Assembly BillPassed first housePublic Resources
AB 2716: Oil and gas: bonding requirements.
What AB 2716 does, verified August 15, 2026
The bill aims to amend the oil and gas regulations in California. It would require oil and gas operators to provide additional security to cover potential risks and threats to life, health, property, and natural resources. This security can be in the form of an indemnity bond, deposit, or other means of financial assurance approved by the state. The bill would also exempt certain individuals from filing a bond when acquiring the right to operate a well or production facility. These individuals include those who have provided additional security approved by the state and those who acquire the rights solely for plugging and abandoning a well or decommissioning a production facility. The bill would also require the state supervisor to release the bond and the acquiring person from liability once the well or facility has been properly plugged and abandoned or decommissioned. However, indivi…
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Last action: In committee: Held under submission. (2026-08-13)Alert me
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| Aug. 13, 2026 | In committee: Held under submission. |
| Aug. 03, 2026 | In committee: Referred to APPR. suspense file. |
| Jul. 09, 2026 | Read second time and amended. Re-referred to Com. on APPR. |
| Jul. 09, 2026 | From committee: Amend, and do pass as amended and re-refer to Com. on APPR. (Ayes 6. Noes 0.) (July 1). |
| Jun. 10, 2026 | Referred to Com. on N.R. & W. |
Latest bill textAmended version, July 9, 2026 · 8,046 words
| Amended IN Senate July 09, 2026 |
| Amended IN Assembly April 27, 2026 |
| Amended IN Assembly March 25, 2026 |
CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION
Assembly Bill
No. 2716
| Introduced by Assembly Member Ávila Farías |
February 20, 2026 |
An act to amend Sections 3017, 3205.3, and 3205.8 of, and to add Sections 3205.9 and 3205.10 to, the Public Resources Code, relating to oil and gas.
LEGISLATIVE COUNSEL'S DIGEST
AB 2716, as amended, Ávila Farías. Oil and gas: bonding requirements.
Existing law authorizes the Geologic Energy Management Division in the Department of Conservation to require an operator of an oil and gas well to provide, in addition to specified types of required indemnity bonds, an additional amount of security acceptable to the division based on the division’s evaluation of the risk that the operator will desert its well or wells and the potential threats the operator’s well or wells pose to life, health, property, and natural resources, as provided. Existing law requires the division to consider specified factors in evaluating the risks that the operator will desert its well or wells and the potential threats the operator’s well or wells pose to life, health, property, and natural resources. Existing law prohibits this additional security from exceeding the lesser of the division’s estimation of the reasonable costs of properly plugging and abandoning all of the operator’s wells and decommissioning any attendant production facilities, or $30,000,000. A person who violates or fails to comply with this provision, or any related law concerning oil and gas, is guilty of a crime.
This bill would instead prohibit this additional security from exceeding the lesser of the division’s estimation of the reasonable costs of properly plugging and abandoning all of the operator’s wells and decommissioning any attendant production facilities, or a maximum amount of additional security based on the total number of active and idle wells under the control of the operator pursuant to a specified schedule, as provided. The bill would prohibit the division from increasing the amount of additional security required of an operator that had an additional security agreement approved by the division as of January 1, 2027, until 5 3 years after the effective date of the agreement, as provided. The bill would explicitly extend these additional security requirements to a person who acquires the right to operate or control a well or production facility, as provided. The bill would establish that compliance with these additional security requirements by either the operator of record or the person who acquires the right to operate or control a well or production facility constitutes compliance for both parties, and would prohibit the division from requiring duplicative security, as provided.
Existing law authorizes the above-described additional amount of security to be an indemnity bond, specified forms of deposit, or any other means of equally effective financial assurance approved by the division, including a demonstration of self-insurance pursuant to a specified process.
This bill would, as a condition of obtaining division approval of self-insurance or a corporate guarantee, require an additional security agreement between the operator and the division that includes, among other things, an enforceable schedule for the plugging and abandonment of wells and decommissioning of production facilities consistent with an operator’s idle well management plan, as provided. The bill would also require the operator, as part of that additional security agreement, to immediately notify the division if the operator is unable to satisfy the financial criteria, and would make a failure to make this notification a violation subject to civil and criminal penalties, as provided. By expanding the scope of a crime, the bill would impose a state-mandated local program. The bill would also require the division to reevaluate whether self-insurance or a corporate guarantee continues to constitute an equally effective means of financial assurance at least once every 3 years, or upon a material change in the financial condition of the operator or guarantor entity, whichever occurs first. The bill would require an operator approved for self-insurance or a corporate guarantee who the supervisor subsequently determines to be out of compliance with an approved idle well management plan, or specified operators out of compliance with idle well fee requirements, to provide other financial assurance within 90 days of that determination, as provided.
