Feature: Washington Cut the Oil Bond to $25,000. California Made Its Unlimited.

On June 22, the U.S. Department of the Interior proposed scrapping a Biden-era rule that required oil and gas operators on federal land to post a $500,000 statewide bond, restoring the prior $25,000 level and cutting compliance costs by an estimated $17 million a year. The logic was stated plainly: lower the cost of entry, and capital comes back to drill.

That same week, the opposite logic is hardening into law in California — and it is worth understanding, because it is the quietest and most effective shutdown tool the state has.

Start with what bonding is. Before an operator drills, the state requires a financial guarantee — a surety bond — that the well will eventually be plugged and the site restored, so the cost doesn't fall on taxpayers if the company walks away. In principle, nobody disputes the idea. In practice, the level and structure of the bond are a policy dial, and California has turned it as far as it goes.

The posted schedule is already among the nation's highest: individual well bonds of $25,000 to $40,000, and blanket bonds that top out at $200,000 for 20–50 wells and $400,000 for more than 50 — and that's before idle-well coverage. But the schedule isn't the lever that matters most. AB 1167, signed in 2023 (Carrillo, Chapter 359), requires that any company acquiring a well — "by purchase, transfer, assignment, conveyance, exchange, or other disposition" — post a bond the state deems "sufficient to cover, in full, all costs of plugging and abandonment, decommissioning… and site restoration." No blanket cap. The full cleanup cost, in cash or surety, up front. And this May, the Assembly passed AB 2461 (Hart, D–Santa Barbara) on a 53–21 vote to extend that full-cost requirement to every change of control — including stock transactions.

Read what that does to investment. The way marginal California wells stay producing — and stay funded for their eventual cleanup — is for capital to buy them, rework them, and keep them online. Full-cost bonding on acquisition makes that math impossible: a buyer must post the entire end-of-life cost the moment it takes over, before producing a barrel. So the wells don't get sold and reworked. They get abandoned in place by whoever holds them. New drilling has already collapsed — California issued just 73 new drilling permits in 2024 — and production is down roughly 20%. Bonding is a large, unspoken part of why.

Be fair about the other side, because the argument deserves it. Supporters of AB 1167 and AB 2461 point out — correctly — that taxpayers have already spent hundreds of millions cleaning up orphaned wells, that current industry bonding covers a small fraction of the true liability, and that roughly two-thirds of idle wells leak methane. Those are real problems. But a rule written so that no one can afford to acquire a well does not get that well plugged faster. It strands it with the operator least able to pay, and it freezes out the very capital that keeps wells producing, funded, and maintained. The cleanup goal and the investment blockade are not the same thing — and California has built the second in the name of the first.

This is why CA4ES has been actively working to educate federal officials on Sacramento's weaponization of bonding requirements. The permit denials and court fights make the news. Bonding never does. There is no dramatic vote to kill a project — just a financial-assurance number set high enough that the investment quietly never arrives. Washington just lowered its number to bring capital back to American oilfields. California raised its toward infinity to keep capital out, and called it accountability.

You can stop production with a permit denial, or you can stop it with a bond no one can post. California is doing both. And the only thing that lowers the price of fuel is more fuel.

Sources: World Oil, CalMatters — AB 1167, Center for Biological Diversity — AB 2461, CalGEM bonding schedule (SuretyBonds.com), Consumer Watchdog

California's gas tax rises to 63.4 cents on July 1 — the nation's highest — The Center Square / KCRA
California's gasoline excise tax goes up 2.2 cents on July 1 to 63.4 cents a gallon under the SB 1 inflation escalator — part of what local outlets are calling one of the biggest state tax hikes in a decade. State Sen. Tony Strickland noted other states suspended their fuel taxes as prices rose, while California raises its on schedule: "Our gas prices are astronomically high because of taxes — and also because we lost 20% of our oil production and we rely almost exclusively on foreign oil."

National gas average drops below $4 as summer travel heats up — AAA
For the first time since March 30, the national average fell under $4, to $3.99, capping nearly four weeks of declines as crude slid on the deal to reopen the Strait of Hormuz. AAA expects a record 72.2 million Americans to travel for Independence Day. California again leads the nation's most expensive markets at $5.64 — relief is reaching the rest of the country faster than it reaches the drivers who need it most.

