Gov. Gavin Newsom and Big Oil: It’s Complicated

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By Judith Lewis Mernit, CAPITAL AND MAIN

September 30, 2020

It was early November 2018, and the boosters of Kern County were nervous. Gavin Newsom had been elected governor of California a few days before, and he had promised all campaign long to get tough on California’s oil industry. At the county’s annual Energy Summit, Lorelei Oviatt, director of the county’s planning and natural resources department, let it be known in a freewheeling speech that California’s oil industry was not going down without a fight.

She reserved the bulk of her ire for the climate activists who rode herd on then-Gov. Jerry Brown that year and now had their sights set on Newsom: the “Keep It in the Ground folks who believe in the idea that we should Just. Stop. Producing. Oil. Like, right now.”

A bit later, B. Joe Ashley of the California Resources Corporation, an oil and natural gas producer, elaborated: “We as Californians still import oil at the rate of about 350 million barrels per year” at the cost of roughly $26.6 billion that year, when oil sold for around $74 a barrel.

If you had tuned in to now-Governor Newsom’s climate-week talk with Van Jones on Thursday, September 24, you would have heard some of those same arguments—from Newsom. “We’ve been importing [oil] from Colombia, Ecuador and Saudi Arabia,” the governor said, implying that California can’t stop drilling for oil until it stops overconsuming. “And trust me—they don’t care much about labor standards or environmental standards.”

If Newsom had looked too good to be true in his first months in office, the Keep It in the Ground folks would soon learn how little time it would take both the governor and the legislature to edge in the opposite direction of environmental advocacy — scuttling a proposed “setback” law, Assembly Bill 345, which would have directed regulators to consider mandating space between drilling operations and “schools, playgrounds, and public facilities where children are present,” and killing outright a bill that would tax producers for the resources extracted from California’s ground—an instrument known as a “severance tax,” which every other oil-producing state imposes, from Alaska to Wyoming to Texas.

Despite Newsom’s early speeches, it was Oviatt’s battle cry that continued to echo the loudest in Sacramento.

In the first six months of his administration, the governor approved twice as many “fracking” permits as his predecessor did during the same time period the year before. Subsequent fracking permit approvals that went to Aera Energy, an ExxonMobil-Shell partnership and one of the major oil companies in the state, happened with the help of lobbyists with connections to the governor, as Steve Horn reported for Capital & Main in June.

During those same six months, FracTracker Alliance and Consumer Watchdog found that permits for new oil and gas production wells overall have shot up nearly 190 percent. According to Kassie Siegel, director of the Center for Biological Diversity’s Climate Law Institute, “Those permits hang over us like a sword of Damocles.” When oil prices go up again, if they ever do, producers can frack away at their already-permitted wells.

Newsom spoke to Jones the day after he had issued an ambitious executive order, setting a goal of ending sales of gas-powered passenger vehicles in the state starting in 2035, building out electric-vehicle charging infrastructure and extending the zero-emissions mandate to “medium- and heavy-duty vehicles” by 2045.

The Environmental Defense Fund hailed the move as “a bold plan for a clean future”; The Mercury News labeled it “historic,” as it unarguably is. But to a host of organizations that have long been calling for an end to California oil production the executive order was a letdown.

“Setting a timeline to eliminate petroleum vehicles is a big step,” Siegel wrote in an email following the announcement. But it was “rhetoric rather than real action on the other critical half of the climate problem—California’s dirty oil production.”

Liza Tucker of Consumer Watchdog, a nonprofit advocacy group, had a similar reaction: Banning sales of new gas-powered cars addresses only the demand side of the climate equation. And that’s all good, she said, “but if you don’t accompany it with a transition off the actual production of fossil fuels, you’re clapping with one hand.”

*   *   *

Newsom’s first moves in office looked auspicious for the cause of reducing the state’s carbon emissions. His first budget proposal included $1.5 million to study what a “managed decline” of the petroleum business would look like. And in October of 2019 he signed legislation changing the name of the Department of Conservation’s Division of Oil, Gas and Geothermal Resources, commonly known as DOGGR, to the Geologic Energy Management Division (CalGEM), and emphasized the division’s mandate to protect public health and safety.

When, in July of 2019, Newsom fired the state’s top oil and gas regulator after Consumer Watchdog and FracTracker Alliance found that several of his staff held investments in oil companies under their watch, it appeared Newsom had put the state on a clear path to shaking off oil’s influence once and for all, verifying California’s status as a leader on climate solutions. “The steps he’s taken so far are very encouraging,” Sierra Club California director Kathryn Phillips told me at the time. “I’m anticipating we’ll be seeing more.”

The setback law, authored by State Assemblymember Al Muratsuchi, a Democrat whose district includes PBF Energy’s Torrance, California, refinery, was not supported by Newsom, despite his promises to prioritize public health in regard to the fossil-fuel industry. “He said that in November of 2019,” Siegel recalled. “He said, ‘We’re going to protect public health.’” He directed CalGEM to consider setback rules in its new health and safety regulations. “And over 300 days later, they’re telling us they might finish this health rulemaking by the third quarter of 2022. But people are sick now. The state is on fire now.”

The new executive order at least sets a deadline for a draft rule by the end of 2020. “But under California law, an agency can take up to 12 months to finalize a proposed rule,” Siegel said. “So, still way too slow.”