Existing law also requires a person who acquires the right to operate a well or production facility to file with the State Oil and Gas Supervisor an individual indemnity bond or a blanket indemnity bond in an amount determined by the supervisor to be sufficient to cover, in full, all costs of plugging and abandonment, decommissioning the facility, and site restoration, as provided. Under existing law, an operator may, in lieu of this bonding requirement and with the written approval of the supervisor, provide the required security through an equally effective means of financial assurance, including specified types of deposits, an irrevocable letter of credit, or a fully funded trust fund, and excluding self-insurance or corporate guarantees, as provided.
This bill would repeal the exclusion of self-insurance or corporate guarantee, as described above. The bill would additionally authorize an operator to, in lieu of the bonding requirement and with the written approval of the supervisor, provide the required security through specified means of financial assurance, including pursuant to the above-described process for obtaining division approval for self-insurance or a corporate guarantee applicable to existing operators, as provided.
Existing law authorizes the supervisor or a district deputy to order the plugging and abandonment of a well or the decommissioning of a production facility that has been deserted. If the supervisor determines that the current operator, as determined by the records of the supervisor, does not have the financial resources to fully cover that cost of plugging and abandonment of the well or the decommissioning of a production facility that has been deserted, existing law makes immediately preceding operators responsible for that cost. Existing law authorizes the supervisor to continue to look seriatim to previous operators until an operator is found with sufficient financial resources to cover the cost, except as provided.
This bill would exempt from the above-described requirement to file with the supervisor, upon acquiring the right to operate a well or production facility, an individual indemnity bond or a blanket indemnity bond sufficient to cover all costs of plugging and abandonment, decommissioning the facility, and site restoration, (1) an operator who operator, or a person who acquires the right to operate or control a well or production facility, who has complied with an idle well management plan or fee schedule, and specified reporting requirements, as provided, if the operator of record has provided obtained and maintained additional security approved by the division, as provided, and (2) a person who has acquired the rights to a well or production facility for the sole purpose of plugging and abandoning that well or decommissioning the production facility. facility for purposes of redevelopment, as defined, or to satisfy the above-described obligations of previous operators, as provided. The bill would explicitly state that a person who has acquired the rights to a well or production facility for the sole purpose of plugging and abandoning that well or decommissioning the production facility for the purposes of redevelopment or to satisfy the obligations of previous operators is subject to the state oil and gas laws as an operator, until a determination by the supervisor that the well has been properly plugged and abandoned or the production facilities have been decommissioned, or that additional work related to abandoning the well is not practical or would pose greater environmental or safety risk, as provided. Upon this determination by the supervisor, the bill would require the supervisor to release the bond, and would release the acquiring person from any further obligation or liability for the well or facility. The bill would require a person who, before an acquisition for the sole purpose of plugging and abandoning the well or decommissioning the production facility, was responsible as an owner or operator of the well or production facility and subject to orders related to remediation issued by the supervisor to remain responsible for the well or production facility and any unfunded costs associated with plugging and abandonment of the well or decommissioning of the facility, as provided. The bill would prohibit the use of a well or production facility acquired for the sole purpose of plugging and abandoning the well or decommissioning the production facility from being used for oil or gas production or injection. production, injection, gas storage, or any associated operation. By creating a new crime, the bill would impose a state-mandated local program.
This bill would require a person acquiring the rights to a well or production facility for the sole purpose of plugging and abandoning that well or decommissioning the production facility, facility for the purpose of redevelopment, before completing the acquisition, to submit to the supervisor a declaration, under penalty of perjury, that the acquisition is for the sole purpose of plugging and abandoning the well or decommissioning the production facility, facility for the purpose of redevelopment, a description of the redevelopment plan, and a plugging and abandoning work plan, as provided. By expanding the scope of the crime of perjury, the bill would impose a state-mandated local program. The bill would require an acquiring person who submits the declaration to commence plugging and abandonment or decommissioning operations within 24 months of the date of acquisition, unless the supervisor determines that a longer period is warranted, as provided. and would authorize the supervisor to grant a 12-month extension, as provided. The bill would authorize require the supervisor to require an acquiring person who fails to commence operations within 24 months within this time period to file financial assurance, as provided. The bill would require a person acquiring the rights to a well or production facility pursuant to these provisions to provide annual updates on the plugging and abandonment work plan. If the supervisor determines that the acquiring person is not capable of plugging the wells within these timeframes, the bill would require the acquiring person to post specified financial assurance and would require the supervisor to notify the previous operator who is responsible for the plugging and abandonment. The bill would establish that no more than 100 wells or associated production facilities may be included, on an annual basis, in this alternative financial security program, as provided.
