The California Geologic Energy Management Division (CalGEM) declined a request from state lawmakers to impose fees under AB 1167 on California Resources Corporation’s (CRC) merger with Aera Energy. AB 1167 requires individuals or companies to assure the full cost of plugging and abandoning wells must before CalGEM can approve the transfer of a well.
In February 2024, CRC announced a merger agreement with Aera Energy in an all-stock transaction that valued Aera at $2.1 billion. The companies completed the deal on July 1, 2024. CRC’s acquisition of Aera makes it the largest oil and natural gas exploration and production company in California.
In a June 11, 2024 letter to the state’s oil supervisor, 14 lawmakers said the merger was “precisely the sort of transaction that AB 1167 was designed to address.” The letter noted:
The Aera-CRC merger transaction will result in unprecedented consolidation of California’s idle wells, placing control of roughly 40 percent of them in the hands of CRC. Absent the protections afforded by AB 1167, the merger risks creating a single entity that is too big to fail. Should CRC become insolvent, California would be confronted with an immense fiscal liability; the need to spend taxpayer funds to plug and abandon roughly 15,000 idle wells, at an estimated average cost of $111,000 each, for a total price tag well over a billion dollars.
Environmental groups followed with additional letters in June and July urging application of the law to the transaction.
CalGEM determined that the bonding requirements under AB 1167 do not apply to stock transfers, as Aera continued to be the well operator. “Based on the SEC filings and materials provided to the Department, it is evident that only ownership of Aera Energy LLC is being transferred, not any of Aera’s assets,” CalGEM responded in a June 27, 2024 letter. “The bonding requirements under Public Resources Code (PRC) section 3205.8, added by AB 1167, do not apply to stock transfers, nor does the law make any mention of such transactions.”