AB 1167 Bonding Law Is Hammering Local Tax Bases

In Sacramento, the State Board of Equalization is usually not the loudest body in the room, but when the BOE sends a formal Letter to Assessors to all 58 county assessors in California, smart people pay attention. And BOE’s June 18, 2025, Letter to Assessors No. 2025/017 is a major warning flare. It confirms that AB 1167’s new petroleum property bonding requirements are not just distorting oil and gas transactions, they are now driving down taxable property values for local governments across California.

The BOE letter explains that, effective January 1, 2024, AB 1167 imposed a new rule that no transfer of an oil and gas property may occur unless a bond is filed covering the full cost of plugging and abandonment and site restoration. BOE then states the obvious consequence: because most mineral properties in California are valued under an income approach as if acquired by the next owner, those new bonding costs must now be reflected in the valuation itself. BOE does not mince words. The agency says the requirement “may have a dramatic effect on property values.” That is bureaucrat-speak for a tax base getting clobbered.

The damage is not theoretical. BOE further notes that, in practice, few bonds would be underwritten, and new owners would be required to park the full estimated abandonment amount into certificates of deposit or similar financial assurance mechanisms, tying up enormous amounts of capital at the front end of a transaction, making most transactions uneconomic. In other words, AB 1167 did exactly what CIPA and others warned it would do: it froze well transfers, distressed the marketplace for mature oil assets, and forced assessors to recognize lower values because the economics of ownership have been wrecked by state policy.

Now comes the part nobody in the Legislature bothered to talk about during the public debate in 2023. According to confidential local sources in Los Angeles and Kern Counties, and based on early information from the field, the losses are already mounting into more than $100 million collectively across California’s five major oil-producing counties. That is real money, for counties, schools, public safety, roads, libraries, and basic services. So the obvious question is this: is that what the Legislature intended to vote for? Less money for teachers and first responders? Because that is where this road leads.

That is why AB 2716 matters. Sponsored by CIPA, the bill is necessary to repair damage already done by AB 1167. AB 2716 would allow CalGEM to use existing compliance tools including sinking funds, self-insurance, and corporate guarantees to ensure operators can meet their future liabilities. The original law did not increase production, improve energy affordability, stabilize supply, or create a more orderly transition. It did one thing exceptionally well: it shut down transactions, distressed California’s independent oil producers, and triggered massive collateral damage for local government finance. That is not reform. That is self-inflicted economic vandalism with a chapter-and-verse paper trail from the Board of Equalization.

California keeps claiming it wants an orderly energy transition. Fine. Then govern like adults. You do not strangle in-state production, trap mature assets in place, vaporize local tax revenue, and call it progress. You do not punish California operators only to increase dependence on foreign production and imported energy. And you certainly do not pretend the consequences were unforeseeable when the BOE is now circulating instructions to all 58 county assessors on how to account for the wreckage.

AB 1167 has not delivered some broad public benefit that offsets this harm. It has not done anything else. Nothing. It distressed the oil production industry and cost local governments over a hundred million dollars in local tax value. Sacramento should fix it.