This bill would, on and after January 1, 2028, and quarterly thereafter, require the division to include, as part of its annual report to the Legislature related to well transfer activity and financial assurance, post on its internet website specified information related to well transfers, wells and production facilities acquired for the sole purpose of plugging and abandoning or decommissioning, and a description of wells located in or within one mile of a disadvantaged community. The bill would require the supervisor and Director of Conservation to annually attend specified legislative hearings to report on well transfer activity, implementation and status of financial assurance for indemnification, and the above-described provisions related to redevelopment of oil and gas wells, and would require the division, on or before January 1, 2032, to prepare and submit a related report to the relevant legislative policy and budget committees in both houses of the Legislature, as provided.
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.
This bill would make the operation of its provisions contingent upon the enactment of AB 2461 of the 2025–26 Regular Session.
The people of the State of California do enact as follows:
SECTION 1.
The Legislature finds and declares all of the following:(a) When signing Assembly Bill 1167 (AB 1167) of the 2023–24 Regular Session (Chapter 359 of the Statutes of 2023), the Governor cautioned that new financial assurances requirements for oil and gas well transfers may create a risk of current operators deserting hazardous wells and stated his intent to work with the Legislature to enact revisions necessary to address that risk and to align the statute with existing and developing programs administered by the Department of Conservation’s Geologic Energy Management Division (CalGEM).
(b) Since the enactment of AB 1167, oil and gas operators have, in nearly all cases, been unable to transfer producing or idle wells, resulting in a substantial reduction in the market value and liquidity of those assets, and adding to the risk cited by the Governor and the Department of Finance that the legislation could result in additional oil and gas well desertions.
(c) The impairment of well transferability has constrained many operators’ ability to access capital needed to maintain facilities, comply with regulatory requirements, and responsibly plan for decommissioning and asset retirement obligations.
(d) The resulting reduction in asset value and access to capital has increased the risk that wells may remain with operators lacking the financial capacity to maintain or properly abandon them, thereby elevating the risk of well desertion identified by the Department of Finance analysis and by the Governor at the time AB 1167 was signed.
(e) At the time AB 1167 was enacted, Section 3237 of the Public Resources Code already provided that an operator transferring a well after January 1, 1996, remains liable for plugging and abandonment obligations if the acquiring operator becomes insolvent or otherwise fails to meet those obligations.
(f) Existing law authorizes CalGEM to order responsible operators to plug and abandon wells and, if an operator fails to do so, to perform that work using industry fee revenue and to recover costs through reimbursement requirements, civil penalties, liens, and other enforcement mechanisms, through which the state has recovered more than $25,000,000 from responsible operators in the last few years alone.
(g) Pursuant to Section 3237 of the Public Resources Code, operators transferring wells have regularly required acquiring operators to establish sinking funds or similar financial arrangements to ensure sufficient resources are available to meet future asset retirement obligations when wells are no longer economically productive.
(h) Using the authority established by Assembly Bill 1057 (AB 1057) of the 2019–20 Regular Session (Chapter 771 of the Statutes of 2019), CalGEM significantly strengthened California’s financial assurance framework and secured tens of millions of dollars in additional bonding and other financial assurance mechanisms to ensure that oil and gas operators’ decommissioning responsibilities are adequately funded at the end of the economic life of their facilities.
(i) The State of California is eligible for $165,000,000 in federal taxpayer funds from the orphan well program authorized by the bipartisan Infrastructure Investment and Jobs Act (Public Law 117-58), of which over $25,000,000 has already been encumbered and spent to plug wells in California, with more to come.
(j) Assembly Bill 2729 (AB 2729) of the 2015–16 Regular Session (Chapter 272 of the Statutes of 2016) established a comprehensive framework for the management and remediation of idle wells, and subsequent legislation has built upon that framework to accelerate idle well remediation and reduce long-term risks associated with prolonged well inactivity.
(k) Following the enactment of AB 1167, the Legislature passed and the Governor signed Assembly Bill 1866 (AB 1866) of the 2023–24 Regular Session (Chapter 548 of the Statutes of 2024), which built upon the idle well framework established by AB 2729 by strengthening idle well management requirements and contributing to continued significant reductions in idle well inventories, resulting in the lowest proportion of idle wells in operator portfolios in decades.
(l) The cumulative effect of AB 2729, AB 1057, AB 1866, and related statutes demonstrates that California has made substantial progress in reducing idle and orphaned wells while strengthening financial assurance requirements for oil and gas operators. Operators have plugged over 12,000 idle wells in the last three years alone. alone, and the number of idle wells remains over 30,000.
(m) Severely restricting the transferability of oil and gas assets has produced unintended consequences that undermine business valuations, reduce income, and impair the financial stability of remaining operators, without advancing the state’s existing idle well and decommissioning objectives.
(n) These unintended consequences demonstrated by more than two years of data are now evident and warrant legislative action.
(o) It is therefore necessary and appropriate to enact revisions consistent with the Governor’s October 7, 2023, signing message for AB 1167 in order to mitigate the risk of well desertion, preserve responsible asset stewardship, and better align statutory requirements with existing regulatory programs administered by CalGEM.
SEC. 2.
