On November 10, 2020, the Board of Supervisors directed the Resource Management Agency to propose Non-Coastal Zoning Ordinance (NCZO) and Coastal Zoning Ordinance (CZO) amendments that would: (1) limit new discretionary Conditional Use Permits for oil and gas operations to 15 years, (2) increase current County surety and insurance amounts for oil and gas compliance and restoration, and (3) incorporate measures that promote timely permanent plugging and restoration of oil and gas wells idle for 15 years or more.
Planning Commission Hearing
The Planning Commission conducted a hearing on these proposed ordinance amendments on July 28, 2022. However, a subset of public comments was unintentionally not included in the public record to the Planning Commission. Therefore, the Planning Commission is holding another hearing to consider this matter.
This hearing is scheduled for August 18, 2022, at 8:30 a.m. On August 11, 2022, at 5:00 p.m., the Planning Commission staff report will be available for public review on the Planning Commission’s meeting and agenda website https://vcrma.org/planning-commission
In preparation for the hearing, the proposed ordinance amendments are available for public review.
Frequently Asked Questions
- What are the objectives of the proposed ordinance?
- How many oil and gas wells are there in Ventura County, and how is the number of wells per operator determined?
- What is the State’s role in oil and gas operations versus the County’s role?
- Why is the 15-year permit expiration limit only being applied to new permits and not to existing oil and gas permits?
- What amount of bonding and insurance does the County currently require?
- What new sureties is the County proposing?
- Why is the County requiring surety for Long-Term Idle Wells as opposed to enforcing proper plugging and abandonment?
- Why does the County propose collecting an additional surety for Long-Term Idle Wells (LTIW) that are idle for 15 years or more when the definition for LTIWs are wells idle for eight years of more?
- Doesn’t the State already require sureties and insurances from oil and gas operators? Why does the County also require them?
- Why are there maximum surety amounts for the Well Abandonment Surety and the Long-Term Idle Well Abandonment Supplement Surety?
- What new insurance provisions is the County proposing?
1. What are the objectives of the proposed ordinance?
In November 2020, the Ventura County Board of Supervisors (BOS) directed the Resource Management Agency (RMA) to draft ordinance amendments to address three topic areas related to oil and gas operations in the unincorporated area: (1) limit new discretionary permits for oil and gas operations to 15 years; (2) increase the amount of compliance and site restoration surety and insurance from what is currently required; and (3) incorporate measures into the ordinance to assure the timely permanent plugging and restoration of oil and gas wells that have been inactive (referred to as “idle wells”) for 15 years or more.
2. How many oil and gas wells are there in Ventura County, and how is the number of wells per operator determined?
The State of California, under the direction of the California Geologic Energy Management Division (CalGEM) is required to track the numbers and type of wells operated by oil and gas companies. The County relies on CalGEM’s statewide reporting system, called WellSTAR (Well Statewide Tracking and Reporting system) Data Dashboard to determine wells per operator.
There are several different types of well which are defined below.
- Active wells are those that are drilled, completed and in use. The number of active wells in Ventura County: 1,679
- Deserted wells have been identified by CalGEM for operator failure to pay required idle wells fees or failure to respond to a plug and abandonment order. The number of deserted wells in Ventura County: 439
- Orphan wells have no financially viable operator of record either due to an operator’s bankruptcy and/or decision to relinquish a lease without complying with the requirement to properly plug and abandon the well(s). Orphan wells must be formally identified by CalGEM, and none have yet been formally identified as such in Ventura County.
- Idle wells have not produced oil or gas for 24 consecutive months or more. The number of idle wells in Ventura County: 2,267
- Long-term idle wells (LTIW) have been idle for eight years or more. The number of long-term idle wells in Ventura County: 1,520. The number of long-term idle wells that have been idle for 15 years or more in Ventura County: 1,275.
- Plugged and Abandoned wells are those that have been permanently sealed and closed pursuant to regulatory standards. The number of plugged and abandoned wells in Ventura County: 4,396.
