#USA #Los Angeles #Consumer Watchdog #California Oil #Newsom Administration

Decline in California Oil Drilling Permits: A Cause for Alarm

The state of California is witnessing a dramatic drop in approvals for new oil drilling permits. In 2024, only 73 permits were granted compared to a staggering 2,664 in 2019, the year Gavin Newsom assumed the governorship. This significant decline raises serious questions about the regulatory actions of the state oil regulators, especially regarding adequate bonding requirements for oil well operators.

Consumer advocacy groups, such as Consumer Watchdog and FracTracker Alliance, are sounding the alarm. The recent trend indicates a potential risk to taxpayers as regulators have halved the necessary bonding for the California Resources Corporation (CRC) after acquiring Aera Energy. Initially, a bonding of $60 million was required, but this was reduced to $30 million, using a legal loophole that allows for shared liability. Alarmingly, Aera's cost to plug its wells is estimated to start at $1.1 billion.

Liza Tucker, a consumer advocate, praised the declining number of permits under the Newsom administration but highlighted an urgent concern that the state’s citizens are exposed to substantial financial risks due to insufficient bonding provisions. CRC and Aera have now emerged as California's largest onshore oil operators, and the reduced bonding requirements pose considerable hazards.

Kyle Ferrar, the Western Program Director at FracTracker Alliance, shares a grim outlook. He points out that CRC has a history of absorbing low-producing oil and gas wells and is grappling with profitability concerns due to diminishing output per well. Without adequate bonding, the companies may find it increasingly challenging to cover the costs associated with plugging wells, let alone addressing the environmental ramifications of Aera’s operations.

Despite the legislative backdrop, highlighted by the signing of AB 1167 by the governor in 2023, which mandates oil and gas operators to bond properly for wells and facilities acquired from others, compliance appears lacking. This law was aimed at ensuring future plugging and reclamation costs fall upon the operators rather than taxpayers. However, David Shabazian, then-director of the Department of Conservation, notably refused to implement the law appropriately, raising further concerns about governance and operational integrity.

In response to Shabazian's inaction and the relationships he fostered that potentially wavered the enforcement of the law, he has since stepped down. The CRC now controls more than 38,000 wells, with 14,000 of those classified as idle. This shocking figure indicates CRC holds around 40% of California's idle wells, exacerbating the environmental crisis where some 65% of idle wells exhibit hydrocarbon leaks, namely methane, a substantial contributor to climate change.

Felicitating a tightening of the regulatory frameworks, recent actions from other states provide a stark contrast to California's leniency. States such as Alaska have instituted stringent bonding measures for oil company acquisitions, learning from the consequences of bankruptcies that escalated liabilities. The state mandated that both BP and Hilcorp maintain $30 million in bonding, showcasing an efficient approach to safeguarding taxpayer interests.

With mounting pressure from public advocacy groups, alarm over environmental degradation, and increasingly frequent wildfires linked to climate change, the need for comprehensive regulation and adequacy in bonding requirements has never been clearer.

As 2024 advanced into the fourth quarter, new drilling approvals dwindled further, highlighting the ongoing challenge the state faces. Disturbingly, there has been a 38% reduction in plugging permits relative to the same period in previous years. The narrative surrounding oil drilling in California is shifting as the state grapples with balancing industry demands and environmental responsibilities.

For more comprehensive insight into California's oil permitting landscape, updates can be tracked via Newsomwellwatch.com, operated by Consumer Watchdog and FracTracker Alliance, creating a bridge between public awareness and regulatory oversight.

The intersection of environmental health and operational accountability in California's oil industry warrants urgent attention. The winds of change are blowing, yet there lies a crucial path of reform yet to be traversed by state officials to truly safeguard not only the environment but the taxpayers as well.