SB 940 amends Public Resources Code Section 3701 to expand the statutory definition of “geothermal resources” to expressly include any oil or gas reservoir that is used principally for thermal energy storage or geothermal energy generation. The change brings those repurposed reservoirs squarely within the State Oil and Gas Supervisor’s existing jurisdiction — including inspection powers and the criminal penalties that apply when an owner or operator refuses inspections or violates related regulations.
For operators and project developers, the bill converts a choice about regulatory pathway into a definitional trigger: if a reservoir’s principal use is thermal storage or geothermal generation, the operator becomes subject to the supervisor’s regulatory regime. The amendment also includes a short reimbursement provision saying no state reimbursement is required for local agencies because the only new costs arise from the expansion of a criminal law.
At a Glance
What It Does
SB 940 adds a new clause to Section 3701 of the Public Resources Code so that an oil or gas reservoir “used principally for thermal energy storage or geothermal energy generation” qualifies as a geothermal resource. That qualification places such reservoirs under the State Oil and Gas Supervisor’s authority, including inspection powers and enforcement mechanisms already applicable to geothermal wells.
Who It Affects
Operators and owners of oil and gas reservoirs that are being converted, or considered for conversion, to thermal energy storage or geothermal power; geothermal and energy-storage developers using subsurface reservoirs; and the State Oil and Gas Supervisor’s office, which gains explicit jurisdiction over those converted reservoirs. Local agencies and school districts may face incidental costs tied to criminal-procedure changes.
Why It Matters
The change removes an ambiguity about regulatory coverage for repurposed reservoirs at a time when seasonal thermal storage and subsurface geothermal development are growing as decarbonization tools. It shifts the compliance baseline for affected projects — not by creating new standards in this text, but by making the supervisor’s inspection and enforcement authorities applicable where they may not have been clear before.
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What This Bill Actually Does
SB 940 is a narrow but consequential fix to how California defines "geothermal resources." The bill inserts an explicit second clause into Section 3701: an oil or gas reservoir counts as a geothermal resource if it is used principally for thermal energy storage or to generate geothermal energy. The statute keeps the original cross‑reference to the existing definition in Section 6903, but adds this backstop that captures repurposed hydrocarbon reservoirs.
Because the State Oil and Gas Supervisor already regulates geothermal wells and may criminally penalize owners or operators who refuse inspections or violate geothermal regulations, the practical effect is to make the same suite of regulatory tools available for reservoirs once they are being used principally for thermal storage or geothermal generation. SB 940 does not itself create new technical standards, permitting timelines, or operational requirements for thermal storage or geothermal generation; it changes who is covered by the supervisor’s existing authorities.Two implementation features matter in practice.
First, the statutory trigger is “used principally,” which is a factual determination the bill does not define; that will require either guidance, regulatory interpretation, or litigation to establish how mixed uses or partial conversions are treated. Second, the bill’s fiscal language states no constitutional reimbursement is required because any local costs would stem from expanding criminal liability; the text does not appropriate funds to expand inspection or enforcement capacity, so the supervisor’s office may need to adapt resource allocation if caseloads rise.For developers and operators, the bill is both clarifying and consequential: projects that meet the “principal use” threshold will face the supervisor’s inspection regime and potential criminal penalties for noncompliance, even if those projects previously considered a different regulatory route.
For regulators and communities, SB 940 provides a clearer statutory basis to inspect and enforce safety and environmental rules against reservoirs that have been repurposed for energy storage or geothermal generation.
The Five Things You Need to Know
SB 940 adds subsection (b) to Public Resources Code Section 3701 so that an oil or gas reservoir used principally for thermal energy storage or geothermal energy generation is defined as a "geothermal resource.", By qualifying those reservoirs as geothermal resources, the bill makes them subject to the State Oil and Gas Supervisor’s jurisdiction, including inspection authority and any regulations the supervisor enforces for geothermal wells.
Under existing law referenced in the bill, an owner, operator, or employee who refuses to permit inspection of a geothermal well or who violates applicable geothermal regulations may be guilty of a crime; SB 940 extends that exposure to qualifying repurposed reservoirs.
The amendment does not create new technical standards, permitting processes, or operational requirements — it simply changes the definition that triggers the supervisor’s existing authorities.
Section 2 declares no state reimbursement is required for local agencies or school districts because the only potential costs arise from creating or changing criminal liability under state law.
