Consumer Watchdog Urges California to Enforce Bonding for CRC's Acquisition of Berry Corp
The California oil industry is in turmoil as California Resources Corporation (CRC) prepares to purchase rival Berry Corporation. This move has sparked significant concern among advocates for fiscal responsibility and environmental protection, including Consumer Watchdog. The crux of the issue lies in the financial bonding requirements that govern how these transactions are regulated, particularly regarding the wells these companies manage.
Consumer Watchdog asserts that California is not holding CRC accountable for the financial responsibilities tied to the wells it acquires. Liza Tucker, a consumer advocate from the organization, emphasized that with the impending acquisition, it is crucial for Governor Gavin Newsom and state regulators to demand adequate bonding. This requirement is designed to safeguard taxpayers, ensuring they are not left with an enormous financial burden for the future costs associated with well plugging and land restoration.
Previously, during CRC's acquisition of Aera Energy, there were significant concerns over how CRC was allowed to reduce its bonding obligations. At that time, David Shabazian, the then director of the Department of Conservation, made controversial decisions that were seen as favoring CRC, leading to a reduction in their required bonding amount. Critics have pointed to Shabazian's past professional ties with Jason Marshall, who transitioned from his regulatory role to a corporate position at CRC. Such connections raise questions about potential corruption and conflicts of interest within the state's regulatory framework.
In Tucker's words, the Newsom administration has a legal right to require full bonding as the CRC/Berry deal proceeds, citing a 2023 law introduced by Assemblymember Wendy Carrillo. This legislation mandates that, in the event of an acquisition such as the one CRC is planning, companies must file a bond with CalGEM that reflects the costs for proper well management and remediation. The law has sparked debate about its implications, as it can require bonds up to $30 million but seems insufficient given the scale of CRC's operations. For instance, the acquisition will result in CRC controlling over 40,000 wells in California, of which 14,000 are currently idle. This situation illustrates a looming liability that could amount to an estimated $1.6 billion just for well plugging, which breaks down to an average of $112,000 per well.
Critics, including Tucker, express that the largest oil producers cannot be permitted to continue operating without stringent financial safeguards in place. She notes that a maximum bond is vastly insufficient, especially when considering the potential environmental fallout from poorly managed wells. Furthermore, lawmakers who enabled increased drilling in regions like Kern County, a historical hub of oil production, should reevaluate these financial ceilings.
As CRC moves forward with its acquisition strategy in a significant market, the pressure is mounting on regulators to ensure the fiscal responsibilities tied to environmental impacts are adequately secured. Consumer Watchdog emphasizes that it is unacceptable for taxpayers to bear the full brunt of the financial aftermath that could emerge from poorly regulated oil production practices. With a significant shift in leadership following Shabazian’s departure, the opportunity now exists for Newsom and regulators to demand accountability from CRC and ensure sufficient bonding levels. This instance may very well serve as a test for California's commitment to protecting its residents and environment from the repercussions of corporate transactions that have profound public implications.
Consumer Watchdog asserts that California is not holding CRC accountable for the financial responsibilities tied to the wells it acquires. Liza Tucker, a consumer advocate from the organization, emphasized that with the impending acquisition, it is crucial for Governor Gavin Newsom and state regulators to demand adequate bonding. This requirement is designed to safeguard taxpayers, ensuring they are not left with an enormous financial burden for the future costs associated with well plugging and land restoration.
Previously, during CRC's acquisition of Aera Energy, there were significant concerns over how CRC was allowed to reduce its bonding obligations. At that time, David Shabazian, the then director of the Department of Conservation, made controversial decisions that were seen as favoring CRC, leading to a reduction in their required bonding amount. Critics have pointed to Shabazian's past professional ties with Jason Marshall, who transitioned from his regulatory role to a corporate position at CRC. Such connections raise questions about potential corruption and conflicts of interest within the state's regulatory framework.
In Tucker's words, the Newsom administration has a legal right to require full bonding as the CRC/Berry deal proceeds, citing a 2023 law introduced by Assemblymember Wendy Carrillo. This legislation mandates that, in the event of an acquisition such as the one CRC is planning, companies must file a bond with CalGEM that reflects the costs for proper well management and remediation. The law has sparked debate about its implications, as it can require bonds up to $30 million but seems insufficient given the scale of CRC's operations. For instance, the acquisition will result in CRC controlling over 40,000 wells in California, of which 14,000 are currently idle. This situation illustrates a looming liability that could amount to an estimated $1.6 billion just for well plugging, which breaks down to an average of $112,000 per well.
Critics, including Tucker, express that the largest oil producers cannot be permitted to continue operating without stringent financial safeguards in place. She notes that a maximum bond is vastly insufficient, especially when considering the potential environmental fallout from poorly managed wells. Furthermore, lawmakers who enabled increased drilling in regions like Kern County, a historical hub of oil production, should reevaluate these financial ceilings.
As CRC moves forward with its acquisition strategy in a significant market, the pressure is mounting on regulators to ensure the fiscal responsibilities tied to environmental impacts are adequately secured. Consumer Watchdog emphasizes that it is unacceptable for taxpayers to bear the full brunt of the financial aftermath that could emerge from poorly regulated oil production practices. With a significant shift in leadership following Shabazian’s departure, the opportunity now exists for Newsom and regulators to demand accountability from CRC and ensure sufficient bonding levels. This instance may very well serve as a test for California's commitment to protecting its residents and environment from the repercussions of corporate transactions that have profound public implications.
Topics Policy & Public Interest）
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