Section 3017 of the Public Resources Code is amended to read:3017.
(a) It is the intent of the Legislature that the oil and gas industry pay for all necessary costs of plugging and abandonment and site restoration of oil and gas wells.(b) It is the intent of the Legislature that, to minimize the risk that the state will be liable for costs of plugging and abandonment, no well be transferred to another owner until and unless adequate financial assurance to cover the full cost of plugging and abandonment and site restoration has been provided, except when the well is being transferred for the sole purpose of plugging and abandoning the well or decommissioning the attendant production facility.
SEC. 3.
Section 3205.3 of the Public Resources Code is amended to read:3205.3.
(a) (1) The division may require an operator or person who acquires the right to operate or control a well or production facility 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 division based on the division’s evaluation of the risk that the operator or person who acquires the right to operate or control a well or production facility will desert its well or wells and the potential threats the operator’s well or wells pose to life, health, property, and natural resources. The additional security required by the division shall not exceed the lesser of the division’s estimation of the reasonable costs of properly plugging and abandoning all of the operator’s wells and decommissioning any attendant production facilities in accordance with Section 3208, or the maximum amount established pursuant to paragraph (2). For purposes of this section, compliance with the requirements of this section by either the operator of record or the person who acquires the right to operate or control a well or production facility shall satisfy the requirements of this section for both parties and the division shall not require duplicative security from the other party with respect to the same wells or production facilities.(2) The applicable maximum amount of additional security shall be determined based on the total number of active and idle wells under the control of the operator, as follows:
(A) Thirty million dollars ($30,000,000) for an operator having 4,000 or fewer active and idle wells in the state.
(B) For an operator having more than 4,000, but no more than 10,000, active and idle wells in the state, the following amounts shall apply:
(i) On and after January 1, 2028, to December 31, 2029, inclusive, thirty-five million dollars ($35,000,000).
(ii) On and after January 1, 2030, to December 31, inclusive, 2031, 2031, inclusive, forty million dollars ($40,000,000).
(iii) On and after January 1, 2032, fifty million dollars ($50,000,000).
(C) For an operator having more than 10,000 active and idle wells in the state, the following amounts shall apply:
(i) On and after January 1, 2028, to December 31, 2029, inclusive, forty-five million dollars ($45,000,000).
(ii) On and after January 1, 2030, to December 31, 2031, inclusive, sixty million dollars ($60,000,000).
(iii) On and after January 1, 2032, eighty million dollars ($80,000,000).
(D) Notwithstanding Subject to subdivision (e) and notwithstanding subparagraphs (A) to (C), inclusive, the division shall not increase the amount of additional security required of an operator that had an additional security agreement approved by the division pursuant to this section in effect as of January 1, 2027, until five three years after the effective date of the agreement. Upon expiration of the five-year three-year period, the division may increase the amount of additional security required of the operator to an amount not exceeding the applicable maximum amount determined pursuant to subparagraphs (A) to (C), inclusive, subject to the notice requirements of subdivision (d).
(b) When making an estimation under this section of the reasonable costs of properly plugging and abandoning an operator’s well or wells and decommissioning any attendant production facilities, the division shall provide the operator with an opportunity to submit the operator’s own estimation and shall consider all of the following:
(1) The depth of the well or wells.
(2) The accessibility and surroundings of the well or wells and any attendant production facilities.
(3) Available information about the condition of the well or wells and any attendant production facilities.
(4) Available information about the cost to plug and abandon a comparable well or wells.
(5) Available information about the cost to decommission production facilities comparable to the production facilities attendant to the well or wells.
(6) The operator’s cost estimates, if provided.
(7) Whether the operator is a public utility gas corporation, as defined in subdivision (a) of Section 216 of the Public Utilities Code.
(8) Any other information that the division determines to be relevant to the estimation of cost.
(c) The division, in evaluating the risk that the operator will desert its well or wells and the potential threats the operator’s well or wells pose to life, health, property, and natural resources, shall consider all of the following:
(1) The difference between the estimation of reasonable costs of plugging and abandonment under subdivisions (a) and (b) and the total amount of indemnity bonds or other financial assurances in place to ensure funding of the plugging and abandonment of the operator’s well or wells.
(2) The level of current production from the well or wells.
(3) Available information regarding estimated reserves remaining in place associated with the well or wells.
(4) Whether the well or wells are “critical,” are “environmentally sensitive,” or are in an “urban area,” as those terms are defined by the division in regulation.
(5) To the extent that relevant information is available to the division, the financial status of the operator and the operator’s financial capacity to plug and abandon all of the operator’s wells.
(6) The past record of compliance by the operator with the division.
(7) The number of idle wells to be covered by the indemnity bond and the operator’s record of compliance with the requirements of Section 3206 and the division’s regulations related to the management of idle wells.
(8) Whether the operator’s well or wells are subject to any bonding or financial assurance requirements by a local government.
