State Puts Hold on Some Oil Well Permits After Chevron's Kern County 'Crisis'

Updated 4:20 p.m. Tuesday

State regulators announced Tuesday they're imposing a moratorium on new permits for an oil extraction method that has been linked to what California's top conservation official is calling "a crisis of oil leaks" — a series of uncontrolled crude petroleum releases from Chevron wells in Kern County.

The state Division of Oil, Gas and Geothermal Resources announced Tuesday it won't issue new permits for the technique, which uses high-pressure steam to release oil trapped in underground rock formations. Meantime, the agency announced, experts from Lawrence Livermore and Sandia National Laboratories will study conditions in the part of Kern County's Cymric oil field where massive amounts of crude petroleum and oily water have flowed to the surface since 2003.

The releases, which regulators and the industry call "surface expressions," gained widespread attention after KQED reported a series of large, uncontrolled flows around Chevron wells that began in May and continue today.

Wade Crowfoot, the state's secretary of Natural Resources, described conditions in the Cymric field as a "crisis of oil leaks."

"We've experienced a spate of unpredicted, uncontrolled oil leaks this spring and summer," Crowfoot said in an interview.

DOGGR, part of the California Department of Conservation, also announced it will refer dozens of pending oil company applications for hydraulic fracturing and other "well stimulation" methods to the Lawrence Livermore lab for third-party scientific review to ensure that they meet state safety and environmental standards. At the same time, DOGGR is asking a state audit agency to review its current permitting process.

The department also disclosed it's launching a series of workshops to begin the process of writing new rules designed to protect communities and residents who live near oil and natural gas production sites.

In a statement Tuesday, Gov. Gavin Newsom said the initiatives are part of California's effort to achieve its ambitious climate change and energy goals.

'Necessary Steps'

"These are necessary steps to strengthen oversight of oil and gas extraction as we phase out our dependence on fossil fuels and focus on clean energy sources," Newsom said.

Since May, large volumes of oil have alternately gushed or seeped out of the ground at the site of several high-pressure steam injection wells run by San Ramon-based Chevron in the Cymric field. The leak site is in the Temblor Range foothills 35 miles west of Bakersfield.

The first in a series of major above-ground flows in the field continued from May through the beginning of August and prompted a major cleanup effort.

Environmentalists have called on the Newsom administration to be more aggressive in regulating the surface expressions, and state lawmakers have scheduled a joint Assembly-Senate hearing into the incidents.

New regulations that went into effect in April ban surface expressions, which have been part of the steam injection work for years.

In fact, one series of leaks, which began in 2003 and are collectively referred to by Chevron and regulators as GS-5, has led to the release of tens of millions of gallons of oil.

Over the last several months DOGGR issued notices of violation to Chevron for GS-5 and the 2019 leaks and imposed orders to reduce steaming operations near the seeps. In one case, the division slapped Chevron with a $2.7 million fine.

'It Might Be a Really Long Pause'

But the seeps continue, with Chevron reporting two new uncontrolled flows in the last 12 days. (The new incidents are recorded in a state database here and here.)

"These surface expressions are illegal and cannot simply be the cost of doing business. Our focus is eliminating them," Crowfoot said, describing the moratorium on high-pressure steam injection permits as "a pause."

"It might be a really long pause," Crowfoot said, which could lead to a ban of the practice in some areas. "There are other means of oil extraction that if they (the oil industry) choose to do, might cost them more but would be with less ... risk."

Jason Marshall, the acting head of DOGGR, said in an interview that Chevron is improving its handling of the leaks in the Cymric Oil Field.

"They’re getting a better handle on what’s going on out there," Marshall said. "I think they had some production practices that they were just wash, rinse repeat. ... (Now) we’re seeing a higher level of participation by some of the reservoir engineers rather than just production engineers — people who know more about the geology getting involved rather than just people who know how to construct wells."

Chevron has repeatedly emphasized that its goal is to prevent the leaks and that it continues to work with regulators to address them.

