By Nick Cunningham, OILPRICE.COM
July 15, 2019
Fracking for oil and gas in California is about to get a lot more difficult.
Last week, California Governor Gavin Newsom sacked the state’s top oil regulator after the Desert Sun reported that fracking permits in California doubled in the first six months of this year without the Governor’s knowledge. The Desert Sun report was based on data from FracTracker Alliance and Consumer Watchdog, two organizations that keep tabs on the industry.
“The Governor has long held concerns about fracking and its impacts on Californians and our environment, and knows that ultimately California and our global partners will need to transition away from oil and gas extraction,” Governor Newsom’s chief of staff Ann O'Leary said in an email to California’s Secretary of Natural Resources.
The Desert Sun, based on data from the consumer advocacy groups, also reported that top officials with the Division of Oil, Gas and Geothermal Resources (DOGGR) held investments in the oil and gas companies that they regulated. Roughly 45 percent of the permits went to companies that officials held stocks in, according to the watchdog groups. At the same time, nearly two dozen officials hired at the agency under former Governor Jerry Brown came from oil companies that have a presence in the state.
The Western States Petroleum Association or WSPA, an oil and gas trade group, says that California took in $24.6 billion in revenue because of industry operations and directly and indirectly contributes to more than 300,000 jobs.
Gov. Newsom staked out an environmental platform when he ran for governor, and even initiated a study looking at how to transition away from fossil fuels. Despite that, 191 fracking permits were approved in the first half of 2019, compared to 222 issued in all of last year. The top recipient of permits was a company called Aera Energy, a joint venture of ExxonMobil and Royal Dutch Shell.
Newsom said that he does not have the authority to issue a moratorium on fracking, although some environmental groups dispute that fact. “The governor definitely has the power to instruct the agency to ban fracking, to stop issuing permits for new wells, teo stop the expansion of the industry and to protect public health,” Kassie Siegel, director and senior counsel of the Climate Law Institute at the Center for Biological Diversity, told the AP.
ut the shakeup at the state agency could dramatically slow the pace of permitting. Newsom said that he wants his opposition to fossil fuels reflected in the work of the state regulator.
It’s unclear how this will affect the oil industry in the state, but it could mark a point of departure from past administrations.
California often leads on environmental issues. For instance, the state is in the midst of a war with the Trump administration over fuel economy standards and California has vowed to go it alone even as Washington looks to water down requirements for automakers. The state has also lead on renewable portfolio standards, clean energy and cap-and-trade.
But fracking was one area that was not substantially affected during the administration of Governor Jerry Brown, who often portrayed himself as a climate change hero. Environmental groups pushed him for years to halt fracking, but he consistently fended them off. They also called for greater setback distances for drilling operations, another plea that went unanswered.
The state used to be the largest source of production, and its historical importance was portrayed in 2007 film There Will Be Blood, which depicted Southern California’s early oil days.
But California’s oil production, which topped 1 million barrels per day in the early 1980s, has been suffering a long gradual decline since then.
More recently, there was a ton of hype around the shale potential in California. Nearly a decade ago, the EIA said that the Monterey Shale in California could hold as much as 13.7 billion barrels of oil, which would have been more than the Eagle Ford shale.
However, in 2014, the agency downgraded its assessment by a whopping 96 percent to just 600 million barrels. “Not all resources are created equal,” EIA’s then-Administrator Adam Sieminski said in 2014. “It turned out that it is harder to crack the reservoirs and get the oil flowing from the Monterey” than it was from North Dakota’s Bakken or South Texas’ Eagle Ford. “The rocks are still there,” said Sieminski. “The technology is not there yet.”
At the same time, California is increasingly water scarce, a problem that will only grow as the climate changes, and competition for water in agriculture is not a trivial problem.
Even still, California still produces more than 450,000 bpd, enough to make it the seventh largest source of output in the country. And the surge of fracking permits shows that there is still interest in drilling. Governor Newsom wants to phase out the industry, but that will be a major challenge given the size of California’s output.
Meanwhile, Chevron – another top permit recipient in the state – has come under fire for a massive oil spill in Kern County that has been ongoing since May. About 800,000 gallons of crude oil and water have spilled, and the state oil regulator – now under new leadership – issued a notice of violation and said that Chevron has not done enough to put an end to the leak. “The Chevron spill clearly shows that California needs stronger climate leadership from the Governor,” Annie Leonard, Executive Director at Greenpeace USA, said in a statement.
“Chevron takes these matters seriously,” the company said in a Saturday statement.