(9) Whether the operator’s well or wells are already subject to additional bond coverage by the division pursuant to Section 3270.4.
(10) Any other information that the division determines to be relevant to the evaluation of the risk, including industrywide financial trends, which shall include, but is not necessarily limited to, those trends affecting the solvency and creditworthiness of oil and gas operators in California.
(d) The division shall provide the operator with notice of the requirement to provide additional security, and the notice shall be served by personal service or certified mail. The operator shall provide the additional security within 180 days of service of notice. The notice shall include an explanation of the division’s estimation of the reasonable costs to plug and abandon the operator’s well or wells and of the basis for the decision to require the operator to provide additional security. The requirements of this subdivision shall also apply to any subsequent increase in the amount of additional security required under subdivision (e).
(e) The division shall increase or decrease the amount of additional security required under this section to account for changed circumstances or new information. The operator may, at any time, petition the division to reevaluate the division’s evaluation of the risk or cost estimates, and the division shall respond to the petition in writing within 60 days of receipt of the petition.
(f) (1) An operator shall provide additional security required under this section in the form of an indemnity bond, a form of deposit described in Section 995.710 of the Code of Civil Procedure, or any other equally effective means of financial assurance approved by the division. Examples of equally effective means of financial assurance that the division may consider for approval include a letter of credit, a corporate guarantee, a trust fund, or a demonstration of self-insurance.
(2) The division may only approve self-insurance as an equally effective means of financial assurance if the operator provides detailed financial information demonstrating to the division’s satisfaction that, based on the considerations under subdivision (c), the risks associated with the operator’s potential for desertion of its well or wells are low, and only if the approval is conditioned upon all of the requirements established pursuant to paragraph (3). If the division approves self-insurance as an equally effective means of financial assurance, at least once every five three years the operator shall update the supporting financial information and the division shall reevaluate whether self-insurance continues to be an equally effective means of financial assurance. If an operator provides financial information to the division under this section that is not otherwise publicly available, the division shall maintain the information as confidential.
(3) An approval of self-insurance or a corporate guarantee under paragraph (2) shall be set forth in an additional security agreement between the operator and the division and shall be conditioned upon all of the following requirements:
(A) (i) The additional security agreement shall include an enforceable schedule for the plugging and abandonment of wells and decommissioning of production facilities consistent with the operator’s decommissioning obligations under paragraph (2) of subdivision (a) of Section 3206. An operator who owns or operates 11 or more idle wells without an approved idle well management plan or who is out of compliance with its idle well management plan shall be ineligible for self-insurance.
(ii) An operator who owns or operates 11 or more idle wells who enters into an additional security agreement that includes self-insurance or a corporate guarantee who is subsequently determined by the supervisor after the annual performance review to be out of compliance with an approved idle well management plan pursuant to paragraph (2) of subdivision (a) of Section 3206, or an operator who owns or operates 10 or fewer idle wells who enters into an additional security agreement that includes self-insurance or a corporate guarantee who is subsequently determined by the supervisor after the annual performance review to be out of compliance with either an idle well management plan or idle well fee requirements pursuant to paragraph (1) of subdivision (a) of Section 3206, shall be required to provide other financial assurance within 90 days of that determination, which may be in the form of a bond, or, upon written approval of the supervisor, an equally effective means of financial insurance, including a deposit pursuant to Section 3205.5, an irrevocable letter of credit, or a fully funded trust fund.
(B) The operator shall provide to the division the three previous year’s years of certified reserve reports and audited financial statements, including balance sheets and income statements. If audited financial statements are not available, the operator shall provide financial statements certified by the operator’s chief financial officer. The additional security agreement shall include financial criteria that the operator shall satisfy for the duration of the agreement. The financial criteria set forth in the agreement may address the operator’s bond ratings, debt-to-equity ratios, liquidity, cash return on liabilities, net profitability, minimum net worth, remaining economic life of production fields or leases, and any other financial indicators the division determines are relevant to the evaluation of the operator’s risk of desertion under subdivision (c). The operator shall immediately notify the division if the operator is unable to satisfy one or more of the financial test criteria set forth in the agreement. A failure to notify the division as required by this subparagraph is a violation of this chapter, subject to the civil penalties provided in Sections 3236.2 and 3236.5, the criminal penalties provided in Section 3236, and the cost recovery provided in Section 3236.6, and is grounds for termination of the additional security agreement pursuant to subparagraph (C).
(C) If the division determines, based on the information provided pursuant to subparagraphs (A) and (B), that self-insurance or a corporate guarantee is no longer an equally effective means of financial assurance, the division may terminate the additional security agreement at its sole discretion and require the operator to provide additional security in the form of an indemnity bond, a form of deposit described in Section 995.710 of the Code of Civil Procedure, or any other equally effective means of financial assurance approved by the division pursuant to paragraph (1). The division shall provide the operator with notice of termination and a requirement for additional security pursuant to subdivision (d), allowing the operator 180 days from service of the notice to satisfy the additional security requirement.
