In a potential watershed for local oil production, a senior Sacramento energy official recommended Friday that the Newsom administration exempt Kern County’s contentious petroleum permitting plan from California’s stringent environmental review law in order to help stabilize the state’s fuel supply.
Vice Chairman Siva Gunda of the California Energy Commission told Gov. Gavin Newsom in a 24-page letter that litigation over the environmental law has stalled production in Kern County, effectively increasing the state’s reliance on imported oil at a time of geopolitical uncertainty and rising refining costs.
Gunda’s letter specifically recommended prioritizing Kern County production in “existing established, and densely developed oilfields” but not in areas surrounded by homes, schools and other sensitive sites. It advised keeping in place California’s ban on fracking and other controversial well-stimulation techniques.
The move came one day after Kern’s Board of Supervisors voted unanimously to approve the third version of a massive environmental review aimed at allowing oil companies to drill up to 26,970 new wells by 2035. The review, which still has to be reviewed by a judge, is expected to be challenged in court by environmental groups concerned about climate change and local health impacts.
If Newsom pushes the recommendation through the state Legislature, as Gunda advised, it would amount to a near-reversal in energy policy for an administration that has aggressively clamped down on in-state oil production in pursuit of a quick transition to zero-emission transportation.
A spokesman for Newsom’s office said he and his staff “will review the recommendations in detail and advance solutions that maintain a safe, affordable and reliable supply of transportation fuels for California.”
The architect of Kern’s 13-year push for local permitting authority, Lorelei Oviatt, called Gunda’s recommendation “an evolution” of state policy and an acknowledgment of the work she and her staff have done to promote oil production while also protecting the environment.
She said the biggest change came in April when Newsom “waved the white flag” by asking the commission for advice after two refineries representing a fifth of the state’s gasoline supply announced they plan to close.
“We look forward to action being taken on this,” said Oviatt, director of Kern’s Planning and Natural Resources Department.
Local oil producers have complained for years that the sharp slowdown in oil-field permitting under Newsom, besides costing good-paying jobs and eroding Kern’s tax base, would hurt consumers across the state by reducing energy reliability and raising fuel prices.
The CEO of the California Independent Petroleum Association trade group, Rock Zierman, noted in a statement Friday that the state now imports 78% of its oil while sending $25 billion annually to countries with lower environmental and labor standards than California’s.
“We agree with the Energy Commission on one major point: If California is serious about stabilizing gas prices, it must increase local crude production and stop the rise of expensive foreign imports,” he stated. “Kern County taking control of local permitting decisions would be a step in the right direction.”
Earthjustice, an environmental group that has sued to stop local oil permitting, and which criticized the county for pushing forward with its third attempt at a legally sufficient environmental review of local oil permitting, declined Friday to comment on Gunda’s recommendations.
The oil production-related comments were among several pieces of advice in the letter, including making regulatory changes in support of the “necessary import” of refined fuel products. It advised putting in place policies and programs to ensure environmental, public health, labor, economic and consumer protections “for a successfully managed transportation fuels transition.”
Gunda noted that although demand for gasoline in the state has continued to decline, there is a “credible risk” of additional refinery conversions or closures that could lead to volatility in fuel markets.
His letter said many California refineries are geared to process local crude oil and are not well-suited to run on imports. Without investment in retrofitting those plants, it said, refineries’ processing costs go up and their efficiencies go down.
It also said declining in-state reduction, as a result of California Environmental Quality Act lawsuits that have stalled Kern oil production, have driven several crude-oil pipelines that carry oil to refineries north and south to run only intermittently. It noted these slowdowns raise oil transportation prices.
The letter went on to point out that relying on imported oil subjects the state to volatile geopolitics.
There was additionally an acknowledgment of local conditions.
“The contraction in domestic crude oil production erodes high-wage jobs and shrinks local tax bases, placing additional strain on oil-dependent communities and public services,” Gunda wrote.