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Oil producers appeal for time to comply with regulations during pandemic

20200310-bc-oilprices

An oil pump station works in a field off Merced Road in this file photo.

Local oil producers are having a hard time keeping up with their regulatory obligations during the pandemic.

Half a dozen companies in Kern County have responded to a state offer by applying for extra time to test oil field injection sites, plug wells, and perform other required health and safety tasks.

Some applicants have received deadline extensions and others haven't. More than a dozen applications are pending.

Oil producers have generally made the case that, although they have been designated critical industries during the pandemic, sharply lower barrel prices have limited their ability to operate as normal.

The Arizona-based Center for Biological Diversity has criticized the state's offer, saying oil companies operators were using the pandemic as an excuse and should not be allowed to set aside their responsibility to protect against pollution.

QUALIFYING CONDITIONS

State Oil and Gas Supervisor Uduak-Joe Ntuk stated in May that to qualify for an extension delays must have been caused by COVID-19 or government orders related to it and that any postponements must "not increase the risk of damage to life, public health, property or natural resources."

"Since all California operators are responding to historically low supply demand, with difficult layoffs and cutbacks," he wrote in a May 1 letter, "CalGEM will consider a one-time, two-month extension in the requirements to submit idle well management plans (IWMP) and fees provided that individual operators demonstrate that this extension will not result in environmental harm."

State records show 39 deadline extension requests were filed with CalGEM, the California Geologic Energy Management Division, between March 23 and June 16. As of Thursday, six have been approved and 18 denied. Two were ruled unnecessary because the operator has the time requested even without asking for it. An additional 13 remained under consideration.

Ntuk said by email Friday, "Each request is unique for each operator and situation. CalGEM is reviewing the submissions and will process them shortly."

In several of the denials, state officials judged the applicants' requests to be beyond the scope of Ntuk's offer, often because the companies asked for more time than he had offered to grant them.

HIGH COSTS

Local oilman Chad Hathaway, who had asked CalGEM for extra time to conduct mechanical testing of his company's injection wells in the Edison Oil Field, said he made the request because doing such work is expensive and requires hiring outside labor at a time he'd rather spend the money keeping his own staff working.

"It requires a workover rig, third party packer service, third party pumping service and about 18 hours’ worth of labor all of which are third party (not internal employees)," he wrote in an email. "All in all, about $7-10K worth of time and materials. We prefer to keep OUR people working on projects that can support themselves. We cannot afford to hire third party contractors at the moment."

The state didn't grant or deny Hathaway's request. It said he didn't need to do the testing immediately because the wells aren't being used, but that he'll have to complete the work prior to resuming operations there.

‘MARKET HARDSHIPS’

Another local company that filed a request, Bakersfield-based Aera Energy LLC, asked for a 90-day hiatus for its idle-well testing compliance plan because of COVID-19-related market hardships.

Noting its well-testing regimen had been progressing ahead of schedule, Aera wanted to extend a six-year compliance period by four months.

But CalGEM denied the request in a June 19 letter, saying the company had asked for an extension beyond July 1, which Ntuk had disallowed for such cases.

Company spokeswoman Cindy Pollard said it and other California companies are having to cope with COVID-19 and low oil prices. The deadline extension Aera asked for wouldn't have relieved it of CalGEM's oversight or its commitment to health and safety.

"Instead it would have given us a little extra time to meet that compliance, in light of the financial limitations we were experiencing, while continuing to produce the oil our state needs," she said by email. "Aera is especially proud that we were ahead of the State’s required pace of abandoning idle wells before COVID and we remain committed to meeting the pace outlined in our plan.”

OTHER REQUESTS

Other locally operating companies requesting regulatory deadline extensions include California Resources Corp., Chevron, Crimson Resource Management and E&B Natural Resources.

Chevron asked for a one-year deadline extension to abandon or remediate 19 wells that had failed mechanical integrity tests in the Kern River Oil Field.

Making its case in a May 26 letter to CalGEM, Chevron said that "due to the large backlog of remediation work from new UIC regulations and the resource limitations due to COVID-19," the company would miss its deadline for addressing the wells' problems. Chevron couldn't be reached for comment.

State records show the company's request remains under consideration.

E&B requested additional time for a variety of projects including mechanical testing of cyclic steam and steam-flood wells in the Poso Creek Oil Field, testing of water disposal wells elsewhere in Kern, idle-well management work and continuous pressure monitoring at local wells. Some of the requests were denied and some are pending.

Ted Cordova, the Bakersfield-based oil producer's public and governmental affairs director, said by email the requests were intended to "balance the economic forces facing the entire state while still complying with the toughest environmental protections on the planet."

"Our operations have been deemed essential and we are focused on keeping Kern County residents working instead of relying upon public services," he wrote. "Providing flexibility on deadlines ensures that responsible and affordable energy production continues while still protecting the environment and the economy.”

Santa Clarita-based CRC is awaiting word from the state on its requests for more time to conduct mechanical testing of injection wells. It said by email it hopes the state will reexamine oil companies' regulatory deadlines.

"CalGEM and other state regulators have chosen not to defer pending regulatory deadlines or new regulations as a general matter and have required specific COVID-19 extension requests," it said.

"While these agencies originally envisioned the COVID-19 hardships ending this month, the increase in COVID-19 cases and the Governor’s July 1 order make it clear that the pandemic and its effects will be with us for many months to come," it wrote.

Follow John Cox on Twitter: @TheThirdGraf