(D) The additional security agreement shall include a provision acknowledging that, in the event of operator insolvency, the person who was responsible as an owner or operator of the well or production facility before any transfer shall remain responsible for plugging and abandonment, decommissioning, and site restoration obligations pursuant to subdivision (c) of Section 3237 and identify all previous owners with residual liability dating back to January 1, 1996.
(E) Where applicable, the additional security agreement shall include a corporate guaranty agreement executed by the operator’s parent company, affiliate, or other controlling entity, guaranteeing the operator’s decommissioning obligations under the agreement. The division shall establish the criteria for a corporate guaranty agreement.
(F) The additional security agreement shall remain in full force and effect until the date on which the decommissioning obligations have been satisfied, and the division has provided a written release of the operator’s obligations under the agreement, or until the agreement is terminated by the division pursuant to subparagraph (C).
(4) The division shall reevaluate whether self-insurance or a corporate guarantee approved under this subdivision continues to constitute an equally effective means of financial assurance at least once every three years, or upon a material change in the financial condition of the operator or guarantor entity, whichever occurs first.
(g) (1) Any two or more operators may elect to enter into a liability sharing agreement.
(2) Operators that elect to participate in a liability sharing agreement shall be jointly and severally liable for all amounts owed under this chapter by all other operators that participate in the liability sharing agreement.
(3) The division shall treat all operators that participate in a liability sharing agreement as a single operator when requiring additional security under this section, except that the additional security required by the division shall not exceed the lesser of the division’s estimation of the reasonable costs of plugging and abandoning all of the participating operators’ wells and decommissioning any attendant production facilities in accordance with Section 3208, or the applicable amount identified in subdivision (a).
(4) A liability sharing agreement is formed when all of the participants have provided the division written notice of intent to participate in the liability sharing agreement with express acknowledgment of all other participants in the agreement.
(5) An operator may elect to withdraw from a liability sharing agreement at any time, but all participants in the liability sharing agreement, including the withdrawing participant, shall continue to be jointly and severally liable for all amounts owed under this chapter for a period of five years after the withdrawal.
SEC. 4.
Section 3205.8 of the Public Resources Code is amended to read:3205.8.
(a) (1) Notwithstanding any other provision of this chapter, a person who acquires the right to operate a well or production facility, by purchase, transfer, assignment, conveyance, exchange, or other disposition, except a well that has an average daily production level that exceeds 15 barrels of oil or 60,000 cubic feet of natural gas during the 12 months preceding the date of acquisition or a natural gas storage well, shall, as soon as possible, but not later than the date when the acquisition of the well or production facility becomes final, file with the supervisor an individual indemnity bond for the well or production facility, or a blanket indemnity bond for multiple wells or production facilities, in an amount determined by the supervisor to be sufficient to cover, in full, all costs of plugging and abandonment, decommissioning of the facility, and site restoration pursuant to Section 3208 and regulations implementing this chapter.(2) A person who acquires the right to operate more than one well or production facility, by purchase, transfer, assignment, conveyance, exchange, or other disposition, or who operates more than one well or production facility 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. The blanket indemnity 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 for the difference in the amount.
(b) A person who intends to acquire the right to operate a well or production facility, by purchase, transfer, assignment, conveyance, exchange, or other disposition, shall submit a request to the supervisor for a determination of the amount of the bond required pursuant to subdivision (a) before completing the acquisition and shall not complete the acquisition until the determination is received and the bond has been filed with the supervisor.
(c) The supervisor shall determine the amount of an individual indemnity bond required pursuant to subdivision (a) based on the supervisor’s determination of the full costs of plugging and abandonment, decommissioning the facility, and site restoration using any reasonable method, including, but not limited to, consideration of the factors listed in subdivision (b) of Section 3205.3, or the cost estimation criteria described in subdivision (b) of Section 3205.7, or consultation with a contractor to obtain an estimate of the cost to plug and abandon the wells, decommission the facility, and complete site restoration. The supervisor shall determine the amount of a blanket indemnity bond required pursuant to subdivision (a) based on the sum total of combining the costs from the same determinations as individual indemnity bonds for each well or production facility covered by the blanket indemnity bond.
(d) (1) In lieu of the bond required to be provided pursuant to subdivision (a), the operator may, with the written approval of the supervisor, provide the required security through an equally effective means of financial assurance, which includes a deposit pursuant to Section 3205.5, an irrevocable letter of credit, a fully funded trust fund, a means of financial assurance listed in subdivision (f) of Section 3205.3, or any other equally effective means of financial assurance that has been approved by the division as described in paragraph (2). The required financial assurance may be obtained or funded by the transferor of the covered well.
