Newsom Kills Proposal to Add Oil Regulators (Even Though Industry Would Have Paid)

Gov. Gavin Newsom has dropped a bid to add dozens of staff members to the agency that oversees oil and gas drilling in California.

That's after a leading energy industry group asked his administration for help as it deals with a severe drop in fuel demand due to the state's coronavirus stay-at-home orders.

The governor's initial 2020-21 state budget proposed adding 128 analysts, engineers and geologists to the California Geologic Energy Management Division, or CalGEM. Oil producers would have had to pay $24 million to fund the expansion.

"Earlier proposals to expand staff at CalGEM have been withdrawn due to COVID-related economic issues impacting that sector and our fiscal health in our state," Natural Resources Agency Secretary Wade Crowfoot said Thursday after Newsom unveiled his revised budget.

"But rest assured that CalGEM continues to ensure full regulatory oversight," Crowfoot said.

At the end of March, the California Independent Petroleum Association — which represents 500 crude oil and natural gas producers — sent Crowfoot a letter urging the administration to drop the CalGEM proposal.

CIPA said at the time that the costs and extra oversight would further hurt an industry struggling after a pandemic-driven collapse in demand for gasoline and jet fuel.

"This proposal would have increased staffing by an additional 40 percent while in-state production has gone down," said CIPA CEO Rock Zierman in a statement to KQED on Friday. "Adding new positions would have added general fund pension obligations for taxpayers at a time when the state is facing a massive deficit and the governor is looking at ways to reduce all state operating costs."

The increase in CalGEM's staffing came after a year in which the agency — formerly known as the Division of Oil, Gas and Geothermal Resources, or DOGGR — had come under increased scrutiny. Newsom shook up agency management last year after it came to light that it had dramatically ramped up approvals for drilling projects using hydraulic fracturing, or fracking, and that some senior staffers held investments in the companies they were overseeing as regulators.

The Newsom administration described its proposal to expand CalGEM as designed to ensure that it could do a better job of overseeing often environmentally risky extraction techniques like fracking and cyclic steam injection. That steam process has been at the center of persistent problems in the Cymric Oil Field in western Kern County.

A senior staffer with the Center for Biological Diversity, an environmental group that tracks the state's oversight of oil drilling, criticized the Newsom administration for pulling back from its CalGEM expansion.

"During this public health crisis it's more important than ever to protect the air we breathe and the water we drink from oil industry pollution," said Kassie Siegel, director of the center's Climate Law Institute.

"We understand that the pandemic has wreaked havoc on Californians and the state budget, but cutting these positions won't save a cent," Siegel said, referring to the fact the added staff would have been paid for by the industry.

The administration also recently signaled it is willing to postpone a deadline for oil and gas producers to pay fees and submit plans to manage thousands of unused oil wells after a similar request from the petroleum association.

State Oil and Gas Supervisor Uduak-Joe Ntuk said despite dropping the increased CalGEM staffing, California regulators will provide strong oversight of oil and gas production.

"While earlier proposals to expand staff have been withdrawn due to COVID-related economic issues, all CalGEM regulatory operations, including field inspections and witnessing of tests, are continuing," Ntuk said in a statement.

"All regulations remain in effect and operators are still accountable for meeting them," he said.

KQED's Kevin Stark contributed reporting to this story.