American Oil and Gas Reporter - May 2020 - 77

IssuesUpdate: California Independent Petroleum Association
Thus far, the California cities of San
Jose, Berkeley, Mountain View, Santa
Rosa and San Luis Obispo have enacted
bans against new natural gas hookups, but
numerous municipal fleets in the state run
on natural gas, he notes, and it is essential
or the fuel of choice for many restaurants
and other facilities, he says. "We are
talking about affordability and reliability,"
Zierman emphasizes. "We live in a state
that had rolling blackouts before COVID19 and saw a utility go bankrupt. We have
seen electric lines start fires, so going to
an all-electric system poses a lot of problems. The coalition is designed to fight
for choice. People are free to use nothing
but electricity if they want."
Carbon Solutions
According to Zierman, aspirations for
a low-carbon future inspired policymakers
to change DOGGR's name to CalGEM,
and the 2019 state budget contained funds
for an interagency study headed by the
California Environmental Protection Agency
on how to make the state's economy carbon-neutral by 2045. But goals of a lowcarbon future must include actually pulling
the carbon dioxide out of the atmosphere
and sequestering it, he insists, noting that
an overwhelming consensus of scientists
believe that doing so will be necessary to
meet atmospheric standards such as those
in the Paris Accords.
"You still have to pull carbon out of
the atmosphere," Zierman says. "It helps
to plant trees, but you also can do it by
carbon capture and sequestration. Our industry has a 100,000 straws in the ground
that connect to empty caverns. They held
oil and natural gas for eons, which makes
them perfect for a system to take CO2
back to where it comes from."
Only 30% of the fossil fuels California
uses originate in the state, Zierman observes,
and petroleum product consumption continued to climb in 2019. "Our state has a
low-carbon fuel standard, a cap-and-trade
system and the most electric cars in America, but our demand for fossil fuels continues
to climb," he points out. "Nevertheless,
extremists want to phase out California
oil and gas production."
Although it may be impossible to persuade the industry's most extreme critics
to choose a different path, Layton suggests,
many Californians who strongly support
a transition away from petroleum should
at least be able to understand the benefits-including tax revenue and jobs-of
producing what oil it does consume in

the state instead of importing it.
"The absolute extremists seem to think
we can flip a switch to be done with oil
and everybody will be in an electric car
in six months," Layton surmises. "We
are never going to convince them, but
some who strongly support getting off
oil actually realize that it is not going to
happen anytime soon."
Correcting The Record
CIPA is working to dispel misstatements about idle well management, Zierman says, and has issued a fact sheet in
response to a joint February article by
the Center for Public Integrity and the
Los Angeles Times. The article overstated
the state's risks and falsely implied that
taxpayers would be held liable for plugging, he says.
"The bottom line is the industry pays
100% of plugging costs, not taxpayers,"
Zierman emphasizes. CalGEM has
plugged 1,350 such wells since 1977,
and all those costs are borne by a levy on
oil and gas producers, he says, and an industry-financed fund contains $3 million.
California companies plugged 1,346 idle
wells in 2018 alone, he points out, and
nine operators decommissioned more
wells than the state requires.
"Our assessment is now larger than
the severance tax in Colorado," Zierman
compares.
A healthy industry will ensure that
resources are available to plug wells,
CIPA's fact sheet states. Despite claims
to the country, the state's production decline is not inevitable, but stems from
the challenges operators face in obtaining
permits for new projects, with 2,000 permits impacted by the delay.

Since the enactment of AB 2729, which
increased fees and blanket indemnity
bonds, operators have been required to
plug a percentage of their wells each year,
Zierman says. Other new laws relating to
idle wells include AB 1057, which allows
the oil and gas supervisor to require an
additional security bond up to $30 million
to cover future remediation costs on all
wells and facilities. Meanwhile, AB 1328
mandates an independent study commissioned by CalGEM and the California Air
Resources Board to review emissions from
idle and abandoned wells, and SB 551 requires operators to give CalGEM an estimate of future plugging obligations and a
financial plan to meet the responsibility.
In a joint letter in January, 37 environmental groups asked the governor on
his first anniversary in office to declare a
climate emergency, prevent state agencies
from issuing oil and gas permits, ban hydraulic fracturing and produce a plan for
a public utility company.
However, Zierman suggests, the governor is likely to take a dim view of such
a move's results, especially importing
more oil from overseas. "I don't think
Gavin Newsom wants to bring in more
oil from Saudi tankers," he says. "I don't
think he sees that as a rational policy
when unemployment stands to hit 20%
or worse. It would be one thing if they
found ways to reduce consumption, but
again, this effort essentially says: 'Let's
not produce it here and instead export
our wealth and tanker in oil while enriching
the Saudi royal family, which suppresses
human rights.' That is the policy they
want. It has nothing to do with climate
change, and I think the governor will
reject that."
❒

CIPA Urges State's Regulators
To Take Situation Into Account
SACRAMENTO, CA.-The California
Independent Petroleum Association is
seeking regulatory relief for members
facing low prices while questioning why
the state's primary oil and gas regulator
must seek to expand staff 40% during a
major economic downturn.
In order to save California jobs and
businesses while preserving state and
local tax revenue, CIPA is asking the
California Geologic Energy Management
Division, formerly the Division of Oil,

Gas and Geothermal Resources, to provide
relief by altering the compliance schedule
for idle well testing and underground injection control compliance, reports association Chief Executive Officer Rock
Zierman.
CalGEM plays a critical role in maintaining industry stability and can ease
companies' obligations to test a percentage
of idle wells and increase the duration of
operators' required testing compliance
plans from six to 10 years, according to
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American Oil and Gas Reporter - May 2020

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