The Fossil Fuel Phase-Out's Multi-Million Dollar Problem: An Environmental Justice Analysis Of Idle Oil Well Management in California.

• Author: Heye, Lydia

TABLE OF CONTENTS INTRODUCTION A. Idle Wells in California B. Environmental and Health Risks of Idle Wells I. Analysis of California's Idle Well Program A. Current Laws and Regulations of Idle Wells B. Outline of the Environmental Justice Frameworks C. Assessing the Current California Regulations for Idle Well Management Through an Environmental Justice Lens 1. Distributive Justice 2. Procedural Justice 3. Corrective Justice 4. Social Justice II. PROPOSALS A. Increase Idle Well Fees B. Increase Indemnity Bond Amounts C. Add Cumulative Impacts to CCR [section] 1772.4 Considerations D. Allow for Public Comment on Critical Prioritization Decisions CONCLUSION INTRODUCTION

To properly assess CalGEM's updated regulations and current laws for idle well management, an understanding of the current idle well problem is necessary. The following Subpart will provide an overview of the current idle well situation in California and the environmental risks associated with idle wells. This paper will address the two processes of cementing a well and restoring a drill site: "plugging and abandonment" and "decommissioning," or "plugging and decommissioning." According to California Public Resources Code (PRC) section 3208, a well is properly abandoned when, "it has been shown ... 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 ... from the infiltration or addition of any detrimental substance and to prevent subsequent damage to life, health, property, and other resources." Under CCR section 1760(d), "decommission" means to safely dismantle and remove a production facility and to restore the site where it was located.

1. Idle Wells in California

   Although California is the seventh largest oil producer in the United States and has the fifth largest share of crude oil reserves, oil production has declined nearly sixty percent since its peak in 1985. (13) This is in large part due to the increased demand for natural gas, which is cheaper than gasoline, made from heavy crude oil. (14) When an operator decides that production costs outweigh the profit from production, an operator is likely to temporarily abandon the well, rendering it idle. (15) An idle well is defined as an oil well that has not produced oil or gas for twenty-four months or more. (16) As of 2018, there were about 229,000 oil and gas wells in the state of California. (17) Of those, around 122,000 have already been plugged, and the remaining 107,000 are active or idle. (18) In the city of Los Angeles alone, there are roughly 819 active wells, 296 idle wells, 3,181 plugged wells, and 933 buried wells. (19) Between January and April 2019, nearly 800 wells became idle throughout the state, and only two of those wells had been given a return to use (RTU) date before April 1, 2020.20 There are currently almost 1,500 idle wells that have been idle for 100 years or more within the state of California. (21)

2. Environmental and Health Risks of Idle Wells

   There is generally a poor understanding of the environmental and health risks relating to idle wells. (22) However, there is enough evidence to show that idle wells pose a significant risk to both the environment and the surrounding community.

   Overall, there are three main threats to public health, safety, and the environment associated with idle wells. First, idle wells have the potential to contaminate groundwater. Methane, oil, brine, radionuclides, or surface level pollutants can leak out and contaminate freshwater aquifers when a well's cement or casings have degraded. (23) For example, in 2018, the Environmental Protection Agency (EPA) was notified of several abandoned wells on Navajo Nation lands that were bubbling water at the surface. After some testing, it was confirmed that the wells contained dangerous levels of benzene, chloride, arsenic, and sulfate. Properly plugging these wells would "require major funds," according to the Navajo Nation Environmental Protection Agency. (24) Rather than plug the wells, the local community was advised to not drink the water. (25) Second, unplugged idle wells can continue to emit methane gas, a potent greenhouse gas directly contributing to climate change. (26) Nationally, abandoned oil and gas wells emitted roughly 281 kilotons of methane in 2018.27 In some cases, the gases emitted from these idle wells have caused explosions. (28) Idle wells, such as those in Arvin--a city in Kern County, California--have been known to emit methane from their pipes and casings. For instance, in 2014, flames shot out of wall sockets in a home from explosive levels of gas leaking from a pipe at the end of the block. (29) The leak left strong odors and has left the residents with lingering headaches. (30) In 2019, at a construction site in Marina del Rey, California, a nearly ninety-year-old abandoned well exploded sending a "geyser of gas and dirt 100 feet into the air." (31)

   Third, idle wells, particularly orphaned wells, can still have old equipment present at the site, contaminated soil from spills, and other waste on the surface. (32) These pose safety hazards, particularly for sites located close to residential neighborhoods, farms, or schools.

