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SB-1147 Offshore oil and gas wells.(2017-2018)

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Date Published: 05/25/2018 09:00 PM
SB1147:v97#DOCUMENT

Amended  IN  Senate  May 25, 2018
Amended  IN  Senate  April 09, 2018

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Senate Bill No. 1147


Introduced by Senator Hertzberg

February 14, 2018


An act to add Sections 3205.6, 6217.9, and 6829.3 to the Public Resources Code, relating to oil and gas.


LEGISLATIVE COUNSEL'S DIGEST


SB 1147, as amended, Hertzberg. Offshore oil and gas wells.
(1) Existing law requires a person engaging in the drilling, redrilling, deepening, or in any operation permanently altering the casing, of one or more wells located in submerged lands under ocean waters within the jurisdiction of the state to file with the State Oil and Gas Supervisor a blanket indemnity bond for a specified amount to cover all of the operator’s operations in any of those wells. Existing law requires a person who operates one or more of those wells to provide an additional amount of security acceptable to the supervisor covering the full costs of plugging and abandoning all of the operator’s wells.
This bill would require the supervisor, before January 1, 2020, to evaluate and estimate the costs associated with the decommissioning of offshore oil and gas wells under its jurisdiction and, if necessary, to develop a schedule to increase the bond amounts or other financial surety provided by an operator of an offshore oil or gas well to ensure sufficient moneys are available to the state to decommission the well if no other entity is responsible for those decommissioning costs.
(2) Existing law establishes the Oil Trust Fund in the State Treasury and appropriates the money in the fund to the State Lands Commission commencing when specified requirements are met. Existing law requires the Controller to transfer certain oil-revenue-related moneys to the fund. Existing law requires the commission to expend the money in the fund to finance the costs of well abandonment, pipeline removal, facility removal, remediation, and other costs associated with removal of oil and gas facilities from specified tidelands.
This bill would establish the Offshore Infrastructure Decommissioning Fund and would require that the commission, upon appropriation by the Legislature, expend moneys in the fund only to finance only the costs of well plugging and abandonment, pipeline removal, facility removal, remediation, decommissioning, or other costs associated with the removal of oil or gas facilities that are not the responsibility of another entity from California’s tidelands. The bill would provide that both (A) oil and gas interests and operations subject to the provisions establishing the Oil Trust Fund and (B) contingent on specified conditions being met, the lessee of other specified leases are exempt from contributing to the Offshore Infrastructure Decommissioning Fund. The bill would require the commission to seek additional infrastructure bonding, as feasible, under its jurisdiction when lease terms are negotiated or renegotiated for offshore oil and gas leases.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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


SECTION 1.

 The Legislature finds and declares all of the following:
(a) Due to the recent bankruptcies of two independent oil companies, the state faces costs of at least $100,000,000 to prepare to remove and decommission offshore oil and gas wells and associated infrastructure.
(b) The existing bonding for Platform Holly and Rincon Island is inadequate to meet the related necessary decommissioning costs, and efforts to obtain additional moneys under lease transfer terms will be subject to negotiation and possible litigation and are unlikely to fully cover all of the state’s costs.
(c) Given their inclusion in the California Coastal Sanctuary, and the age of the associated oil and gas fields and infrastructure, additional nonwell infrastructure bonding may not be readily available.
(d) Additional actions are needed to ensure the state is not financially responsible for the decommissioning of private oil and gas infrastructure.

SEC. 2.

 Section 3205.6 is added to the Public Resources Code, to read:

3205.6.
 (a) Before January 1, 2020, the supervisor shall do both of the following:
(1) Evaluate and estimate the costs associated with the decommissioning, including plugging and abandonment pursuant to Section 3208, of the offshore oil and gas wells under its jurisdiction.
(2) If necessary, based on the estimates made pursuant to paragraph (1), develop a schedule to increase the bond amounts or other financial surety provided by an operator of an offshore oil or gas well to ensure sufficient moneys are available to the state to decommission the well if no other entity is responsible for those decommissioning costs.
(b) The supervisor shall coordinate with the State Lands Commission to ensure the actions taken pursuant to this section and Section 6829.3 are not duplicative. duplicative and are consistent with Section 3205.1.

SEC. 3.

 Section 6217.9 is added to the Public Resources Code, to read:

6217.9.
 (a) The Offshore Infrastructure Decommissioning Fund is hereby established in the State Treasury.
(b) Upon appropriation by the Legislature, the commission shall use the moneys in the fund only to finance only the costs of well plugging and abandonment, pipeline removal, facility removal, remediation, decommissioning, or other costs associated with the removal of an oil or gas facility that is not the responsibility of another entity from California’s tidelands.
(c) (1) Oil and gas interests and operations subject to Section 6217.8 are exempt from contributing to the fund established pursuant to subdivision (a).
(2) Provided State Oil and Gas Lease Nos. PRC 91, PRC 163, PRC 425, PRC 426, and PRC E-392 remain in full force and effect and the lessee is in good standing, the lessee of State Oil and Gas Lease Nos. PRC 91, PRC 163, PRC 425, PRC 426, and PRC E-392 is exempt from contributing to the fund established pursuant to subdivision (a) while the lease terms and conditions in effect on January 1, 2018, remain in effect.

SEC. 4.

 Section 6829.3 is added to the Public Resources Code, to read:

6829.3.
 (a) The commission shall seek additional infrastructure bonding, as feasible, under its jurisdiction when a lease term is negotiated or renegotiated for an offshore oil or gas lease.
(b) The commission shall coordinate with the State Oil and Gas Supervisor to ensure the actions taken pursuant to this section and Section 3205.6 are not duplicative.