Local Control of Oil and Gas Operations: Getting a Handle on Fracking and Cyclic Steaming Through Land Use Prohibitions, Moratoria, Discretionary Permits, and Citizen Initiatives

• Publication year: 2014
• Author: by Heather Minner* and Peter Broderick**

Local Control of Oil and Gas Operations: Getting a Handle on Fracking and Cyclic Steaming Through Land Use Prohibitions, Moratoria, Discretionary Permits, and Citizen Initiatives

by Heather Minner* and Peter Broderick**

Cities and Counties in California have long regulated oil and gas operations. Historically, these operations were limited to conventional recovery methods. But as oil fields tapped out, the industry responded by using technologies such as hydraulic fracturing (fracking) and steam injection to increase recovery and to expand development into previously inaccessible fields and formations.

These high-intensity operations are riskier and impose greater impacts on surrounding communities than conventional oil and gas development. They have also sparked oil and gas booms across the country, catching many local governments off guard.

Witnessing the impacts that fracking has caused in other states, and faced with a flood of new applications for cyclic steaming projects, California cities and counties are reexamining the adequacy of their existing zoning regulations to deal with these types of oil and gas operations. In Santa Barbara County and San Benito County, local citizens have taken matters into their own hands, placing initiative measures on the November 4, 2014 ballot.

This article discusses land use tools available to local governments and voters to address high-intensity oil and gas operations and details the Santa Barbra County and San Benito County initiative measures. It also examines litigation threats by the oil industry and concludes that there is ample evidence of impacts from fracking and other high-intensity operations to support local bans. It also concludes that well-drafted land use measures will survive state law preemption challenges and will not give rise to valid takings claims.

WHY FRACKING AND WHY LOCAL CONTROL

A. The Long History of Local Control Over Oil and Gas Operations in California

California cities and counties have been validly regulating oil and gas operations since the early 1900s.¹ Early regulations included zoning ordinances restricting oil drilling and production to certain zones or prohibiting drilling and production throughout the jurisdiction entirely.² They also included limitations, safeguards, and controls on how oil and gas operations could be conducted.³ As early as 1925, the California Supreme Court held that local governments have "the unquestioned right to regulate the business of operating oil wells within [their] limits, and to prohibit their operation within delineated areas and districts, if reason appears for so doing."⁴

Today local regulation of oil and gas operations is widespread.⁵ Local governments routinely zone oil and gas uses.⁶ Some have also codified detailed processes for permitting and overseeing such operations and regulate matters such as well spacing and location, grading, piping, fire prevention and control equipment, signage, and liability insurance.⁷ A few jurisdictions have adopted zoning regulations specific to fracking.⁸

B. The Ascendance of High-Intensity Oil and Gas Operations in California

Fracking is just one of several high-intensity oil and gas operations occurring in California. Fracking, acid fracking, and acid matrix stimulation are collectively known as "well stimulation treatments."⁹ These short-term operations include the injection of fluids, chemicals, and/or acids into a well under high pressure to fracture underground formations and produce channels for oil or gas to flow through.¹⁰

Another group of high-intensity operations, known as "enhanced oil recovery operations" includes cyclic steam injection, steamflood injection, and waterflooding. These continuous operations involve the injection of high volumes of water, steam, acid, and/or chemicals into underground reservoirs to restore pressure or to heat thick or "heavy" crude oil to allow it to flow through the well.¹¹ Although early forms of some of these high-intensity operations have been used in California for decades, they have come under increased public scrutiny in recent years.

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This scrutiny has been fueled in part by high-profile shale oil booms in other states facilitated by fracking, and by speculation that the Monterey Shale formation, which underlies portions of Central and Southern California, could produce a similar boom in California.¹² However, California's unique geology makes extraction from the Monterey Shale particularly challenging.¹³ In 2014, the federal government announced that it would decrease by 96% its previous estimate of how much oil is recoverable from the formation.¹⁴ The revision deflated industry enthusiasts promoting the economic benefits of fracking, but many oil industry representatives remain optimistic that technological improvements will eventually open up the deposits.