Siegel noted that the California Council on Science and Technology in 2015 recommended establishing “science-based setbacks” for oil and gas operations in populated areas, where human health can be compromised by toxic emissions. “After that study, [California regulators] said that decisions on oil and gas in California would be made on science. And that promise has been broken over and over and over again.”

The people who live near oil-and-gas operations—14 percent of California’s population, by some estimates—know all too well what it means to be studied. Cesar Aguirre, a community organizer with the Central California Environmental Justice Network, said in an online forum after the climate-week conference, “It means that you’re going to ignore us until it’s no longer convenient for you. And hopefully you can ignore us until you’re out of office, and then you never have to address us.”

To Liza Tucker, the time for studies is over. “Every time you hear, ‘We need another study,’ you know that’s a stalling tactic,” she said.

Phasing out oil in California

No one disputes that California, and both governors Brown and now Newsom, have done more to reduce greenhouse gases than any other state leader. On Thursday, the governor announced more initiatives to join the global community in assessing the risk of impending climate-fueled catastrophe, and move state pension fund investments to low-carbon indexes. Nor is Newsom wrong about California’s demand for oil. The state has tens of millions of internal-combustion engines to feed, making it, in 2018—the last year for which data is available—the second-largest U.S. state source of carbon-dioxide emissions related to energy consumption, and the second-largest consumer of petroleum. (Texas ranks first in both categories.)

Climate experts insist there are, nevertheless, reasons for phasing out California’s oil industry, regardless of how much the state uses. The supply that comes out of California’s ground amounts to little more than 4% of the nation’s petroleum production, and it has already declined by nearly 60% since the mid-1980s. But it is an intensely dirty, climate-damaging kind of oil that keeps the state’s refineries in the business of processing the world’s most carbon-intensive oil.

Hydrocarbons are, as the name suggests, a mix of hydrogen and carbon; refining balances the ratio to send products to market. Light oil that comes from North Dakota’s Bakken Formation tilts so far toward the hydrogen side of the equation that some producers say you can put it straight into your tank. California’s oil, on the other hand, is so heavy it can only be processed at the state’s own refineries.

“The refining infrastructure in California is all geared toward that difficult oil,” Deborah Gordon, a noted international oil expert at Brown University, told me in 2018. California’s refineries are so specialized toward heavy oil, in fact, that they’re also where Canadian oil producers send their Athabasca oil-sands crude—which, according to the Carnegie Oil-Climate Index, which Gordon pioneered, is the only oil that rivals California’s in carbon content. And the more carbon that has to be refined out of oil, the worse for the climate that oil is.

California crude is also complicated by the amount of energy it takes to extract it. In the state’s aging fields, where oil is viscous and stuck in rocks, as much as 40% of California’s oil production requires the injection of high-pressure steam to melt the oil to a suitable consistency for extraction. “It’s like turning peanut butter into honey,” Gordon explained. That steam is usually produced with a natural-gas plant, further burdening the climate with carbon emissions and leaks of methane—the primary component of natural gas and an intense, short-term climate pollutant.

Steam injection was the culprit behind last year’s dramatic spill of more than 1 billion gallons of oil from a Chevron-operated facility in Kern County. It also infamously led to the 2011 death of Chevron engineer Robert David Taylor, who was burned alive in a hot and toxic sinkhole where the ground surface had been weakened by rampant steam injection. Newsom in November 2019 declared a moratorium on new wells that use the technique, which is still in effect. At already-permitted wells, however, operators are free to steam—and spill.

Though “surface expressions” of oil are technically illegal, oil companies rarely, if ever, face prosecution, reported Janet Wilson of The Desert Sun and Lylla Younes of ProPublica last week. They are also free to “scoop up any oil that cracks the surface,” Wilson and Younes wrote, and sell the spilled oil for profit.

Newsom’s new executive order does call for a ban on new permits for hydrofracturing, the controversial practice of injecting a high-pressure, chemical-laced slurry of sand and water into the ground to break up oil-bearing rock, but it does nothing new to curtail steam injection. “I call it ‘steam-fracking,’” said Consumer Watchdog’s Liza Tucker.

With COVID-19–related stay-at-home orders and a falling economy driving oil prices to rock bottom, “we don’t know how many of those permits are actually being used,” Tucker said. “We are demanding that they tell us how many of them have been used.” The permits are officially valid for a year, but drillers almost always apply for a one-year extension, which is hardly ever denied. “They say it’s two years, because they’re assuming no one will ever call them out,” Tucker said.

The oil industry has clearly not given up hope on California. The Western States Petroleum Association, the industry’s main trade group and always one of its most profligate spenders among the Sacramento lobbying set, has spent $11 million persuading lawmakers and regulators from January 1, 2019, through June 30 of this year—only $4 million less than the previous legislative session with six months of reporting yet to go. But environmentalists haven’t given up, either, said Siegel.

“This is a make-or-break moment for Newsom,” she said. “The eyes of the world are on him right now because of the fires and the urgency of the situation. So I am still hopeful he’ll be the leader we need.” But so far, she said, “it’s been one disappointment after another.”

As of this writing, neither CalGEM nor the governor’s office have responded to requests to comment for the story.

Consumer Watchdog
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