Oil and gas: alternative to bond requirement: financial accounts.

Existing law establishes the Geologic Energy Management Division in the Department of Conservation, under the direction of the State Oil and Gas Supervisor, who is required to supervise the drilling, operation, maintenance, and abandonment of oil and gas wells, as provided. Among other requirements, existing law requires each operator, as defined, who engages in the drilling, redrilling, deepening, or in any operation permanently altering the casing, of a well, or who acquires a well, to file with the supervisor an indemnity bond, as specified. An operator who fails to comply with these requirements is guilty of a misdemeanor, as provided. This bill would establish a program in the division to permit a small, independent oil producer to establish a separate, privately owned financial account for the purpose of financing the costs related to ceasing operations or plugging and abandoning a well in lieu of maintaining a bond. The bill would require the division to establish the criteria for participation in the program. The bill would require the participants to contribute at least 5% of the annual revenues from oil operations to the account and would require the division to verify that a producer has made the required contribution by conducting an annual audit of supporting financial information. The bill would prohibit a participant from using moneys in the account for any purpose other than the costs of ceasing operations or plugging and abandoning a well. The bill would remove from the program a participant who uses moneys in the account for any purpose other than the costs of ceasing operations or plugging and abandoning a well and make that producer ineligible for the exemption from maintaining a bond. The bill would provide that a violation of these requirements is not a crime.