California toughens drilling oversight in setback for industry (updated)
19/11/2019 21:40
(Adds stock movement, response from producers)
Nov 19 (Reuters) - California, the seventh-biggest U.S.
oil-producing state, on Tuesday unveiled new regulations for
drillers as it seeks to wind down its reliance on fossil fuels.
The regulations, which were applauded by environmental
groups, sent shares of California-based oil drillers Berry
Petroleum Corp BRY.O and California Resources Corp CRC.N
down sharply.
The announcement by Governor Gavin Newsom underscored the
sharp differences between the heavily Democratic state and the
Trump administration's energy dominance agenda, which has sought
to ease oil and gas regulations and boost U.S. production.
“These are necessary steps to strengthen oversight of oil
and gas extraction as we phase out our dependence on fossil
fuels and focus on clean energy sources,” Newsom said in a
statement.
California announced several new measures, including a
moratorium on an extraction technique that uses high-pressure
steam to break up oil formations underground. The practice has
been linked to a spill at the Cymric oil field in Kern County
this year.
Of the 160 million barrels per year of oil produced in
California, about 8 million come from the high-pressure cyclic
steaming affected by the moratorium, according to Don Drysdale,
spokesman for the state's Division of Oil, Gas and Geothermal
Resources (DOGGR).
In a statement, Berry Petroleum said the moratorium would
not hurt its 2019 financial results and would only potentially
impact future wells. Berry shares fell $2.43, or more than 21
percent, to close at $8.90 on the Nasdaq. California Resources'
stock fell nearly 27 percent to $6.20.
California also said it will require that pending permits
for hydraulic fracturing undergo a review by a scientific panel
of experts.
The state has already been in the midst of an audit of its
permitting processes since July. The audit was prompted by a
report earlier this year that found that oil well approvals had
risen under Newsom.
The state will also begin a formal process to consider a
range of options to protect public health from oil and gas
operations, it said.
In response, Catherine Reheis-Boyd, president of industry
trade group the Western States Petroleum Association, said
"multiple state agencies already validate our protection of
health, safety and the environment during production... every
barrel delayed or not produced in this state will only increase
imports from more costly foreign sources that do not share our
environmental and safety standards.”
California has a goal of becoming carbon neutral by 2045 and
phasing out oil production and consumption.
(Reporting by Nichola Groom
Editing by Marguerita Choy and Dan Grebler)
((nichola.groom@thomsonreuters.com;))