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Environmentalists Fear Oil Company Bankruptcy Could Strand SoCal’s Idle Wells

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Some of the 2,000 idle oil wells owned by California Resources Corporation in Orange and LA Counties. (Screenshot of map compiled by Center for Biological Diversity using the CA CalGEM oil database)
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The owner of more than 2,000 idle oil wells in Southern California declared bankruptcy this week, raising fears among environmentalists that those wells might never be properly sealed.

The local petroleum industry has been in decline for years, because what little oil remains underground is expensive to extract. But as those old wells sit idle and unsealed, they present a potential pollution hazard to drinking water underground and people living nearby.

In 2014, Los Angeles-based Occidental Petroleum spun off ownership of about 7,000 idle wells to a new company, called California Resources Corporation. About 2,000 are in Southern California, grouped near shorelines in Huntington Beach, Long Beach, and Wilmington and along the Santa Clara River in Ventura County. (This map shows their locations.)

On Wednesday, CRC filed for bankruptcy in order to restructure its debt. Spokeswoman Margarita Thompson said the filing acknowledges CRC’s legal obligations to cover the shutdown costs of the wells.

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She added that the company is up to date on its payment for indemnity bonds for its idle wells, which is a form of insurance that would pay to close the wells if the company went under.

But environmentalists now want Gov. Gavin Newsom to intervene to make sure the company sets aside enough money to seal old wells, or push former owner Occidental Petroleum to do so.

“It's not supposed to be the case that oil and gas companies can shed their environmental cleanup responsibilities and obligations in the bankruptcy proceedings,” said Kassie Siegel of the Center for Biological Diversity.

She says the industry has set aside only a fraction of the money needed to permanently shut down idle wells. The California Council on Science and Technology estimates some $550 million is needed to permanently seal so-called “orphan wells” whose owners went broke.

An idle well is one that hasn’t been used in two or more years. There are some 35,000 idle wells in California, and if improperly closed, the hydrocarbons can leak into water aquifers or the air. When oil companies close or go broke, if they don’t have the money to permanently seal the wells, that obligation falls to the state.

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