November 2026 · 7 min read
AB 1866, explained: what California's idle-well law means for operators and buyers
California · idle wells · regulation · due diligence
California has roughly 32,000 idle oil and gas wells. Since January 1, 2025, every one of them carries a cost that shows up on someone's books each spring — and in any deal, on the buyer's. That is the effect of AB 1866, signed in September 2024. Here is what it requires, and what anyone buying, financing or valuing California upstream assets should check.
What counts as an idle well
Under California law, a well becomes idle after 24 consecutive months without producing oil or gas or being used for injection. A well idle for eight years or more is a long-term idle well. A well stays idle until it is properly plugged and abandoned, or shows six continuous months of production or injection use.
The annual choice: pay fees or file a plan
By May 1 each year, an operator must do one of two things for the wells that were idle in the prior calendar year: pay an annual fee for each idle well, or file an Idle Well Management Plan with CalGEM. CalGEM issues fee invoices no later than April 1.
Annual fee per idle well:
| Years idle | Fee per well |
|---|---|
| Under 3 | $1,000 |
| 3 to under 8 | $2,500 |
| 8 to under 15 | $5,000 |
| 15 to under 20 | $12,500 |
| 20 or more (through 2028) | $22,500 |
| From January 1, 2029: 20 to under 25 | $22,500 |
| From January 1, 2029: 25 or more | $60,000 |
What a management plan commits you to
A plan replaces fees with a schedule for eliminating idle wells — plugging them or returning them to use. Plans now cover all idle wells, not only long-term ones, and the required pace rises over time:
| Operator's idle wells | 2025–2027 | 2028–2029 | 2030 on |
|---|---|---|---|
| 250 or fewer | 5% per year | 6% | 8% |
| 251–1,250 | 6% | 8% | 10% |
| 1,251–3,000 | 7% | 10% | 15% |
| More than 3,000 | 15% | 18% | 20% |
At least one well must be eliminated each year.
When choosing which wells to plug first, operators must consider well age, any threat to life, health, property or natural resources, and whether a well sits within 3,200 feet of a sensitive receptor such as a home or school — and document how they prioritized.
Missing a plan has a price. If CalGEM finds an operator out of compliance, the plan is canceled, fees become due for the plan year and the following two years, and no new plan can be filed until all fees, penalties and interest are paid.
Testing doesn't go away
Idle wells still have to be tested. A fluid level test is due within 24 months of a well going idle, and if fluid is at or above the base of an underground source of drinking water, a casing pressure test is required within 90 days.
Compliance in the first year
According to a January 2026 analysis of CalGEM records by the Center for Biological Diversity, about 1,085 operators neither paid fees nor filed a valid plan by the first deadline, covering nearly 3,500 idle wells — most in Kern, Los Angeles, Santa Barbara and Ventura counties. Many of those wells belong to companies that no longer exist. Each one is a potential orphan well, and a cost that may fall on the state.
What this means for buyers and lenders
AB 1866 turns idle wells from a footnote into a recurring cash cost with a deadline. In any California acquisition or refinancing, I would check:
- The idle well count by years idle — that sets the fee bill, and it climbs as wells age.
- Whether the seller paid fees or filed a plan for each of the last two May 1 deadlines, and whether any plan is in good standing.
- The plugging schedule a plan implies — and its cost. Plugging a single idle well in California can cost $220,000 to $900,000.
- Wells within 3,200 feet of homes, schools or other sensitive sites, which are likely to be prioritized and scrutinized first.
- Testing history, especially wells near groundwater.
- Whether the asset-retirement obligation and the valuation (PV-10) actually reflect this schedule.
An illustrative example (not a real company): an operator with 200 wells idle for ten years faces about $1 million a year in fees ($5,000 × 200). Choosing a plan instead means eliminating at least 10 wells a year at first — and at $220,000 or more each, that is $2.2 million or more a year. Either way, the cost is real, and it belongs in the price.
FAQ
Q: When are AB 1866 idle well fees due?
A: By May 1 each year, for wells idle at any time in the previous calendar year. CalGEM issues invoices by April 1.
Q: How much is the idle well fee in California?
A: From $1,000 per well a year for wells idle under three years, rising to $22,500 for wells idle 20 years or more; from 2029, wells idle 25 years or more cost $60,000 a year.
Q: What is an Idle Well Management Plan?
A: A CalGEM-approved schedule, lasting up to eight years, under which an operator eliminates a set share of its idle wells each year instead of paying fees.
Q: What happens if an operator doesn't comply?
A: The plan is canceled, fees become due for that year and the next two, and a new plan can't be filed until everything owed is paid.
Q: Does AB 1866 matter in an acquisition?
A: Yes. Idle well fees and plugging commitments are recurring costs that should be reflected in the asset-retirement obligation and the purchase price.
This article is general information, not legal advice. Requirements change; check the current statute and CalGEM guidance.