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California taxpayers could be stuck with paying $6.9 billion to close and clean up oil wells [1]
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Date: 2023-05-18
Big Oil Resistance Tour in Sacramento on Saturday, May 13. Photo by Dan Bacher.
The supposedly “green” state of California could be facing a $21.5 billion tab to decommission oil company sites and infrastructure, $13.2 billion of that to clean up the oil wells, if mechanisms are not in place to ensure polluters cover the costs themselves, a new report out today from CarbonTracker reveals.
The report. “There Will Be Blood: Decommissioning California’s Oil Fields, finds that even if all projected profits of these companies were utilized for clean up, taxpayers would still be left with a $6.9 billion bill. The report comes as oil companies and refiners report record-high profits in recent quarters.
In response to the report’s release, advocates are calling for the immediate passage of AB 1167, legislation that will ensure oil companies secure bonds for full clean up of wells when transferring ownership, as well as an end to oil and gas subsidies.
“Companies like Chevron, that own the most wells in California, tripled their profits in 2022, and benefit the most from tax breaks and subsidies, have more than enough money to pay for clean up costs,” according to a press statement from advocacy groups. “Additional policies are needed to ensure Californians are not on the hook for cleaning up oil and gas sites.”
“California consumers have been subsidizing oil and gas with their tax money and their health from the production, refining, and combustion of oil and gas,” said Liza Tucker, Consumer Advocate with Consumer Watchdog. “The tab to California, based on Consumer Watchdog’s extensive research, shows that the true cost to the public of California’s oil and gas production and combustion is estimated to reach $10 Trillion by 2045.”
“It is high time to stop subsidizing oil and gas by continuing to incur staggering future public costs,” continued Tucker. “Oil companies want to leave Californians with the tab for closing wells and cleaning up the environmental damage or are offloading wells right now smaller players without the financial wherewithal to close wells later. Californians should not be left holding the bag for tens of billions of dollars to plug wells. Increasing bonding amounts to appropriate levels in legislation—and measures to ensure that when wells are offloaded by oil companies, bonds are put up close to those wells later—is critically important.”
“Big Oil has polluted our land, water, air, communities and our political system for their benefit,” said Ilonka Zlatar with the Oil and Gas Action Network. “Governor Newsom has begun to hold them accountable for price gouging Californians, but they continue to benefit from tax breaks while reaping record profits and skirting responsibilities of cleaning up and properly plugging wells which keep our communities sick. There is no reason to continue giving tax breaks to Big Oil, they should be paying for the damage they have caused.”
According to the report, California’s oil and gas producing resources have been in overall decline for nearly four decades, but the industry turned a corner downward with the price collapse of 2015.
“The inherent cyclicality of the commodity markets overlapped with the intrinsic depletion of the aged resource base and accelerated the decline of the onshore industry. Since 2014, onshore oil production in California has decreased by 42%, and production from gas wells has dropped even further,” the report notes.
“More importantly, for the first time in decades, new drilling slowed, and the number of actively producing wells also declined even before increasing political pressure,” the report said.
“Several sources of funds for decommissioning do exist, but the total falls far short of the money required. Oil and gas companies have provided $106 million in financial assurance for onshore wells, less than one percent of their overall closure and clean-up costs. An estimated $265 million in state and federal taxpayer money has been allocated to pay for costs inherited from defunct oil companies. Taxpayers are on the hook for much more than industry has set aside, and the remaining unfunded liability is dozens of times larger than these existing funds,” the group wrote.
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