(2) If an operator requests to use financial assurance listed in subdivision (f) of Section 3205.3, or any other equally effective means of financial assurance, the division shall approve the equally effective means of financial assurance in the same manner as described in paragraphs (1) to (3), inclusive, of subdivision (f) of Section 3205.3.
(e) (1) This section does not apply to a person who acquires the rights to a well or production facility for the sole purpose of plugging and abandoning that well or decommissioning that production facility. facility pursuant to Section 3205.9.
(2) This subdivision does not affect any other requirement of this chapter, nor does it relieve a person of any other responsibility pursuant to this chapter.
(3) A person shall not use a well or production facility acquired for the sole purpose of plugging and abandoning that well or decommissioning that production facility pursuant to Section 3205.9 for oil or gas production or injection. production, injection, gas storage, or any associated operation.
(f) (1) This section shall not apply to an operator with operator, or to a person who acquires the right to operate or control a well or production facility, if the operator of record has obtained and maintained additional security approved by the division pursuant to Section 3205.3. 3205.3 and if the conditions in paragraph (2) are met. As applied to any additional wells acquired by the operator or to a person who acquires the right to operate or control a well or production facility with preexisting additional security pursuant to Section 3205.3, the operator or the person who acquires the right to operate or control a well or production facility shall update the additional security pursuant to subdivision (e) or (f) of Section 3205.3. For purposes of this section, if the person acquiring the right to operate or control a well or production facility is not the operator of record, compliance by the operator of record with Section 3205.3 shall be deemed compliance by the acquiring person.
(2) The operator or a person who acquires the right to operate or control a well or production facility qualifies for an exemption pursuant to this section for any transferred well or facility if the following conditions are met:
(A) The operator has in place and has been in consistent compliance with an idle well management plan pursuant to paragraph (2) of subdivision (a) of Section 3206. In the event an operator at any time subsequent to the transfer is determined by the supervisor after an annual performance review to be out of compliance with the idle well management plan, the operator shall be required to provide the financial assurance required under subdivision (a) within 90 days.
(B) Notwithstanding subparagraph (A), an operator who operates or owns 10 or fewer idle wells may either have in place and be in consistent compliance with an idle well management plan pursuant to paragraph (2) of subdivision (a) of Section 3206 or be in consistent compliance with idle well fee requirements pursuant to paragraph (1) of subdivision (a) Section 3206. In the event an operator subject to this subparagraph at any time subsequent to the transfer to be determined by the supervisor after an annual performance review to be out of compliance with the idle well management plan or fails to pay idle well fees due, the operator shall be required to provide the financial assurance required under subdivision (a) within 90 days.
(C) The operator is in full compliance with any schedule or requirement established by the supervisor for submission or initial or revised reports pursuant to Section 3205.7.
(g) An operator who acquires a well under the exemption described in subdivision (f) shall update their additional security to reflect the added asset retirement obligations associated with the well within 36 months of the date of the acquisition to ensure that the financial assurance maintained by the operator continues to reflect the operator’s decommissioning obligations as determined by the division.
(h) This section does not relieve an operator or prior operator of their statutory liability to fully fund and execute the plugging and abandonment of a well, nor does this section limit the supervisor’s authority to pursue cost recovery, civil penalties, or other enforcement actions to protect state taxpayers.
(i) The department shall post on its internet website the information on all indemnity bond determinations made by the supervisor, and shall include for each determination the bond amount and calculations used.
SEC. 5.
Section 3205.9 is added to the Public Resources Code, to read:3205.9.
(a) (1) A person who has acquired the rights to a well or production facility for the sole purpose of plugging and abandoning that well or decommissioning the production facility for the purposes of redevelopment or satisfaction of obligations as a prior operator of record under subdivision (c) of Section 3237 shall not be subject to any of the requirements of Section 3205.8, but shall file a bond as required under Section 3204, 3205, 3205.1, or 3205.2, as(2) A person described in paragraph (1) shall be subject to the requirements of this chapter as an operator of the well or production facility, until either of the following occur:
(A) The supervisor determines that the well has been properly plugged and abandoned and the production facilities have been decommissioned in accordance with Section 3208.
(B) As applied to work conducted in accordance with the approvals given by the supervisor under Section 3229, the supervisor subsequently determines that additional work is not practical or would pose greater environmental or safety risk.
(3) Upon a determination by the supervisor pursuant to subparagraph (A) or (B) of paragraph (2), the supervisor shall release the bond, and the acquiring person shall have no further obligation or liability for the well or facility.
(b) Notwithstanding subdivision (a), a person who was responsible, under Section 3226 or 3237, as an owner or operator of the well or production facility before an acquisition described under subdivision (a), shall remain responsible for the well or production facility and any unfunded costs associated with plugging and abandonment of the well or decommissioning of the facility pursuant to Section 3208.
(c) Use of a well or production facility acquired under this section for purposes of oil or gas production or injection production, injection, gas storage, or any associated operation is prohibited.
