Idle Wells

California Resources Corporation (CRC) has the largest mineral acreage position in California with the most diverse operations. Many of our fields have stacked pay, with thousands of feet of hydrocarbon-bearing formations. CRC operates long-lived assets that produce for decades and enable us to progress along the value chain from primary recovery to waterfloods to tertiary recovery. All wells, whether active or idle, are valuable assets that reflect the value of the labor and materials used in well construction to access oil and gas formations. Both active and idle wells have an essential role in our life of field planning, since they enable us to access formations through existing well bores and facilities – thereby reducing our surface footprint, energy use and emissions. 

Plugging and Abandonment of Idle Wells

In California, an idle well is defined as a well that has not been used for two years or more and has not yet been plugged and abandoned. Plugging and abandonment involves permanently sealing the well to isolate the subsurface hydrocarbon-bearing formation, so oil and gas can no longer flow through the well bore. Retaining a well in idle status for future reactivation in oil and gas production, subsidence control or geologic energy storage, instead of plugging and abandoning it, enables safe and efficient access to subsurface formations without the need to drill and complete a new well.

Different methods of oil and natural gas recovery are often designed and implemented in phases over many years and the use of idle well bores in future projects results in smaller project footprints and increased efficiency. Idle wells are located within fields where we operate and that our personnel actively inspect and maintain. California law recognizes the importance of idle wells and accordingly provides operators with a choice of either scheduling idle wells for plugging and abandonment at a defined time in an idle well management plan or performing additional testing and paying idle well fees to retain the flexibility to return the idle wells to service in the future. Because of the diversity of CRC’s portfolio and our life-of-field plans, certain of our operations teams conduct additional testing and pay additional fees to retain the right to use idle wells, rather than submitting idle well management plans that require the abandonment of their idle wells at a specified future date.

Regardless of which idle well management approach our teams follow, we take our duties for future plugging and abandonment seriously. CRC regularly inspects our idle wells to ensure the equipment is maintained in a safe condition. CRC pays significant taxes and fees to the state, including idle well fees, to fund the state’s direct oversight of plugging and abandonment. For decades, the state has also required CRC and other operators to provide indemnity bonds for plugging and abandonment. In 2019, Governor Newsom signed legislation that requires state agencies to review plugging and abandonment costs and associated bond amounts. As a public company, our asset retirement obligations, including for plugging and abandonment, are reported on our financial statements pursuant to accounting standards. The scale of CRC’s property ownership, oil and natural gas resources, project inventory and integrated infrastructure provides substantial cash flow and enduring value for ongoing operations, full-field development and ultimate field abandonment.