California oil regulators levied more than $2.7 million in fines against Chevron Oct. 2 for alleged violations related to a series of west Kern oilfield leaks that shone a harsh light on the industry even as the state said they caused minimal environmental damage.
The size of the civil penalty — the second-largest issued under the state oil division's new office of enforcement — was attributed to risks created by the leaks, as well as their pervasiveness and the state's intention of keeping Chevron from benefiting from sales of oil contained in the more than 1.25 million gallons of fluid that since May have flowed to the ground in the Cymric Oil Field.
DOGGR said the leaks were likely caused by Chevron's steam injection work near McKittrick. It noted that the leaks, a historically common phenomenon known in the business as "surface expressions," became illegal in California in April.
Chevron said it was reviewing the state order outlining the penalties.
"Chevron takes very seriously its responsibility to operate safely and in a manner that is protective of public health, the communities where we operate and the environment," the company said in a written statement.
"We have made significant progress working with Unified Command to clean up the impacted area, which is nearly complete," Chevron added, referring to work done under the direction of a multi-agency team of state officials. "It remains our operational goal to prevent seeps consistent with DOGGR’s updated regulations, and we continue to work closely with regulators to address any seeps that occur."
The issuance of penalties came as little surprise in light of the state's months-long focus on the surface expressions and its dissatisfaction with Chevron's explanations for what caused them. The accident has caught the attention of state lawmakers and environmental activists pressing them to ban oil production statewide.
State officials including Gov. Gavin Newsom, who toured the site of the surface expression in late July, initially said the leaks caused no environmental harm, even though they noted it endangered the safety of nearby workers.
But a nine-page order spelling out Chevron's penalties Oct. 2 disclosed the first instance of actual environmental damage: a Lesser Nighthawk found oiled at the site had to be euthanized at the wildlife care center where the bird had been taken for treatment.
The bulk of the fine, $1.8 million, stems with the state's accusation that Chevron, by allowing spilled oil to flow into a streambed and then recovering it there, failed to comply with petroleum transport requirements.
The balance of the penalty relates to Chevron's alleged failure to prevent a surface expression. DOGGR's order says steam and oil came to the surface for periods of two to three minutes at a time, "which are indications, among other things, that the expressions were not low-energy seeps."
In explaining the size of the penalties, the state order referenced the pervasiveness of the leaks, saying that as of Aug. 1, four surface expressions have flowed into a 41,947-square-foot dry steambed. It also detailed the violations' "persistence," adding that there have been 36 days of surface expression activity since mid-May.
To make sure Chevron doesn't benefit economically from the accident, the state calculated how much oil the company can hope to derive from the surface expression. It estimated 7,129 barrels worth about $399,000 were brought to the surface during the series of leaks.
DOGGR went on to assert Chevron should have no trouble paying the fine because it has taken in revenue of $3.3 billion per year in California, on average, between 2005 and 2018.
The entire matter has occupied 516 hours of DOGGR staff time, the order estimates, and the acting State Oil & Gas Supervisor has run up total "prosecution costs" of $49,981.
State law allows Chevron to appeal the penalties.
Fines collected from Chevron are expected to be deposited into a remediation account set up to address problems resulting from oilfield operators' noncompliance with state rules.
At the discretion of DOGGR's senior regulator, the office of the State Oil & Gas Supervisor, as much as half the fine total may be directed toward what are known as supplemental environmental projects benefiting communities impacted by petroleum production. There was no word on whether that might happen in Chevron's case.
This story has been amended to reflect the state's finding that Chevron's leak caused the death of a bird in August. Also, the amount stated for Chevron's average annual revenue has been corrected.