Kern County Supports AB 2716 if Amended to Protect Local Tax Revenues

Kern County has formally weighed in on AB 2716 by Assembly Member Anamarie Avila Farias, CIPA’s sponsored bill to correct the serious fiscal and operational problems created by AB 1167. In a May 7 letter to Assembly Appropriations Committee Chair Buffy Wicks, the Kern County Board of Supervisors expressed strong support for AB 2716 if amended to clarify how oil and gas bonding requirements should be treated for property tax assessment purposes.

Kern’s position matters. No county in California has more at stake in the future of responsible in-state oil and gas production, and no county is more directly exposed to the unintended local revenue impacts now flowing from AB 1167. Kern County’s letter makes clear that AB 1167 has not merely created paperwork problems or industry frustration. It has frozen the lawful transfer market for oil and gas assets, impaired property values, threatened local tax revenues, and increased the risk that mature assets become stranded rather than transferred to operators capable of maintaining production or responsibly retiring wells.

AB 1167, enacted in 2023, imposed a full-cost upfront bonding requirement before certain oil and gas property transfers may occur. In theory, the law was intended to protect taxpayers from future plugging, abandonment, decommissioning, and restoration costs. In practice, Kern County explains, the requirement has produced a blunt and unworkable result. CalGEM has confirmed that zero qualifying operational well transfers occurred in 2024 and 2025. According to Kern, the only transactions during that period were full corporate acquisitions by one large operator, transactions that do not trigger AB 1167.

That distinction is critical. The transfer market for the independent producers subject to AB 1167 has effectively stopped. Marginal wells and mature assets that might otherwise be sold, recapitalized, operated more efficiently, or plugged and restored by responsible buyers are now stranded. Kern County correctly notes that this increases the risk of well desertion, the very risk Governor Newsom warned about in his AB 1167 signing message.

CIPA has made the same point in its support letter for AB 2716. AB 1167 has had the practical effect of freezing the market for oil and gas properties in California. When assets cannot be sold, transferred, financed, or valued in a functioning market, they become impaired assets. That impairment is now appearing in county property tax filings, with property tax experts estimating approximately $130 million per year in lost local ad valorem property tax value statewide. Over the 2024, 2025, and 2026 tax years, CIPA estimates the cumulative local fiscal exposure at roughly $390 million.

Kern County’s concern is grounded heavily in the State Board of Equalization’s June 18, 2025, Letter to Assessors. That BOE letter advised county assessors that AB 1167’s bonding requirements must be reflected in petroleum property valuations. Because most mineral properties in California are valued using an income approach, generally as if acquired by the next owner, the BOE explained that valuations for properties subject to AB 1167 must account for the cost of the bond or other financial assurance. The BOE further noted that few bonds are being underwritten, and that new owners may be required to set aside funds in Certificates of Deposit for the full estimated abandonment amount.

This is where the fiscal damage becomes obvious. If an oil and gas property is valued as though a hypothetical buyer must immediately post full-cost abandonment and restoration security, that “Year Zero” cost can severely reduce, or even eliminate, the property’s assessed value. Kern County’s letter states that preliminary models suggest this valuation effects could reduce Kern’s oil and gas assessed roll by approximately 45 percent, even using conservative abandonment-cost assumptions. The county warns that actual CalGEM abandonment estimates are often higher. For many small operators already assessed at minimum value, Kern warns the new mandate could wipe assessed values off the tax roll altogether.

That means real harm to local government. Property taxes support counties, cities, schools, special districts, public safety, roads, libraries, and other local services. Kern County’s letter makes the point plainly: the BOE interpretation of AB 1167 could eliminate property tax revenue flowing into Kern’s General Fund and reduce revenues available for school districts and other public services in a community already facing economic disadvantage.