The company says that recent surface expressions may be the result of its work to stop the GS-5 release.

"We are committed to managing the field and reporting events as required. Safety is our top priority and we will continue to conduct activities to comply with agency requirements, while protecting people and the environment," Chevron said in a statement last week.

The changes announced Tuesday by DOGGR affect only new applications for high-pressure steam extraction work, not existing wells that use the technique.

Both state regulators and Chevron officials have expressed concern that halting ongoing steam work could lead to subsidence in the Cymric field. That, in turn, could damage existing wells and lead to even bigger problems.

"You could start seeing well failures," Marshall said. "You could cause surface expressions by doing that."

In July, Newsom fired DOGGR Director Ken Harris and named Marshall as the agency's acting chief. The moves came after the governor learned of a dramatic increase in permits granted for fracking and allegations that some senior officials in the division had stock in the companies they regulate.

Consumer advocacy and environmental groups who exposed those issues have called on Newsom to impose a moratorium on permits for fracking.

DOGGR, which will be renamed the Geologic Energy Management Division (CalGEM) next year, is not going that far. But it has requested an independent audit by the Department of Finance of its permitting process for fracking and steam injection jobs. That audit, which is expected to take several months, would be made public, according to Crowfoot.

"Earlier this summer concerns were raised about the permitting process, particularly for fracking. What we want to do is ensure public confidence in the process and frankly strengthen the process if there are ways we can do that," Crowfoot said.

While that audit takes place, all fracking and steam injection permits — known as project approval letters and which typically cover multiple wells — will be reviewed by experts at  Lawrence Livermore Lab. State officials say the division usually OKs about two dozen of the approval letters annually.

The division also plans to create new rules aimed at protecting the health and safety of people who live near oil and gas extraction sites. This could include barring the work near homes, schools and hospitals.

State officials plan to conduct a series of workshops in the coming weeks aimed at developing those new rules, which could go into effect in 2021.

'Turning of Tide'?

Environmental and community activists responded positively to Tuesday's announcement.

The Center for Biological Diversity, which has been a harsh critic of state oil and gas regulators, praised Gov. Newsom for taking a "historic" step.

Kassie Siegel, director of the center's Climate Law Institute, said in a statement: “This marks the turning of the tide against the oil industry, which has been allowed to drill at will in our state for more than 150 years. This is the kind of leadership necessary to make California the first major oil-producing state to phase out extraction and protect people and our planet from dirty fossil fuels.”

Gustavo Aguirre Jr., of the Central California Environmental Justice Network, said the group supports the moratorium on high-pressure steam injection — a method he said raises a host of air- and water-quality issues.

"There is no other way to tackle this than to have the state start moving away from permitting these practices that use so much water and create at least 10 times the amount of wastewater they use," Aguirre said.

He added that his organization and its partners hope to see the state's process result in new rules for safety zones around oil and gas production facilities. A coalition called VISION — Voices in Solidarity Against Oil in Neighborhoods — is advocating for a 2,500-foot buffer between oil and gas infrastructure and homes and schools.

The reforms prompted criticism from the oil industry and one of the top Republicans in the state Legislature.

"California's environmental regulations already lead the world, and the further study of the best science and real data about production practices in our state will only reconfirm that leadership," said Catherine Reheis-Boyd, president of the Western States Petroleum Association, in a statement.

"It is disappointing that the state would pursue additional studies when multiple state agencies already validate our protection of health, safety and the environment during production. These agencies should also consider reliability, affordability and resilience of our energy supply, as every barrel delayed or not produced in this state will only increase imports from more costly foreign sources that do not share our environmental and safety standards," Reheis-Boyd said.

State Senate Republican Leader Shannon Grove of Bakersfield also emphasized the changes would lead to a growing reliance on foreign sources of fuel and a major hit to the economy for the region she represents.

"California's thirst for oil will not reduce a single barrel by this policy, but as a result we will import more foreign oil and export California's cash," Grove said in a statement.