A pump jack does its work at an oil field in Kern County. Photo by Frank Lopez
Written by Frank Lopez
The Covid-19 pandemic led to major declines in demand for crude oil.
On April 20, 2020, West Texas Intermediate crude traded at negative prices — the first time the price of oil dropped below $0.
However, demand is returning and recent moves by Kern County’s government would allow for the permitting of more than 40,000 new wells in the county in the next 15 years.
On Feb. 12, the Kern County Planning Commission voted to recommend to the Kern County Board of Supervisors to bring new oil wells to the county.
The oil-permitting ordinance goes for a vote by the Board of Supervisors Tuesday.
The California Supreme Court struck down parts of Kern County’s oil and gas ordinance because it didn’t satisfy certain environmental requirements. The amended resolution is expected to be approved by the Supervisors.
According to the Kern County Planning Commission’s staff report, the number of wells allowed to be drilled per year is capped at 2,697.
Environmental groups including the Sierra Club and The Climate Center oppose the proposal, and a petition against the drilling has garnered more than 7,000 signatures.
One of the largest oil and gas producers in California is Aera Energy, which is owned by Shell Oil and ExxonMobil and headquartered in Bakersfield. It currently has 9,000 producing wells in Kern County.
Aera Energy also has 700 producing wells in Fresno County’s Coalinga oil fields.
According to an annual report from Kern County’s Department Oil and Gas Permitting Division, a total of 9,097 permits were approved in 2020.
Aera President and CEO Erik Bartsch said that the revisions to the ordinance will provide a streamlined process for permitting oil and gas projects in Kern County, while also ensuring environmental coverage and protection under the California Environmental Quality Act.
“Permitting is a controllable element of the business environment that really needs help. Policy makers, regulators, and the industry need to come together to solve this problem. Recovery of the oil industry and the jobs that come with it hang in the balance,” Bartsch said.
Bartsch said that one key type of permitting approval went from having a review period 76 days to 275 days from 2019 to 2020. Another type of approval went from 92 days in 2019 to 457 days in 2020.
With California’s permitting process being so slow, Bartsch said that it hurts Californians trying to get back to work.
“After Coronavirus recedes, we do expect a rebound and opportunities to come to many counties in the Central Valley, including Fresno, and many others. The question is whether or not the state is going to be there to support us with the kind of permitting and regulatory support to allow the rebound to occur and jobs to come back, Bartsch said.
How many wells?
Kern Citizens for Energy, a non-profit coalition founded in 2014 to support the oil and gas industry and its employees in the Central Valley, is in support of the ordinance.
There has been a figure floating around in media publications and literature from environmental organizations that the ordinance would add 67,000 new wells in Kern County.
Tracy Leach, director of Kern Citizens for Energy, said that with the number of wells would be capped at 2,697 per year, so the math adds up to more than 40,000 wells — not 67,000.
With California’s high environmental standards, Leach said that oil in California is produced better and cleaner than anywhere in the world, and that the U.S. needs to quit its dependence on foreign oil.
“We use a lot of energy in our state, so lets get it from the Central Valley. My prediction is that the economy is going to rise up and we need clean, affordable and safe energy produced under strict standards like those in California,” Leach said. “ People should have a choice of how they want to heat and cook and run their households.”
Leach said that 25,000 jobs in Kern County are directly tied to the oil industry — one in seven jobs.
According to a report commissioned by the Kern County Planning Commission and Natural Resources Department, the industry contributed more than $197 million in property tax revenue in Kern County during the 2018-2019 fiscal year.
Industry hard hit
Ralph Combs is manager of regulatory community and government affairs for the Termo Company, an oil and gas exploration company based in Long Beach.
Combs said the industry as a whole was hit hard and Termo shut down three of its 5 wells in Fresno County last year because it didn’t make sense for the wells to keep producing when oil prices were so low.
The company was able to avoid layoffs by reducing wages, making cuts to the 401(K) plan and shutting down 15% of its total wells.
“We made it through, but it was touch and go. Through being extremely disciplined in our spending and stretching out cash flow, we were able to make it through. In general it has been ugly for the industry, but it’s all starting to come back,” Combs said.
Two of the shutdown wells have been brought back, and production in Fresno County is back to about 70 barrels a day.
Though the demand is going back up, Combs said that there is a general consensus that the demand won’t go back to pre-pandemic levels for about another year.
If the ordinance is passed in March, the permitting of new wells could be a net positive for construction companies, pipe companies and others in the Central Valley that would be hired to build new facilities, retrofit old ones and do ground work.
“Having the Kern Ordinance in place provides a good transparency and framework for oil and gas permitting in Kern County. It would bring predictably for the companies and the county, and they can see where that economic development and the infrastructure could occur over the next 10 to 20 years,” Combs said.
Some local politicians, environmental groups and community members did voice their opposition to the ordinance, highlighting the impacts on the land, air and the communities nearest oil and gas development structures.
According to a report from the Natural Resources Defense Council (NRDC), 92% of the state’s population living within one mile of oil and gas development and in vulnerable communities are people of color.
Destiny Rodriguez, Fresno-based regional community relations manger for The Climate Center, said people living in these areas experience negative health effects.
“Despite the overwhelming outcry and opposition from residents, this is moving forward. Those families living near these facilities unfortunately will be experiencing a lot of the health impacts and the environmental impacts as well,” Rodriguez said.
Rodriguez also recognizes the need to protect livelihoods.
There does need to be a just transition to more renewable energy, but at the same time, make sure that oil workers are supported, she added.