SANTA CLARITA, Calif. (AP) — One of the state’s major oil companies said it has filed for Chapter 11 bankruptcy protection as part of an agreement with creditors to restructure $5 billion in debt.

Citing “unprecedented market conditions,” California Resources Corp. President and CEO Todd A. Stevens said Wednesday that oversupply and reduced demand because of the COVID-19 pandemic required the Chapter 11 process, but he asserted that the company will emerge strong and healthy.

Transactions under the restructuring agreement are subject to approval by the U.S. Bankruptcy Court for the Southern District of Texas, where the filing was made.

California Resources Corp. describes itself as the largest oil and natural gas exploration and production company in the state. It has more than 3,000 employees and contractors and focuses the San Joaquin, Los Angeles, Ventura and Sacramento oil and gas basins.

The company said it will continue to operate and maintain high safety and environmental standards, but environmental organizations reacted with alarm.

The Center for Biological Diversity and the Sierra Club said in a letter to Gov. Gavin Newsom that there would likely be a wave of similar actions by oil and gas companies. They urged him to intervene to protect the environment, taxpayers and workers’ pensions and healthcare.

“Any action by oil and gas producers to use bankruptcy proceedings and other cost-cutting and restructuring efforts to evade their environmental obligations will increase the risk that pollution from improperly secured or monitored oil and gas wells will cause environmental damage,” the groups wrote.

The organizations further warned that taxpayers may end up paying to plug and clean up wells.

Uduak-Joe Ntuk, state oil and gas supervisor for the California Department of Conservation’s Geologic Energy Management Division, said the company’s bankruptcy filing does not reduce its obligation to comply with stringent oil and gas regulations and to pay annual assessments.

“CalGEM has taken steps to prepare for developments like this and will continue its oversight of CRC’s facilities and operations to ensure ongoing protection of public health, safety and the environment,” Ntuk said.

Oil prices were declining before the pandemic and then crashed in April. The price per barrel has since recovered some ground.

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