(d) (1) A person acquiring the rights to a well or production facility for the sole purpose of plugging and abandoning that well or decommissioning the production facility for the purposes of redevelopment shall, before completing the acquisition, submit to the supervisor both of the following:
(A) A declaration, under penalty of perjury, stating that the acquisition is for the sole purpose of plugging and abandoning the well or decommissioning the production facility, facility for the purposes of redevelopment, a description of the redevelopment plan, including the zoning status of the property, and that the acquiring person does not intend to use the well or production facility for oil or gas production or injection. production, injection, gas storage, or any associated operation.
(B) A plugging and abandonment work plan that includes the anticipated timeline for commencing and completing plugging and abandonment or decommissioning operations.
(2) An acquiring person who submits a declaration pursuant to subparagraph (A) of paragraph (1) shall commence plugging and abandonment or decommissioning operations within 24 months of the date of acquisition, unless the acquisition. The supervisor may grant a 12-month extension if the supervisor determines that a longer period is warranted based on permitting timelines, site conditions, contractor availability, or other factors beyond the acquiring person’s control. factors.
(3) If an acquiring person fails to commence operations within the period described in paragraph (2), the supervisor may shall require the acquiring person to file financial assurance pursuant to Section 3205.8.
(4) This subdivision does not limit the supervisor’s existing authority to order an operator to plug and abandon a well and decommission facilities pursuant to this chapter.
(5) (A) An acquiring person shall provide to the supervisor at least once annually an update on progress toward completing the plugging and abandonment work plan pursuant to subparagraph (B) of paragraph (1). The supervisor may require more frequent updates at the supervisor’s discretion.
(B) If the supervisor determines that the person who has acquired the well or wells is not capable of plugging the wells within the timeframe established in paragraph (2), the supervisor shall notify the prior operator who is responsible for the plugging and abandonment under Section 3237 of the risk, and shall require the person who acquired the wells to post bonds consistent with Section 3205.8.
(e) No more than 100 wells or associated production facilities are eligible to be added to and participate in the redevelopment pilot program established in this section annually.
(f) For the purposes of this section, the following definitions apply:
(1) “Redevelopment” means redeveloping the property on which the well or production facility is located to a use unrelated to oil and gas development, production, waste disposal, or associated activity.
(2) “Redevelopment pilot program” means the authorization to exempt a person from the requirements of Section 3205.8 pursuant to the conditions of this section for purposes of redevelopment.
SEC. 6.
Section 3205.10 is added to the Public Resources Code, to read:3205.10.
(a) On and after January 1, 2028, and quarterly thereafter, the division shall(1) The number and location of wells and production facilities transferred pursuant to Section 3205.8, including transfers for which alternative financial assurance was provided in lieu of an indemnity bond. bond for the previous quarter.
(2) The number and location of wells and production facilities acquired for the sole purpose of plugging and abandoning that well or decommissioning the production facility pursuant to Section 3205.9, 3205.9 for the previous quarter, and the status of plugging and abandonment or decommissioning operations for those wells and facilities. facilities at the end of the previous quarter.
(3) A description of any wells or production facilities described in paragraph (1) or (2) that are located in, or within one mile of, a disadvantaged community as identified pursuant to Section 39711 of the Health and Safety Code.
(b) The information reported pursuant to this section shall be based on data available to the division and shall not require the division to conduct new studies or analysis beyond those already required under this chapter.
(c) The director and the supervisor shall annually attend a legislative hearing held by either the Senate Committee on Natural Resources and Water or the Assembly Committee on Natural Resources to report on well transfer activity, implementation and status of financial assurance for indemnification, the redevelopment pilot program established pursuant to Section 3205.9, and other related topics.
(d) (1) On or before January 1, 2032, the division shall prepare and submit a report to the relevant legislative policy and budget committees in both houses of the Legislature that includes, but is not limited to, the following information:
(A) The quarterly data required to be posted online pursuant to subdivision (a) compiled and reported by calendar year.
(B) The information required to be posted online pursuant to subdivision (i) of Section 3205.8 reported by calendar year.
(C) The current total liabilities reported pursuant to subdivision (a) of Section 3205.7, and the total amount of indemnity bonds or other financial surety provided to the division pursuant to Sections 3204, 3205, 3205.1, 3205.2, 3205.3, 3205.6, and 3205.8.
(2) A report submitted pursuant to paragraph (1) shall be submitted in compliance with Section 9795 of the Government Code.
(3) Pursuant to Section 10231.5 of the Government Code, this subdivision shall become inoperative January 1, 2036.
SEC. 7.
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.SEC. 8.
This act shall become operative only if Assembly Bill 2461 of the 2025–26 Regular Session is enacted and becomes effective on or before January 1, 2027.Text of AB 2716 as amended, from the official record. Connect Plus keeps every version and highlights what changed.Compare versions