CalGEM Cost Estimates for Well Abandonment and Facility Decommissioning
Effective June 2024, the California Public Resource Code was updated to require that oil & gas operators submit cost estimates to CalGEM for the plugging & abandonment of all wells, decommissioning of production facilities, and complete site remediation. According to CalGEM, the cost estimate reports provided by operators will provide a mechanism to assess the full costs associated with the abandonment and decommissioning activities. Cost estimate reports for operators with production of less than an average of 3.5 total barrel equivalent per day per well were due on January 1, 2025. Operators with average production of more than 3.5 barrels per day are required to submit cost estimates by July 1, 2026. Cost estimate reports for offshore wells are due July 1, 2027.
CalGEM allows for two methods to calculate the cost estimates:
Method 1 utilizes CalGEM’s cost methodology based on site specific well and facility characteristics and CalGEM’s data from state contracts for orphaned well P&A, field decommissioning, and site restoration work.
Method 2 allows operators to submit detailed estimates from third-parties who could perform the required abandonment and decommissioning work, provided that the estimates reflect the cost that the service provider would charge to the state and do not include any discounts that would be available to a specific operator.
Beacon West helps operators prepare these decommissioning cost estimates, offering recommendations for when to use CalGEM’s methodology and when to use third party estimates.