Section-by-Section Breakdown
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Adds oil/gas reservoirs used principally for thermal storage or geothermal generation to ‘geothermal resources’
The bill inserts a new clause into Section 3701 that keeps the existing cross‑reference to Section 6903 and then adds an explicit alternative: an oil or gas reservoir used principally for thermal energy storage or geothermal generation counts as a geothermal resource. Mechanically, this is a definitional amendment — it does not rewrite the supervisor’s powers but expands the set of facilities those powers apply to. Practically, the supervisor’s inspection, permitting reference points, and enforcement tools will now reach repurposed hydrocarbon reservoirs meeting the “principal use” test.
Triggers existing inspection and criminal enforcement framework
Although SB 940 does not restate enforcement provisions, the bill relies on the existing statutory scheme under which the State Oil and Gas Supervisor may inspect geothermal wells and penalize refusal to permit inspection or regulatory violations. By folding qualifying oil and gas reservoirs into the definition of geothermal resources, the bill imports that enforcement framework. Stakeholders should treat this as a jurisdictional change: enforcement standards and penalties remain those already on the books for geothermal operations.
No state reimbursement required for local agencies — criminal-law carveout
The bill’s second section says the state does not owe reimbursement to local agencies or school districts under the California Constitution because any local costs would stem from changes to criminal law or definitions. This is a standard technical provision that signals the state will not provide funding tied to the bill’s expansion of criminal exposure; it does not, however, provide additional state resources to the State Oil and Gas Supervisor for expanded oversight.
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Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- State Oil and Gas Supervisor and staff — the amendment gives the supervisor an explicit statutory hook to inspect and regulate repurposed reservoirs, removing ambiguity about jurisdiction and enabling use of existing enforcement tools.
- Nearby communities and landowners — clearer regulatory coverage increases the likelihood of inspections, oversight, and enforcement for repurposed reservoirs, which can address local safety and environmental concerns.
- Energy planners and utilities considering thermal storage — regulatory clarity about oversight can reduce legal uncertainty for projects that rely on subsurface reservoirs, making it easier to account for compliance risk in project planning.
Who Bears the Cost
- Owners and operators of oil and gas reservoirs that are converted principally to thermal energy storage or geothermal generation — they face the State Oil and Gas Supervisor’s inspection regime, potential fines, and criminal exposure for refusal to permit inspection or for violations.
- Geothermal and thermal‑storage developers using repurposed reservoirs — developers will bear compliance costs to meet inspection, monitoring, and any supervisor‑imposed conditions, even where those reservoirs previously fell under different regulatory expectations.
- Local agencies and school districts — although the bill says no state reimbursement is required, local entities may still incur administrative or enforcement-related costs tied to criminal‑justice processes stemming from expanded criminal definitions.
- The Supervisor’s office — while gaining jurisdiction, the office may need to allocate additional staff, technical expertise, or administrative capacity to oversee a broader set of reservoirs without an appropriation in this bill.
Key Issues
The Core Tension
SB 940 balances two legitimate goals — accelerating regulatory clarity and oversight for repurposed reservoirs versus avoiding overly broad enforcement that could chill development — but it does so by changing a definition rather than by tailoring standards, leaving regulators and project sponsors to reconcile public‑safety oversight with practical deployment needs.
The bill is narrowly worded and achieves its effect by redefining a key term rather than by setting technical standards or new permitting requirements. That approach leaves several practical questions unresolved.
The phrase “used principally” creates a fact‑specific threshold: does a reservoir with dual uses qualify, and how will the supervisor determine principal use? Absent statutory criteria, the supervisor will need to issue guidance or rely on case‑by‑case determinations, which could create uncertainty during project design and preclude predictable permitting timelines.
Another tension involves capacity and fit. The bill expands jurisdiction without creating new substantive standards tailored to thermal energy storage, a technology with different operational risks than conventional geothermal wells or producing hydrocarbon wells.
The supervisor’s existing inspection protocols, monitoring requirements, and enforcement toolbox may not align neatly with the technical needs of seasonal thermal storage projects. Finally, by expanding criminal exposure for operators who refuse inspections or violate regulations, the amendment strengthens enforcement tools but also risks chilling cooperation if operators fear criminal penalties for inspection disputes; striking the right balance between deterrence and constructive compliance will be an early implementation challenge.
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