Big oil whines as in-state oil drilling winds down | Opinion

Make no mistake, it’s not state regulators who are responsible for the reduction in oil production here.

California is also not unique in forcing oil well owners to plug or cap their wells and clean up the environment around them when production stops. For one example, Republican-run North Dakota — known for awhile as a fracking boom state — forces companies to cap wells when they have not produced for a year.

So what is Chevron really whining about in its recent report to the Securities and Exchange Commission? It will have to pay about $112,000 in capping costs for each exhausted oil well it ceases to operate, plus a wide range of expenses for cleaning up surface contamination that in some cases has built up over almost a century.

The company is on the hook for at least $1 billion in close-out costs for wells it has long exploited. But let’s not feel too sorry for this corporation: It made near-record profits on gasoline products in 2023, and set a record in the third quarter, between July and September, when it averaged margins of about $1.03 per gallon on gas from its two huge refineries at Richmond and El Segundo.

Chevron’s problems with well closures are not unique. Fully 3,708 California oil wells were plugged in 2022, the last year for which numbers are yet available, of which a bit more than one-fourth belonged to Chevron. That means other drillers are also in line for billions in closure costs.

One recent report from the London-based think tank Carbon Tracker says Big Oil has been looking to sell off older wells to smaller drilling operations over the last few years, partly to fob closing costs off on them. There have been few takers.

The Carbon Tracker report concludes that California’s onshore oil wells might produce as much as $2.6 billion in revenues in their remaining lifetimes, but will cost at least $6.3 billion to plug and clean up.

Because oil companies probably can’t be forced to pay all that, chances are taxpayers will end up paying much of the shutdown costs, Carbon Tracker claims.

But the companies will be forced to pay a significant amount, no matter how much they protest (all this is separate from what the companies will spend this fall on a ballot referendum trying to kill a new law that aims to ban much drilling near schools and other sensitive sites.)

The figures on declining oil production make it clear the closure costs are not very far off in the future, or, as Chevron put it, not very far “upstream.”

Since 2014, onshore oil production here has decreased by 42 percent, with production from gas wells falling even farther. Right now, state statistics show a major decline in new drilling, too. Where 113 new oil drilling permits were issued in the last quarter of 2022, there were none in 2023’s final three months.  Permits to rework or redrill old wells were also down in the last months of last year, from 466 in 2022 to 28 in 2023.

Meanwhile, state data shows California now has more than 101,000 unplugged wells. Some wells Chevron lists as operating produce as little as three to five barrels of crude oil daily, about enough to fill five Ford pickups once.

So yes, there are plenty of closure costs in the future for Chevron and its brethren. But these costs were known well in advance, and it’s simply not fair for any oil company to blame California for them, trying to foist its own poor planning onto state regulators or an allegedly unfriendly business environment.

Thomas D. Elias is a freelance political writer whose column appears in newspapers throughout California. Email him at tdelias@aol.com.