Chevron’s $2.3 Billion Asset Adjustment Raises Questions Amidst Regulatory Changes in California

It would be misleading at best to accuse California of creating an “adversarial business climate” for the energy sector simply by preventing oil companies from passing off to taxpayers their statutory cleanup obligations. Under the circumstances, Chevron owes California a more detailed explanation of its ARO adjustment, including whether and how it corresponds with AB 1167 and its California impairment charge.

Further, California needs to adapt its policies to navigate the ongoing downturn in oil production within the state and capitalize on the chance to boost the economy by effectively enforcing the California Geologic Energy Management Division’s (CalGEM) authority to implement well-plugging mandates. While the state is already taking advantage of currently available federal funding to plug known orphan wells, California has the opportunity to further support the well plugging, reclamation, and remediation industries. This space has the potential for incredible growth considering the immediate future of oilfield production declines worldwide. Such an industry would provide continued employment to California tens of thousands of oilfield workers.

Chevron should be held accountable for its liabilities in California oilfields. However, Chevron is just one egregious example among hundreds of operators in California that, together, have a combined total of over 100,000 unplugged wells in the state. California state leaders have a choice to make: require operators to plug their wells, or burden California’s economy with billions of dollars of clean-up costs.