mineral rights owner
consents, in writing, to the work plan.

(b) An operator who undertakes any work on a well qualifying
under Section 3251 shall have up to 90 days from the date the
operator receives written consent from the supervisor to evaluate
the well. On or before the 90 day evaluation period ends, the
operator shall file with the supervisor a bond or security in an
amount specified in Section 3204, 3205, or 3205.1, in accordance
with the requirements of whichever of those sections is applicable
to the well, if the well operations are to continue for a period in
excess of the 90-day evaluation period. The conditions of the bond
shall be the same as the conditions stated in Section 3204.

(c) A party may plug and abandon a well that qualifies under
Section 3251 by obtaining all necessary rights to the well. That
party shall be subject to the requirements of this chapter as an
operator of the well, file with the supervisor the appropriate bond
or security in an amount specified in Section 3204, 3205, or 3205.1,
and complete the abandonment. If the abandonment is not
completed, the supervisor may act under Section 3226 to complete
the work.

SEC. 18.  

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.