CIPA-Sponsored AB 2716 Positioned for Assembly Floor Vote

CIPA’s sponsored bonding reform measure, AB 2716 by Assembly Member Anamarie Ávila Farías, is now eligible to be taken up on Third Reading on the Assembly Floor and is expected to come before the Assembly this week ahead of the House of Origin deadline.

The legislation represents one of the most significant oil and gas financial assurance reforms considered by the Legislature since AB 1057 (Limón, 2019). AB 2716 increases California’s maximum oil and gas financial assurance requirements from $30 million to $80 million while also fixing the unintended consequences created by AB 1167 (Carrillo, 2023), which froze the market for responsible oil and gas asset transfers.

AB 2716 is now double-joined with AB 2461 (Hart), legislation Assembly Member Ávila Farías has indicated she will support as part of a broader negotiated package. Together, the two measures significantly expand California’s bonding and financial assurance requirements while also ensuring there is a workable pathway for operators to comply with the law and responsibly transact assets.

As CIPA has repeatedly emphasized, opposition to AB 2716 is increasingly difficult to reconcile with longstanding calls for increased operator financial security. The bill opens up and substantially strengthens the bonding framework originally established under AB 1057 while simultaneously reducing orphan well risks by allowing distressed assets to move to stronger, better-capitalized operators.

Governor Gavin Newsom himself warned in his signing message for AB 1167 that the bill could unintentionally increase the number of orphan wells absent a legislative fix. According to both the Department of Finance and industry stakeholders, that prediction proved accurate as transactions largely stopped after the law took effect in January 2024.

The market freeze has had consequences beyond the oil field. Counties have reported significant impacts to local property tax assessments as oil and gas assets lost transactional value, contributing to an estimated $130 million reduction in local government revenues tied to schools, public safety, and core county services. AB 2716 seeks to restore a functioning market while simultaneously increasing state financial protections.

The negotiated package emerging from the Assembly Natural Resources Committee has increasingly been described around the Capitol as a rare “grand bargain.” The compromise combines dramatically higher financial assurance requirements with practical compliance mechanisms and closes loopholes tied to certain corporate transactions.

With the House of Origin deadline approaching rapidly, the upcoming Assembly Floor debate is expected to become a major test of whether lawmakers are willing to support both stronger financial protections and practical policies that reduce long-term orphan well risk, stabilize local government revenues, and restore responsible oil and gas transactions in California.