The timing is especially frustrating. Kern County notes that the BOE’s interpretation arrives just as the county hoped to regain some lost economic viability through SB 237, the 2025 legislation that expedited permitting for oil and gas wells in Kern. Instead, the county is now in the contradictory position of gaining permitting certainty on one hand while facing potentially severe assessment reductions on the other. Put more simply, California finally opened one door, then tried to tax-value the floor out from under the room.

AB 2716 is designed to fix that imbalance. As CIPA has explained, AB 2716 does not eliminate operator responsibility. It does not excuse abandonment obligations. It does not repeal California’s bonding requirements or idle well requirements. Instead, AB 2716 aligns oil and gas transfer requirements with the risk-based financial assurance framework already established under AB 1057, recognizes existing CalGEM-approved security, avoids duplicative financial assurance mandates, and restores a workable pathway for responsible transactions.

Kern County agrees with that general approach. The county states that AB 2716 maintains seller liability, preserves full CalGEM enforcement authority, allows a broader set of financial assurance mechanisms, and creates a more efficient pathway for transactions undertaken solely to plug, abandon, and restore well sites. Kern’s conclusion is important for CIPA members: the bill does not reduce accountability. It enables compliance, restores orderly market function, and reduces the orphan well risk now heightened by AB 1167’s unintended consequences.

However, Kern County is asking for one specific and important amendment. The county wants AB 2716 to clarify that AB 1167’s bonding requirement is an acquisition-related obligation only. In other words, the full-cost bonding requirement should not be automatically imputed into the valuation of oil and gas properties that have not actually changed hands.

Kern’s proposed amendment would add language to Public Resources Code section 3017 stating that, for property tax assessment purposes, the bonding requirement imposed by section 3017 or section 3205.8 shall be recognized only as an acquisition-related obligation. The estimated cost of the bond or other financial assurance would not be included in the valuation of an oil or gas property unless the property has actually been transferred and the acquiring party is required to post the bond. If a buyer has been required to post a bond or other security, that cost would be prorated equally over the expected useful life of the property as an annual operating expense.

The practical effect of Kern’s amendment would be straightforward. It would prevent counties from artificially depressing appraised values for properties that have not changed ownership. It would clarify that the bonding requirement is only an acquisition cost. It would preserve the existing practice of scheduling future abandonment and remediation costs in appraisal cash flows. It would protect local government revenues while still recognizing real costs when an actual transfer occurs.

For CIPA members, Kern County’s letter is significant for three reasons.

First, it confirms that AB 1167 has frozen the market. This is no longer merely an industry talking point. Kern County’s Board of Supervisors is now telling the Legislature that the law has halted qualifying operational well transfers and blocked recapitalization of mature assets.

Second, it confirms that the fiscal impacts are real. The BOE Letter to Assessors has turned AB 1167 from a transaction problem into a local government revenue problem. If assessors are required to treat hypothetical full-cost bonding as an immediate valuation hit, counties can lose substantial assessed value even when properties have not changed hands.

Third, it gives the Legislature a narrow, responsible fix. Kern County is not asking the Legislature to walk away from plugging and abandonment obligations. It is asking lawmakers to prevent an acquisition-related bonding mandate from being misapplied in a way that permanently erodes local tax bases.

AB 2716 will be heard in the Assembly Appropriations Committee on Wednesday, May 13. Assembly Member Avila Farias is expected to waive presentation because the bill is anticipated to move directly to the Appropriations Suspense File. The Suspense Hearing is scheduled for Thursday, May 14. CIPA’s hope is that AB 2716 passes off Suspense and moves to the Assembly Floor.

The bottom line is simple. AB 1167 tried to protect taxpayers from future risk, but it has created immediate harm for local governments, independent producers, and California’s energy reliability. AB 2716 offers the Legislature a targeted correction. Kern County’s requested amendment would make that correction stronger by ensuring that oil and gas properties are assessed fairly, local revenues are protected, and responsible transactions can resume.

California should not strand productive assets, erase local tax value, and increase orphan well risk in the name of preventing future liability. AB 2716 is the opportunity to fix it.