American Oil and Gas Reporter - June 2022 - 44

IssuesUpdate: California Independent Petroleum Association
of what Newsom is doing, " Zierman illustrates.
" People in the media and legislature
have been shocked to learn California
imported 18 million barrels of oil from
Vladimir Putin's Russia last year. "
And as people scratch their heads
over that fact, they also are puzzling
over the fact that half of all Ecuador's
crude oil exports go to California. " Which
has a greater carbon footprint? " Layton
poses. " Producing oil by clear-cutting
the Amazon rain forest and sending it on
a tanker to a crowded California port or
producing it in the state according to
strict California environmental standards
and moving it to our local refineries in
existing pipelines? "
Informing Californians about such realities
has helped blunt some anti-industry
attacks in the 2022 California Assembly,
Zierman says. " Like most sessions, it
started with about 25 bills targeting us,
but those have dwindled to one or two, "
he details. " While some people thought
it sounded great to push a bill to end California
oil production, we made sure they
knew that would only increase foreign
imports. For that reason, I think we have
seen a lot of the bills go away. "
Undaunted Demand
Although many in the public arena
express enthusiasm for a societal transition
away from fossil fuels, Zierman notes
that the Golden State's vaunted push to
force that transition keeps hitting a brick
wall. " This is the dirty little secret: California
is using more oil and gas today
than ever, " he muses. " Californians demanded
1.8 million barrels of oil yesterday,
they are demanding 1.8 million barrels
today and they will demand 1.8 million
barrels tomorrow. "
The uses behind that demand cover a
wide swath and extend beyond the Golden
State, Layton notes, recalling the worldwide
lockdown that left freeways and
airports across the globe largely empty.
" Despite the global shutdown due to
Covid-19, the world still used 70 million
barrels a day, " he observes. " If there is a
more powerful example of how important
petroleum is to the world oil every day, I
cannot think of it. "
Not long ago, California produced the
lion's share of the hydrocarbons that it
consumed, Zierman recalls, but California
crude now accounts for less than 30% of
the state's consumption. And if anti-development
forces got their way and ended
all the state's output tomorrow, he adds,
44 THE AMERICAN OIL & GAS REPORTER
consumers quickly would get a reminder
of supply chain realities.
" You cannot offload an additional
350,000 bbl/d of oil without terminals,
tanks and facilities, " he points out. " Increasing
that capacity requires environmental
reviews, permits and construction
lead-time. How long does that take, and
will regulators actually approve the permits?
It is the height of hypocrisy to
allow that but shut down production that
is already connected to these refineries
by underground pipelines. Knowing that
reality keeps us going. California policymakers
need us, whether it they admit it
or not. "
Prices And Permits
Zierman and Layton mention two conflicting
factors influencing many CIPA
members' outlook, with better market
conditions a source of encouragement
that is offset by the glacial pace of new
permitting from the California Geologic
Energy Management Division (CalGEM)
at the California Department of Conservation.
" Commodity prices are strong,
so members are happy about that for the
production coming out of the ground, "
Zierman reports. " However, we are in a
depletion business and want to at least
maintain-if not increase-production. That
effort is being stymied, and people are
sour about that. "
" There is a lot of frustration in the
producer community, and that may be
too mild of a word, " Layton describes.
" It goes back to permitting. There are
challenges with obtaining permits at all
levels of government in California, and
for a variety of reasons. "
The staff at the division must walk a
particularly delicate line as it receives a
torrent of contradictory input from industry
representatives, anti-development organizations
and the governor's office, he acknowledges.
" CalGEM is getting it from
three different directions, " Layton considers.
" We are very frustrated with the
lack of permits while CalGEM has dramatically
increased its staff. There certainly
was a time when CalGEM was the only
thing growing related to the California
oil industry apart from the well abandonment
industry. "
That is because, Zierman says, the
state is dragging its feet on issuing permits
for every industry undertaking except the
one to end a well's life. " While the administration
proudly flaunts the state's
record-low permits for new wells, we
also have a record number of plugging
and abandonment permits, " he reports.
" They can find time and the environmental
justification to allow us to plug even
though that also requires a rig, pouring
cement and disturbing the surface. It is
possible to get plugging permits, but after
120 years, California does not seem to
know how to let us drill new wells. "
Despite this frustration, Layton cites
silver linings around even some of the
darkest clouds. CalGEM's hiring spree
coincided with the last industry downturn,
he notes, which sent many people from
the industry to the public sector. " Our
recent encounters seem to reflect some
improvement in our ability to work with
staff on issues that help move the permitting
process along at the staff level, although
it is yet to lead to a noticeable increase in
permits being issued, " he assesses. " I see
positive movement at CalGEM, as the
new additions to the staff get their sea
legs and can better sort things out. "
Moreover, he expresses hope that
drilling permits may be more forthcoming
if the courts accept the adequacy of an
environmental impact report CalGEM
performed for the Kern County oil field.
If the court determines the EIR meets
the requirements of the California Environmental
Quality Act, Layton says, Kern
County would have authorization to issue
drilling permits within its jurisdiction,
which could go a long way toward easing
the backlog.
" If you look at it from a perspective
in which the glass is half-empty, the EIR
litigation is a potential excuse for CalGEM
to dawdle, " Layton describes. " From the
half-full perspective, all this was dumped
into CalGEM's lap as it was being hammered
by environmental NGOs and being
forced to answer to the administration
because the county cannot use the EIR
until the court says it can. "
The EIR process will pan out, Layton
predicts. " I think issues with the Kern
County EIR will be resolved in the nottoo-distant
future, which will open the
door for a lot of work, " he forecasts. " I
believe a lot of companies have readyto-deploy
investments that have been on
the shelf because of a lack of permits.
Those projects were economic at commodity
prices that were a lot lower than
current ones, so California still can turn
this production decline around. California's
refineries need California oil. And Californians
will always benefit more from
local production. "
❒

American Oil and Gas Reporter - June 2022

Table of Contents for the Digital Edition of American Oil and Gas Reporter - June 2022

Contents
American Oil and Gas Reporter - June 2022 - Intro
American Oil and Gas Reporter - June 2022 - Cover1
American Oil and Gas Reporter - June 2022 - Cover2
American Oil and Gas Reporter - June 2022 - 3
American Oil and Gas Reporter - June 2022 - 4
American Oil and Gas Reporter - June 2022 - Contents
American Oil and Gas Reporter - June 2022 - 6
American Oil and Gas Reporter - June 2022 - 7
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American Oil and Gas Reporter - June 2022 - Cover3
American Oil and Gas Reporter - June 2022 - Cover4
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