3. What is the State’s role in oil and gas operations versus the County’s role?
Generally speaking, CalGEM is mandated to supervise the drilling, operation, maintenance and abandonment of oil, gas and geothermal wells within California. CalGEM has jurisdiction over plugging and abandonment of wells, collecting bonds for oil and gas operations under its state program, maintaining the Idle Well Management Program, issuing plugging and abandonment orders, and ultimately plugging and abandoning orphan wells.
The County Planning Division regulates above-ground operations through both the Non-Coastal Zoning Ordinance and the Coastal Zoning Ordinance. Both ordinances contain similar permitting provisions, which include but are not limited to, addressing setbacks, light and dust control, noise, signage, screening and fencing, waste handling, financial assurance requirements, accident reporting, site maintenance, condition compliance and restoration. The County also requires sureties and liability insurance for oil and gas operations.
4. Why is the 15-year permit expiration limit only being applied to new permits and not to existing oil and gas permits?
The term of existing permits is governed by the conditions in each individual permit and was established when the permit was granted by the County. As a general matter, terms of existing permits cannot be changed by the County except under limited circumstances. The 15-year permit expiration limit will therefore apply going forward to new or modified permits. If any existing permits seek renewal or modification that includes a time extension, this 15-year permit expiration limit would apply.
5. What amount of bonding and insurance does the County currently require?
Financial surety is intended to guarantee an operator’s performance of permit operations, compliance with conditions and other regulatory requirements including obligations such as well abandonment, equipment removal, and site restoration in the event the operator is unable or unwilling to perform them. Currently, County’s ordinances require:
- A bond of no less than $10,000 for each well that is drilled or will be drilled, or a blanket bond of $10,000 covering all of an operator’s oil and gas operations in the County of Ventura.
- An insurance policy that covers liability arising from oil and gas operations for personal injury and damage to property. Insurance coverage requirements are currently set at $500,000 for one person and $1,000,000 for all persons and $2,000,000 for property damage.
The County would release the sureties back to the operator after all regulatory requirements pertaining to proper well abandonment and site restoration have been met.
The proposed ordinance amendments increase both the bond and insurance requirements to better reflect the costs of oil and gas well plugging and abandonment, as well as costs associated with potential environmental damage caused by oil and gas operations.
6. What new sureties is the County proposing?
Three sureties that would all be used for different purposes are being proposed.
- Surface Restoration Surety
The purpose of the Surface Restoration surety is to establish funds for surface demolition, removal of structures and equipment, and restoration/remediation of both well sites and related facilities if the operator does not fulfill these requirements at the end of operations.
Planning Division staff is proposing that this surety be based on the number of wells, excluding properly abandoned wells that an operator has within unincorporated Ventura County, as shown below.
- 1-5 wells - $100,000
- 6-10 wells - $185,000
- 11-20 wells - $300,000
- 21-50 wells - $500,000
- 51-100 wells - $1 million
- 101-200 wells - $3 million
- 201-400 wells - $5 million
- 401+ wells - $10 million
To establish these proposed surety amounts, staff considered costs associated with a typical oil and gas site with ten wells and related equipment. The restoration costs for this type of site are approximately $184,000, as researched by staff for a facility restoration in southern California. The surety amounts are roughly half for operators with fewer wells. Surety amounts for the larger well groupings assume that economies of scale would be realized, thus resulting in lower per well restoration costs.
- Well Abandonment Surety
This surety reflects the likelihood that some wells in unincorporated Ventura County will be orphaned and that the State will lack adequate resources to properly plug and abandon them in a timely manner. Planning Division staff is recommending this surety to address the negative impacts that orphaned wells can pose to the environment, human health and safety, and the potential impairment of subsequent use or redevelopment of the affected land.
