Southwest California Legislative Council letter of OPPOSITION to AB 2729. Making gas and oil more expensive, trying to shut down more wells, cost the state more money

1. April 19, 2016
The Honorable Das Williams
California State Assembly
Sacramento CA 95814
RE: AB 2729 (Williams) Oil and gas: operations
Position: OPPOSE
The Southwest California Legislative Council is an advocacy coalition comprised of representative
members of the Temecula Valley, Murrieta, Wildomar, Menifee Valley, Lake Elsinore Valley and Perris
Valley Chambers of Commerce representing more than 3,500 employers dedicated to promoting job
growth, economic expansion, and preserving the overall global competitiveness of California.
The SWCLC must respectfully OPPOSE AB 2729 , which the California Chamber of Commerce has
labeled a JOB KILLER. AB2729 could bankrupt oil and gas operations in California. AB 2729 would not
improve the idle well environment and, as written, would actually increase the state’s exposure for
plugging and abandonment by encouraging small operators to relinquish their wells to the state.
The Division of Oil, Gas and Geothermal (DOGGR) has regulations in place to ensure that idle wells
are not negatively impacting the public or the environment. Further, DOGGR currently implements a
robust idle well testing program to ensure mechanical integrity and requires prompt repair or
abandonment of idle wells that do not demonstrate a high integrity standard. AB 2729 would greatly
expand the definitions of idle wells and observation wells, needlessly inflating the cost, scope, and
complexity for operators and DOGGR. Provided crude prices returned to 2014 levels, the industry still
would not be in the position to meet the expense of the proposed increase in fees. The bill sets punitive
fees 35 times higher than what they are today, up to $10,000 per well.
The fee increases go beyond what is reasonable to oversee the idle well program. Excessive fees
could force operators to prematurely plug wells and abandon mature fields, without any benefit to the
environment. Fees must be tied to the government services provided and should be raised only for idle
wells that show a lack of integrity.
AB 2729 would require more intrusive re-entry into idle wellbores, which would increase greenhouse
gas emissions, hamper future development, and add unnecessary costs. The proposed measure would
also require operators to plug and abandon 25% of their idle wells each year, regardless of their
demonstrated integrity. This would dramatically increase costs for operators and impede or even
eliminate redevelopment of many mature fields. This is completely arbitrary and is not based on any
threat to public safety or the environment. Many wells are kept idle due to competing investment
opportunities elsewhere.
Oil and gas producers are like every other business, they don’t have unlimited access to capital and
have to prioritize projects they can pursue. Often, wells are kept idle to give the operator enough time to
develop the capital resources necessary to properly reactivate a well site. Forced plugging essentially
equates to a property taking in cases where operators are maintaining the wells in an idle state until

2. such time as they can develop the capital necessary for reactivation. Excessive fees also force
operators to redirect capital that could be otherwise put toward investment and projects that generate
jobs and expand domestic energy production in California.
Unfortunately, the bill has substantial costs and would encourage small operators to relinquish their
wells to the state, and disincentivize potential investors from redeveloping mature fields to the benefit of
the state, counties and mineral owners. Idle wells are assets. Often facilities are acquired specifically
because there are idle wells included since reactivating idle wells are a fraction of the cost of drilling
new wells. If this bill had been in effect in the 1990s, California in-state production of oil would be a
fraction or what it is today because the idle wells that were successfully reactivated by independents
over the last two decades would have been lost by premature forced abandonment.
Reactivating idle wells requires less ground disturbance than drilling new wells and is environmentally
preferred. AB 2729 calls for an increase in indemnity bonds in January of 2018 for a person acquiring
the right to operate a well or production facility for each well, however just two years ago the bond level
was doubled by SB 665 (Wolk); the Legislature rejected the higher proposed increases and settled on
doubling the rate.
The bill does not recognize that orphan well abandonment is paid for by industry, not the state. No
general fund revenue is ever used. By creating a whole new class of orphan wells, AB 2729 would
require the state to plug and abandon far more wells than it has ever had to address under current
regulations.
For these and other reasons, the Southwest California Legislative Council must OPPOSE AB 2729
(Williams) and ask for your 'NO' vote when it comes before you for consideration.
Respectfully,
Don Murray, Chair Gene Wunderlich, Legislative Liaison
dmurray@commercebanktv.com gad@swcaladvocacy.com
cc:
Assembly Member Das Williams 916.319.2137
Assembly Committee on Appropriations 916.319.2181
Assembly Member Jimmy Gomez, Chair 916.319.2151
Assembly Member Frank Bigelow, Vice Chair 916.319.2105
Assembly Member Melissa Melendez 916.319.2167 951.894.5053
Assembly Member Marie Waldron 916.319.2175 760.480.7516
Assembly Member Chad Mayes 916.319.2142
Assembly Member Brian Jones 916.319.2171
Assembly Member Eric Linder 916.319.2160
Assembly Member Jose Medina 916.319.2161
California Chamber of Commerce 916.325.1272