Assemblymember Patrick O'Donnell's AB 353 would remove the $300 million cap on the Oil Trust Fund within the State Treasury.
The Wilmington Oil Field, one of the largest oil and gas fields in the nation, is primarily located beneath the Long Beach tidelands. Although the State entrusted the tidelands to the City of Long Beach in the early 1900s, the State receives a share of net profits from tideland oil production. Once oil production operations cease and revenue is no longer generated, the State will be responsible for significant costs including, but not limited to, the removal of oil and gas facilities, remediation, plugging of wells, and environmental mitigation.
The Oil Trust Fund (Fund) was created by the Legislature in 2005 to cover specified costs associated with the future abandonment of oil wells within the Long Beach tidelands. The Fund is financed by a portion of the net profits the state receives from oil operations, and is statutorily capped at $300 million. The Fund will be the primary source to cover the substantial abandonment and decommissioning work required to remove gas and oil facilities within the tidelands once oil operations cease.
NEED FOR THE BILL
The Fund reached its $300 million cap in June 2014 and has not grown since. All interest earned has been transferred to the General Fund. Meanwhile, projected abandonment costs have increased considerably. The State’s eventual share of these costs is now estimated to be over $900 million, leaving a shortfall of over $600 million. Once Long Beach oil operations cease, which is projected to be around the year 2036, the state will be unable to meet its liability obligations required by law.
In order to reduce the State’s unfunded liability, the state must resume depositing a portion of its oil revenue back into the Oil Trust Fund. AB 353 removes the $300 million cap on the Fund thereby allowing the state to ensure sufficient funding is available for future abandonment costs.