   1. ANALYSIS OF CALIFORNIA'S IDLE WELL PROGRAM

   This Part will provide an overview of current regulations and laws around idle wells in California and a brief introduction to environmental justice. It will go over the environmental justice theoretical framework that will be used to assess the current laws and regulations. It will then apply the environmental justice framework to CalGEM's latest idle well regulations to assess their strengths and weaknesses.

1. Current Laws and Regulations of Idle Wells

   Prior to drilling or acquiring a well, an operator must provide to the State a type of a security, called an indemnity bond. (33) The amount of the bond for an individual well depends on the depth of the well ($25,000 for wells that are less than 10,000 feet deep, and $40,000 for wells that are 10,000 feet deep or more). (34) However, if an operator is drilling or altering (35) twenty or more wells at any time, then the operator can instead file a blanket indemnity bond. (36) Under PRC section 3205(a), an operator can file a blanket indemnity bond of $200,000 for up to 50 wells in the state, $400,000 for up to 500 wells, $2 million for up to 10,000 wells, and $3 million for more than 10,000 wells. This means that operators with more wells are paying less per well than if they had filed indemnity bonds for each individual well (e.g., an operator with 200 wells pays $400,000 under the blanket indemnity bond but would pay $5 million to $8 million depending on the well depth for individual indemnity bonds for each well). These bonds are released upon properly abandoning the operator's wells. (37)

   If the operator files for bankruptcy, it relinquishes its leases, and the costs for properly plugging and decommissioning the orphaned wells fall on the state or local government. (38) The State can then use the operator's indemnity bond to fund the process of properly abandoning the well. However, the bond itself is rarely enough to cover the costs of plugging and decommissioning an orphaned well. The cost for onshore plugging and decommissioning varies based on several factors, such as the location and age of the well. (39) The average cost of plugging and abandonment ranges from $40,000 to $152,000 depending on the CalGEM district. It costs nearly three times as much to plug and abandon idle wells in the CalGEM Southern District, which is more densely populated than other districts. (40)

   In the short-term, it is significantly cheaper for operators to keep their wells idle than to properly plug and decommission them. (41) When an operator decides to maintain an idle well, they must pay annual idle well fees unless they have filed an Idle Well Management Plan (IWMP). (42) The annual fees range from $150 to $1,500, depending on how long the well has been classified as idle. (43) These funds go into the Idle-Deserted Well Abatement Fund, which the State can use to help cover the cost of properly abandoning orphaned wells. These funds are currently insufficient to cover the cost of plugging and abandoning orphaned wells in the State. (44) In 2018, the State received $4.3 million in idle well fees, though it is estimated that it will cost the State $500 million to plug and abandon orphan wells. (45)

   An operator can instead decide to file an IWMP to manage or eliminate their long-term idle wells, and thus not be subject to the annual idle well fees. (46) An operator can file an IWMP to show the State that it will plan on properly abandoning its long-term idle well, that the well has maintained production of oil or gas, or that the well had been used for injection for a continuous six months since becoming idle. If the operator decides to eliminate its long-term idle wells, then the annual rate at which it must reduce (plug and decommission) its wells depends on the number of wells it has in the state. If an operator has 250 or fewer wells, then the operator must reduce 4 percent of its long-term idle wells annually, 5 percent for operators with up to 1,250 wells, and 6 percent for operators with 1,250 or more wells.

   Alternatively, an operator can file an Idle Well Testing Waiver Plan to schedule the plugging and abandonment of its idle wells for up to eight years in the future in exchange for a waiver from the testing requirements discussed below. At least 10 percent of the idle wells covered in the plan must be plugged and abandoned each year. The operator must also prioritize certain wells based on considerations in CCR section 1772.4.

   CalGEM recently updated their regulations regarding idle well management to include provisions requiring an idle well Testing Compliance Work Plan. (47) The regulations require that all...