State Regulators Decline to Mandate Cleanup Bonds for Oil Merger

California state regulators have opted not to require California Resources Corp. and Aera Energy to set aside an estimated $2.4 billion in bonds for the cleanup of idle oil wells following their recent merger. This decision has raised concerns about the potential financial burden on taxpayers, as the state’s oil and gas wells, particularly those that are unplugged, pose significant risks to public health and contribute to climate change. The legislation, known as the Orphaned Well Prevention Act (AB 1167), was designed to ensure that companies set aside funds for cleanup when transferring ownership of wells. The merger between California Resources and Aera has resulted in the formation of the largest oil company in California, controlling approximately 16,000 idle wells—40% of the state’s total. These wells, which neither produce oil nor have been plugged, are at a heightened risk of becoming orphaned, meaning they could be left without responsible parties for their cleanup. Despite the merger's implications, the California Geologic Energy Management Division concluded that the bonding requirements did not apply due to the structure of the deal, which maintained the same operator for the wells. Critics of the decision highlight that the merger leaves both companies with over $1 billion in impending cleanup costs. Aera has also been active in lobbying efforts, spending around $250,000 in the first quarter of the year, which included lobbying related to the implementation of AB 1167. Governor Gavin Newsom, who signed the legislation, has not publicly commented on the agency's interpretation of the law or its implications for the merger.