American Oil and Gas Reporter - May 2017 - 90

in northwestern Los Angeles County to
the Oregon border, and includes Kern
County, which is home to the bulk of
California's oil production. However, he
goes on, "We anticipate this regulation
will be used as a template by other regional
boards, including the Central Coast, which
has some (oil) operations around Monterey,
and also the South Coast, which includes
Orange County. It may even be adopted
as a statewide procedure."
Methane Emissions
In March, Zierman continues, the California Air Resources Board finalized what
he characterizes as "the toughest methane
emissions regulation in the nation."
The rules, he indicates, which are intended to cut emissions a minimum of 50
percent, apply to on- and offshore production
facilities; crude oil, condensate, and produced water separation and storage; underground storage; gathering and boosting
stations; and gas processing plants as well
as transmission and compressor stations.
He says the rules require such measures
as leak detection and repair for both active
and idle valves, flanges and connectors;
replacing higher-emitting "wet seals" with
lower-emitting "dry seals;" use of "nobleed" pneumatic pumps; and vapor control
and/or flaring of collected emissions.
The rules are part of California's overarching preoccupation with reducing
greenhouse gas emissions that began with
AB 32 in 2006, which mandated reducing
emissions to 1990 levels by 2020, which
Zierman says equates to a 20-25 percent
reduction. The primary focus under AB
32 has been a cap-and-trade program for
any entity that emits more than 25,000
tons of carbon dioxide-equivalent a year.
AB 32's mandate only extends to
2020, so last year, Zierman recalls, the
legislature passed SB 32, which calls for
lowering GHG emissions to 40 percent
below 1990 levels by 2030.
Also last year, he says, CARB released
its 2030 Target Scoping Plan Discussion
Draft, which contains draft amendments
to extend cap-and-trade beyond 2020, as
well as a number of command-and-control
regulations that include a low-carbon fuel
standard for refineries and the upstream
methane rules. Meanwhile, he mentions,
lawmakers are considering AB 378 this
year, which would extend CARB's capand-trade authority to Dec. 31, 2030.
CIPA's position is simple, Zierman
says, "The new target is 40 percent. All
right, put that in the cap-and-trade program
and be done. Let industries do business
deals as efficiently as they can. You don't
need to doodle on all these little things
(regulators) may know nothing about.
But that isn't the way they operate."
90 THE AMERICAN OIL & GAS REPORTER

Local Regulation
On top of these, Layton observes that
California oilmen have seen a flood of
local regulatory initiatives in the past year.
In November, Monterey County voters
passed Measure Z, which not only banned
all forms of well stimulation, but also implemented a five-year phaseout of oil and
gas wastewater injection and impoundment
facilities (AOGR, December 2016, pg. 31).
Layton also cites-among others-a production ban proposed by the Alameda
County Planning Commission, the Santa
Barbara Planning Commission's management plan for the Gaviota Coast that includes
language discouraging enhanced oil and
gas recovery, and an agreement signed in
September by the city of Los Angeles with
anti-oil activists without industry input,
even though CIPA had been granted intervenor status in the underlying lawsuit. The
Los Angeles settlement agreement raises
well fees and subjects oil operations to environmental assessments distinct from those
required for any other businesses (AOGR,
November 2016, pg. 20).
Layton describes these various actions
as "a coordinated effort by the same group
of people. They go in under the banner of
preventing 'fracking,' but then you find it

really isn't about fracturing. They are bans
on everything necessary to produce oil."
According to Zierman, Chevron Corp.
and Aera Energy LLC filed lawsuits against
Monterey County's referendum in December, obtaining an injunction against implementation. Then in March, the National
Association of Royalty Owners-California
along with about a dozen individual mineral
owners filed a third lawsuit.
He says the lawsuits argue that while
local governments may regulate surface
impacts, Measure Z affects downhole operations, which are the sole purview of
the state. But more importantly, he says,
the lawsuits allege an illegal taking of
property without just compensation, which
if successful, would subject Monterey
County to billions of dollars in damages.
Layton comments that after failing to
halt industry activity at the state level,
anti-oil activists now are targeting local
jurisdictions one by one. "Although all
CIPA companies don't operate in all these
different jurisdictions, we are all in this
together," he reflects. "We must do whatever we need to, to make sure these
outside interests don't find themselves in
positions of power because they are unopposed."
r

Colorado Appeals Court Sides
Against Balanced Interpretation
By Dan Larson
Special Correspondent
DENVER-Colorado's Division V
Court of Appeals ruled in March that the
Colorado Oil and Gas Conservation Commission should reconsider its rejection
of a petition seeking a rule making until
the best available science demonstrates
activity will not impair the environment.
According to a lawyer familiar with the
case, although the decision stops short of
ordering such a rule making, it fundamentally alters the manner in which
COGCC traditionally has viewed the criteria for rule making and permits.
The March 23 ruling in Martinez, et.
al. v. Colorado Oil and Gas Conservation
Commission has drawn a speedy response
from representatives of the state's oil and
gas industry, who are expressing support
for the commission's reading of its authority. Some legal experts warn a different
interpretation may prove ominous for oil
and gas activity. According to Mark Mathews, an attorney at Brownstein Hyatt
Farber Schreck in Denver, not only does
the petition in question jettison a standard
that weighs environmental priorities as

one concern among others, it also arguably
opens the door to a permitting approach
in which oil and gas companies must
perform the nearly impossible task of
proving a negative.
"By throwing out the balancing test
traditionally used by the COGCC that
weighs the importance of developing oil
and gas resources with safety and public
health issues, and not providing any guidance for the level of required environmental
protection, the decision may be interpreted
as mandating the commission not to approve any rule-or even any permit-that
allows impairment of the environment to
any degree," Mathews assesses. "That is
extraordinary."
A Balancing Act
After the ruling, a COGCC spokesman
indicated the commission was "evaluating
whether to appeal to the Colorado Supreme
Court" and reiterated the commission's
belief that "existing rules and permitting
requirements are protective of public
health, safety and welfare and, as such, it
does not see a near-term effect on our
regulatory approach."
The case was brought in October 2013

American Oil and Gas Reporter - May 2017

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