California takes a strike at oil industry, blocks new fracking

Regulators will consult with experts to determine whether fracking can be done safely during the moratorium.

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    Inglewood Oil Field Homes stand while pumpjacks operate near a hydraulic fracturing (fracking) test well at the Inglewood Oil field in Los Angeles, California [Bloomberg]
    Inglewood Oil Field Homes stand while pumpjacks operate near a hydraulic fracturing (fracking) test well at the Inglewood Oil field in Los Angeles, California [Bloomberg]

    California halted approvals of new oil wells that use high-pressure steam extraction techniques following recent leaks at a Chevron Corp. facility in Kern County.

    Regulators will consult with experts to determine whether the process can be done safely during the moratorium, the state's Department of Conservation said in a statement Tuesday. California also said it will have an independent audit of its permitting process for hydraulic fracturing and other methods of stimulating crude flows.

    Shares of California Resources Corp. tumbled as much as 32% on the news while Berry Petroleum Corp., which operates in the state as well, slumped 18%.

    "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," Governor Gavin Newsom said. "This transition cannot happen overnight; it must advance in a deliberate way to protect people, our environment, and our economy."

    The Department of Conservation fined Chevron $2.7 million last month after several "surface expressions" of water, steam and oil were found at the Cymric field near Bakersfield. The leaks were likely the result of steam operations and created a "significant threat of harm to human health and the environment," the department said.

    Chevron is among companies using steam injection to help crude flow from older wells that have little natural pressure.

    Representatives for Chevron and California Resources didn't immediately comment on Tuesday.

    The new regulations appear to go beyond the incident in Kern County and may spell a tougher environment for oil producers in California, which is aiming to become carbon neutral by 2045.

    "This marks the turning of the tide against the oil industry" in California, said Kassie Siegel of the Center for Biological Diversity.

    SOURCE: Bloomberg