Overview
The California Department of Conservation, Geologic Energy Management Division (CalGEM) is embarking on the largest State Abandonment project in its history – the permanent and safe closure of approximately 171 orphan oil and gas wells and attendant production facilities in Santa Barbara County.
Site investigation, methane sampling, planning, and permitting commenced in Fall of 2022. Plugging commenced on January 30, 2023, and work is expected to occur through the end of 2024. CalGEM is working closely with state and local partners to ensure the project complies with all regulatory requirements. The project is the first State Abandonment project in California to receive orphan well remediation grant funding from the federal Bipartisan Infrastructure Law.
Current Status
As of July 17, 2023, 67 of the 171 wells included in the first phase of the HVI Cat Canyon State Abandonment project have been plugged. Work is ongoing and expected to continue through 2024. The work to remediate these wells also will include the proper closure and removal of associated pipelines and facilities.
Enforcement Background
In September 2021, CalGEM issued an Order to HVI Cat Canyon, Inc. to plug and abandon the 210 wells in the Casmalia, Cat Canyon, and Santa Maria Valley Oil Fields, decommission production facilities and restore lease and well sites pursuant to current state regulations. Most of these wells have been idle since before 2019, some as early as the 1980's.
HVI Cat Canyon Inc. is undergoing Chapter 7 bankruptcy. In 2020, the federal bankruptcy court approved a plan for HVI Cat Canyon's, including its wells. The end result: HVI Cat Canyon, Inc. (formerly Greka) left the state with approximately 210 orphan wells as a liability.
CalGEM classifies these wells, which no longer have a financially capable and compliant operator, as orphan. Because the wells are a potential danger to public health, safety, and natural resources, it is necessary to permanently seal them.
The 171 wells to be plugged and permanently sealed is the first phase of this State Abandonment project. The remaining 39 wells will be addressed separately as they may require more complex remedial work.
Location
The 171 wells and facilities are located in the Cat Canyon, Santa Maria Valley, and Casmalia oil fields in the northern section of Santa Barbara County near the cities of Santa Maria and Orcutt.
Timeline
- Order 1217 to Plug and Abandon Wells, Decommission Attendant Facilities, and Restore Well Site issued September 13, 2021
- Preliminary work started in the fall of 2022
- Plugging work commenced in early 2023
- Work expected to take approximately 2 ½ years to complete
What is the cost of the project and who is paying for it?
The estimated cost for the first phase of the HVI Cat Canyon State Abandonment project is approximately $36 million, which will be paid for by state and federal funding, after CalGEM seized a $1 million bond from the company and applied it to the work Much of the state funding is expected to come from sources derived from industry assessments and fees.
In July 2023, CalGEM revealed a draft expenditure plan to use state and federal funds to plug and abandon many orphan wells across the state. This plan includes the funds already set aside for the first phase of the HVI Cat Canyon State Abandonment project. You can learn more about the expenditure plan here. Public comment on the draft expenditure plan will be accepted through August 11.
The breakdown of funding for the HVI Cat Canyon State Abandonment project is as follows:
- The largest share of the decommissioning work -- $22.5 million -- is federal funding. Another $2.5M in federal funding will cover administrative costs and other work, such as unexpected costs and cultural and biological monitoring.
- $9,344,656 is coming from funds earmarked for well abandonment in the state budget.
- $2,850,825 is coming from assessments on the California oil and gas industry. HVI Cat Canyon had a $1 million bond that CalGEM seized and is part of the assessment funds. Additionally, CalGEM will continue to pursue cost recovery through the bankruptcy process and any other avenues available under state law.
Who should I contact if I have questions about the project?
For project questions, please contact the CalGEM Northern District at: CalGEMNorthern@conservation.ca.gov or the CalGEM Public Transparency Office at: CalGEMPublicTransparencyOffice@conservation.ca.gov.
Key Terms
Idle Well: a well that has not been used for two years or more and has not yet been properly plugged and abandoned (sealed and closed).
Deserted Well: a well that CalGEM has ordered to be permanently plugged but that is still awaiting a final determination as to whether there's a financially responsible current or former operator to pay for the work.
Orphan Well: a deserted well determined to have no legally responsible current or prior operator with sufficient financial resources to fully cover the costs of plugging and abandonment.