The cost to plug and abandon a well can vary significantly depending upon many factors, including location, well depth, and the technical complexities necessary to properly enter and seal a well. To estimate costs for Ventura County’s purposes, staff considered payments made by CalGEM to contractors to plug and abandon a total of 50 orphaned wells throughout the state between 2017-2019. These plugging and abandonment costs (i.e., contractor payments) averaged approximately $143,300 per well. Based on this value, the proposed surety amount is $36,000 per well not to exceed $5 million for any single operator. This surety would provide approximately 25 percent of the estimated cost to plug and abandon a well and is intended to supplement the bond amounts collected by CalGEM, which are likely to be insufficient on their own to cover the cost of plugging and abandoning orphaned wells.
- Long-term Idle Well Supplement Surety
The BOS directed staff to “incorporate measures [into an ordinance] to assure timely permanent plugging and restoration of oil and gas wells that have been idle for 15 years or more.” Planning Division staff is recommending a requirement that operators provide a supplemental bond of $15,000 for each Long-term Idle Well (not to exceed $5 million for any individual operator) that has been idle for 15 years or more. This supplemental bond amount may be combined with the amount of an operator’s Well Abandonment Surety for wells that require both types of sureties.
7. Why is the County requiring surety for Long-Term Idle Wells as opposed to enforcing proper plugging and abandonment?
8. Why does the County propose collecting an additional surety for Long-Term Idle Wells (LTIW) that are idle for 15 years or more when the definition for LTIWs are wells idle for eight years of more?
The BOS directed staff to evaluate additional regulatory measures for wells that have been idle for 15 years or more. This additional surety accounts for the increased likelihood that these wells will be deserted or orphaned without being property plugged and abandoned.
9. Doesn’t the State already require sureties and insurances from oil and gas operators? Why does the County also require them?
The sureties collected by CalGEM represent a fraction of the costs necessary to plug and abandon a well and are not sufficient to plug and abandon all wells that may become orphan wells (i.e., those wells that have no financially viable operator). CalGEM does not require that operators procure insurance for oil and gas operations. The County has the authority to require increased insurance and financial security obligations on new and existing operations to help ensure permit compliance, proper site restoration, and proper plugging and abandonment.
10. Why are there maximum surety amounts for the Well Abandonment Surety and the Long-Term Idle Well Abandonment Supplement Surety?
Based on the existing numbers of idle wells in the County reported by CalGEM, three operators would be required to provide the $5 million maximum Well Abandonment Surety and only one operator would be required to provide the $5 million maximum Long-term Idle Well Supplemental Surety. If no maximum was proposed, the surety obligations (for the three largest operators) would range from approximately $21 million to approximately $63 million. Added to these two sureties are costs for increased insurance coverages and the Surface Restoration Surety. Planning Division staff worked to establish sureties that consider the costs of restoration and plugging and abandonment, the risks that idle and orphan wells pose to public health and the environment, the likelihood that LTIWs may become orphaned, and sureties collected by the state, while recognizing the financial obligations that would be borne by operators.
11. What new insurance provisions is the County proposing?
The Board directed Planning Division staff to recommend updated insurance requirements. Planning staff consulted with the CEO’s Risk Management Office and other insurance experts to evaluate insurance coverages and these discussions resulted in the following recommended insurance requirements.
General Liability for Oil & Gas Businesses: General Liability, with at least $2,000,000 each occurrence and $4,000,000 general aggregate;
Environmental Impairment: Pollution Liability Policy with coverage not less than $10,000,000. Coverage shall apply to sudden and gradual pollution conditions resulting from the escape of release of smoke, vapors, fumes, acids, alkalis, toxic chemicals, liquids, or gases, natural gas, waste materials, or other irritants, contaminants, or pollutants (including asbestos) written on an occurrence basis.
Control of Well: (initial drill or well modification) coverage of a minimum of $10,000,000 per occurrence; it is designed to cover cost of controlling a well that is out of control, drilling or restoration expenses, and seepage and pollution damage.
Excess (or umbrella) Liability Insurance: Minimum limit of $25,000,000 provided excess coverage for each of the perils insured by the preceding insurance policies.
Planning Staff Contact:
Shelley Sussman, General Plan Implementation Section Manager