California appeals court upholds Coastal Commission injunction against Sable — Noozhawk / New York Post
The Second District Court of Appeal sided with the California Coastal Commission, ruling it was within its authority to issue a cease-and-desist order against Sable's pipeline work in the coastal zone. The case stems from 2024 repairs along the Gaviota Coast tied to restarting the Santa Ynez Unit. The wrinkle, as Courthouse News noted: the injunction was upheld even though the repairs are already complete and the oil has been flowing for months — the litigation, not the production, is what keeps moving.

Oil rises after U.S.–Iran peace talks in Geneva are abruptly postponed — CNBC / Reuters
After crude fell 5% to a three-month low on hopes the Strait of Hormuz would reopen, Brent ticked back up Friday when follow-up talks in Switzerland were called off — a reminder that this week's relief rests on a ceasefire that isn't signed. The barrel that California refines is still hostage to a negotiation it doesn't control, which is exactly why building in-state supply matters more, not less.

Sable Offshore seeks up to $1 billion loan — Rigzone
Even amid the court losses, the owner of the Santa Ynez Unit launched a marketing process for a senior secured term loan of up to $1 billion — a sign the company intends to keep producing through the litigation, not fold under it. The fight over roughly 60,000 barrels a day of domestic California crude is now playing out in state court, federal court, Congress, and the capital markets at once.

Week of June 23, 2026 — Source: AAA, EIA

California's average for regular fell again this week, down about 16 cents to $5.58, extending a decline that has run for nearly a month. The national average fell at the same time — under $4.00 for the first time since March 30, the lowest in months. Both moved for the same reason, and it wasn't California: crude tumbled as the U.S. and Iran reached a framework deal to reopen the Strait of Hormuz, sending WTI from a $90 settle two weeks ago to $76.79 on Wednesday — before follow-up talks in Geneva were abruptly postponed, nudging prices back up. Keep two things in view. First, the gap holds: at $1.59 a gallon, California still pays roughly 40% more than the national average, and remains the most expensive market in the country. Second, the one input Sacramento controls moves the wrong way in one week, when the state gasoline tax rises to 63.4 cents on July 1 — even as several other states suspended their fuel taxes to ease the same price pressure. (National diesel is an EIA-directional estimate; CA diesel of ~$6.77 is AAA's California average, down from $6.99 a week ago.)

Data: AAA — California, AAA — National Average Drops Below $4, Reuters, EIA Weekly Retail

Sen. Strickland named the dependence out loud this week, and it is worth sitting with the math: California has lost roughly 20% of its oil production and now relies almost exclusively on foreign and out-of-state crude. By the state's own accounting, refineries run on about 75% imported oil. That is the part a Hormuz reopening makes cheaper but does not fix — and the Geneva postponement is a reminder of how fragile even the cheaper version is.

Now line the supply picture up against the policy. In the same week the price of imported crude fell on a foreign ceasefire, a California appeals court upheld the injunction blocking Sable's Santa Barbara pipeline — the single largest new source of domestic crude off the state's own coast. The state is winning in court to keep roughly 60,000 barrels a day of California oil constrained, while importing three of every four barrels it refines from somewhere else.

It leans on the federal workaround harder than anyone. California has absorbed more than 60% of all the gasoline and blendstock cargoes moved under the Trump administration's Jones Act waiver — about 3 million barrels of foreign-flagged fuel, the largest share of any state. Be honest about the scale, because the honest version is the more damning one: that flow covers only about 6% of the 36 million gallons Californians burn every day, and analysts found it shaved barely a penny or two off the pump. The waiver is a band-aid, not a supply plan — and it runs only through mid-August.

The contrast that has defined this brief all year holds intact: California will take the barrel from anywhere on Earth except off its own coast.

*Sources: Reuters, gCaptain / RBN Energy, Noozhawk, The Center Square, CEC Oil Supply Sources

The CA4ES Energy Brief is published weekly by Californians for Energy & Science, a 501(c)(3) nonprofit. Data-driven energy intelligence for Californians.

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