CIPA Disappointed in Los Angeles City Council Action on Domestic Oil and Gas Operations

Action Targets ALL Oil Production, Not just Hydraulic Fracturing

SACRAMENTO—California Independent Petroleum Association CEO Rock Zierman expressed disappointment in the actions by the Los Angeles City Council which directed staff to draft a city ordinance to ban all oil and gas well stimulation and the use of injection wells. Despite being heralded by environmental groups as a resolution against fracking, the actual resolution targets nearly all oil and gas production within the city’s limits.

“I’m disappointed the City Council gave into hysteria and directed the City Attorney and staff to prepare and present an ordinance that if adopted will lead to the elimination of all oil and gas production within city limits. That’s bad for a city budget that already has a massive deficit, bad for the men and women who work in our industry, bad for the more than 10,000 royalty owners who live in the city, and bad energy policy that will make us more dependent on imported crude from the Middle East, and shipments of crude oil by rail cars,” Zierman said.

In addition to recommending the banning of the still undefined term “well stimulation”, the action today also recommended banning the use of injection wells. When oil is produced, up to 95% of the fluid that comes out of the well is brackish oil-barring water which is then reinjected back into the formation from which it came. If oil and gas companies are not able to reinject the produced water, they are not able to produce at all and must shut in their wells. Often, reinjection is required by law to prevent subsidence of land. Therefore, the action taken by the City today could literally cause all 15,000 barrels of daily production currently produced in the City to cease. The city collects millions in taxes and fees from that production, not to mention income taxes and sales taxes from those who work in the industry.

The resolution would also affect over 10,000 residents of Los Angeles who own the mineral rights to oil and gas within the city limits. Most minerals in California are owned by individuals, not oil companies. Mineral Owners then lease the minerals to oil companies. While some oil companies can move their investment dollars to other cities or states, mineral owners cannot. As a result, the city will be susceptible to a “regulatory takings” argument and could face billions of dollars in damages.

The City Council did not take the time to ask or understand what they were banning, or whether there were potential legal ramifications they need to reconcile, including preemption by recently enacted State Law regulating oil and gas production,” stated Zierman. “What’s also remarkable is that the resolution explicitly exempts hydraulic fracturing for natural gas storage facilities from the ban, but bans it for production of the natural gas that goes in to the storage facilities. It also exempts acidization done by city agencies. That kind of policy hypocrisy highlights the extremely arbitrary nature of this discussion.”

“It appears that environmental groups are using fracking as a boogeyman to achieve their real goal…banning all domestic oil and gas production,” Zierman added. “Unfortunately, banning oil production in the City won’t mean that Angelenos are automatically going to stop using oil and natural gas. They will just have to increase imports instead.”

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SOURCE: California Independent Petroleum Association