SACRAMENTO, Calif. (CN) – A senior Chevron official told California lawmakers on Monday a 2019 incident that spilled over a million gallons of water and oil into a creek bed was likely caused by its attempts to patch up a shuttered well.
During an oversight hearing at the state Capitol, Billy Lacobie said the very thing Chevron was trying to prevent happened while the company was securing a previously abandoned well at its oilfield in Kern County. The head of operations at Chevron’s six California oilfields told lawmakers and state officials that the spill did not harm surrounding drinking water supplies or farms and had a minimal impact on wildlife.
“We regularly conduct well re-abandonment and this is the first time a seep has occurred in conjunction with this type of activity,” Lacobie said.
For more than 100 days last summer a mixture of oil and water bubbled to the surface on the 27,000 acre site operated by Chevron. The series of uncontrolled releases caused 1.3 million gallons of the toxic mixture to pool in a nearby dry streambed, and spurred increased scrutiny over a controversial extraction method tied to the spill.
The spill that began in May 2019 went largely unnoticed for two months until a series of local news reports alerted Governor Gavin Newsom.
Newsom, who vowed on the campaign trail to increase oversight on fracking and the oil industry, slapped Chevron with a $2.7 million fine – the second largest in state history. He backed up the fine by ordering a moratorium on new wells that use the extraction method popular with Chevron and other operators until it could be further studied by experts.
While Chevron downplayed the spill and is appealing the fine, the state’s order notes that it caused “a significant threat of harm to human health and the environment” and highlighted that Chevron was able to sell off a portion of the spilled oil.
State regulators are still investigating and have not determined an official cause for the event that killed a total of four birds.
Perhaps the most notable impact of the spill was the attention it drew to the controversial extraction method that uses high-pressure steam to break into underground rock formations and heat up the oil. The state says the first “cyclic steam injection well” was drilled in 1960 and that they are “somewhat unique to the state, and are often used to produce heavy oil from shallow diatomite formations.”
In 2019 regulators passed laws that barred operators using the technique from allowing the oil/water fluid mixture to reach the surface, as happened at the Chevron site. At the hearing, a state official said there are approximately 7,000 reports of oil spills per year but most are minor and tied to abandoned boats and accidents with tanker trucks.
California is a major oil producer, ranking fourth in the country in terms of crude oil and 15th in natural gas. The vast majority of its oil is pulled from the land in counties like Kern, Los Angeles and Ventura, and the industry generated over $152 billion and supported over 366,000 jobs in 2017.
Lawmakers at the hearing said it was crucial for regulators to speed up oversight on the industry and prevent future accidents if the state is going to meet its stringent clean energy goals.
Another oil industry concern lurking under the surface is the cost of plugging idle wells.
A recent state analysis identified more than 5,500 potential orphan wells – ones that have been abandoned or idled for five years or more – across the state that could cost taxpayers up to $500 million to close. The analysis estimates that close to 70,000 active oil and gas wells are only marginally active and could soon become orphans.
The total cost of plugging all of California’s 106,000 wells could approach $9 billion, but the report states that only $107 million in bonds have been secured by operators.
Operators are required to purchase bonds when they acquire or drill new wells to pay for eventual plugging costs, but the study says the so-called indemnity bonds are often insufficient to complete the job. The state is often left on the hook when a company goes bankrupt and ditches its claims.
Unplugged or improperly plugged wells can damage groundwater and leak methane, according to the American Geosciences Institute.
The analysis recommended that state regulators conduct a more thorough analysis of active and orphan wells, consider raising idle well fees and require operators to obtain larger indemnity bonds.
Assemblywoman Monique Limon, D-Santa Barbara, told Natural Resources Agency Secretary Wade Crowfoot that she hopes the Newsom administration will shield taxpayers from paying for abandoned wells.
“Anything that costs the taxpayers $5 to $9 billion in the worst case scenario is definitely alarming,” Limon said.
Limon said the state was lucky in the May 2019 spill because Chevron had the means to act quickly and pay for cleanup effort. She added that she is worried about the potential for a smaller company to clean up a similar or larger-sized oil spill.
Along with the $2.7 million fine, Lacobie said Chevron has spent more than $9 million on the incident. He says the company did things such as built fences and put up lighting to keep wildlife away from site and that it has ramped up surveillance of its wells to better detect accidents.
On Monday, lawmakers also advanced legislation that would create buffer zones between schools and oil wells.
Prior to the oversight hearing, the Assembly approved a bill that would give regulators until July 2022 to implement rules requiring a setback distance of at least 2,500 feet between schools and oil or gas operations. The bill’s supporters say setbacks are necessary in light of studies linking proximity to oil wells with higher rates of asthma, high-risk pregnancies and cancer.