Meanwhile, high oil prices and improved technology have encouraged oil companies to expand cyclic steaming operations into other California formations containing heavy, low-quality oil that was previously uneconomical to produce.¹⁵ A realistic view of the future of oil and gas development in California acknowledges that the use of high-intensity oil and gas operations will increase—but an economic panacea is not forthcoming.

C. The Importance of Local Control—Why State Regulation Is Not Enough

In 2013, the California State Legislature passed SB 4 to provide some accountability and transparency in the use of well stimulation techniques. It requires the Division of Oil, Gas & Geothermal Resources ("DOGGR") to develop regulations and establish a permitting process, and it requires the state to study the environmental and health effects of well stimulation techniques. SB 4 does not impose a ban or a moratorium; it does not require DOGGR to stop issuing permits until the study is complete; and it does not apply at all to enhanced oil recovery techniques such as cyclic steaming.¹⁶ Nor does it address numerous local impacts of high-intensity operations, such as air quality, traffic safety, water supply, land use compatibility, or aesthetics.

Many Californians believe that SB 4 did not go far enough in regulating these operations, and there are concerns that its minimum standards are not being enforced. Watchdog groups have already begun to catalogue violations of SB 4's requirements.¹⁷ State regulation of cyclic steaming may also fail to live up to expectations. According to a recent federal report, California regulators failed to conduct on-site inspections for over a third of California's injection wells—an important oversight function to ensure operators have safeguards in place.¹⁸

Under these circumstances, local communities are in the best position to assess the costs and benefits of high-intensity oil and gas operations. The outcome of such a determination will depend on a variety of factors within each jurisdiction—including a community's tolerance for risk.

THE LAND USE TOOLS AVAILABLE TO LOCAL GOVERNMENTS TO REGULATE HIGH-INTENSITY OPERATIONS

A. Oil and Gas Moratoria

Local governments may adopt temporary moratoria on oil and gas development in order to freeze land uses while they, or the voters, consider measures to address high-intensity operations.¹⁹ Temporary moratoria must be adopted through procedures established in Government Code section 65858 and must end or be replaced with permanent measures after two years.²⁰ The advantage of a moratorium enacted under Government Code section 65858 is that it takes effect immediately. Thus, it can preserve the status quo in the event a city or county is presented with a large number of applications for projects involving high-intensity operations. In the absence of urgency, localities may adopt the land use measures discussed below in the first instance.

B. Prohibiting All Oil and Gas Land Uses

The most straightforward way to address concerns over high-intensity oil and gas operations is simply to prohibit all oil and gas land uses within the jurisdiction. Complete bans have long been upheld in California and may be especially appropriate in urban areas or where little conventional development occurs.²¹ Bans may also be limited to specified zoning districts.²² Santa Cruz County recently adopted general plan amendments banning all oil and gas exploration and development in order to head off potential fracking of the Monterey Shale formation in the county.²³ It initially did so through the adoption of temporary moratoria discussed above.²⁴

C. Discretionary Approval for Fracking and Other High-Intensity Operations

Many localities are unwilling to allow high-intensity operations without a case-by-case review of proposed projects. Some local oil and gas codes require additional review and conditions for enhanced oil recovery operations.²⁵ However, since few local codes distinguish fracking from traditional recovery methods, oil companies are able to frack existing wells without any local review and may even omit their plans to frack from new drilling proposals.²⁶ These concerns led Santa Barbara County to amend its zoning codes to specifically require a land use permit and discretionary approval of an oil production plan prior to conducting any fracking operations.²⁷

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Several jurisdictions have determined that such discretionary permit requirements can also apply to existing oil and gas operations if the original permit never analyzed or allowed high-intensity operations.²⁸ For example, Santa Barbara County's fracking regulations apply to both new and existing wells.²⁹ And the San Benito County oil and gas code establishes that new high-intensity operations are a substantially changed use from existing permitted or lawful non-conforming uses and therefore require a new conditional use permit.³⁰

D. Prohibiting Fracking and Other High-Intensity Operations

Local governments may decide that they can live with conventional oil and gas operations, but that they are unwilling to accept the greater risks and adverse...