2019 Report Oil and Gas in California: The Industry, Its Economic Contribution and User Industries at Risk
New economic study demonstrates oil and gas industry’s significant contribution to the California economy.
Our industry’s role as a vital contributor to the California economy has once again been significantly reinforced by a new economic impact study titled “2019 Report Oil and Gas in California: The Industry, Its Economic Contribution and User Industries at Risk in 2017”, published by the Institute for Applied Economics of the Los Angeles County Economic Development Corporation (LAEDC).
The report shines an important spotlight on the critical role our industry plays in the Golden State with valuable statistics to tell our story, including:
- Nearly 366,000 jobs in California are supported by the oil and gas industry – that’s enough people to fill every NFL stadium in California more than 1.5 times!
- More than $152 billion in total economic output was added to the California economy in 2017 – that’s nearly 7.5 times more than the impact of the state’s agricultural exports!
- $26 billion was paid in wages to all workers supported by the oil and gas industry.
- $21.6 billion was contributed in local, state and federal tax revenue to support schools, roads, public safety and other vital services.
The report further illustrates the high-wage career opportunities afforded to individuals across the skills and education spectrum, details the massive fiscal contributions provided to state and local governments, and definitively shows us that the oil and gas industry is critical for the stability, and future of the state’s economy.
On a local level, the report explores the economic contribution at the sub-regional, county and district levels, underscoring how far-reaching the effects of the industry’s activity is felt in communities across the state. For example, in rural areas like Modoc County, there are less than 10,000 residents and the oil and gas industry injected more than $2.2 million into the local economy in 2017. And in Los Angeles County, where more than 77,500 jobs are supported, $6.2 billion was added in total local economic contribution.
Below are factsheets that demonstrate the tremendous impact of the oil and gas industry statewide, and in regions and counties across California.
- Statewide Impact
- Bay Area
- Central Coast
- Southern California
- San Joaquin Valley
- Fresno County
- Kern County
- Los Angeles County
Statement on the Oregon State of the State, from Catherine Reheis-Boyd, President, Western States Petroleum Association
“Late last year Governor Brown said in her budget release that we should ‘put aside our differences and chart a path — together — towards a promising future for every Oregonian.’ We agree with that sentiment and the optimistic theme of the state of the state and continue to believe we should approach energy policy development mindfully and factually so that we can work towards the best energy future for Oregon and the West.
“The state’s Low Carbon Fuel Standard policy remains an inefficient and ineffective path towards emissions reductions. We look forward to working with the administration and stakeholders on climate policies that balance environmental concerns and bring real carbon reductions with economic prosperity for all.”
California State Water Resources Control Board SB 4 Monitoring Requirements
The State Water Resources Control Board (SWRCB) is required to develop groundwater monitoring criteria in consultation with CalGem and other stakeholders that outline the approach to implement monitoring and regional scale groundwater monitoring during well stimulation activity.
Currently, the SWRCB staff has established a tentative schedule to adopt criteria:
SWRCB staff has selected Lawrence Livermore National Laboratory (LLNL) as their technical expert to provide input to staff via a report with recommendations for draft criteria. LLNL is expected to submit their well by well criteria report to SWRCB staff in late February / early March.
Model criteria will include:
- Operator-required groundwater monitoring near wells subject to well stimulation
- Regional-scale monitoring to be implemented by State Water Resources Control Board
- Methods for monitoring
- Chemical analyses
- Frequency and duration of monitoring
- Areas to monitor
The criteria will need to reflect sound science practices for well installation and monitoring in order to ensure groundwater beneficial uses are protected with minimal impacts to the natural topography. This approach will maintain excellent protection for California’s groundwater and streamline well stimulation activity.
WSPA and its members will continue to engage in the ongoing public stakeholder process.
Setting the Record Straight: Water and well stimulation in California
Despite repeated claims that well stimulation in California uses “millions of gallons of water per well,” the amount of water used here is quite small when compared to other uses for water. How small?
According to 568 well reports filed with the FracFocus public website, the average amount of water used for well stimulation in California in 2012 was 116,535 gallons per well. That’s less than half the amount of water needed to irrigate a golf course for a single day.
The total amount of water used in the 568 well stimulation operations reported in 2012 was slightly less than 66 million gallons – or 202 acre feet. On average, agriculture utilizes 34 million acre feet of water annually4 and cities/towns consume slightly less than 10 million acre feet annually (5).
There is a large variation in the amount of water used for well stimulation, according to the FracFocus reports. The smallest amount of water used was 6,645 gallons. The largest amount was 1.5 million gallons. Only two well stimulation operations reported on FracFocus in California in 2012 used more than 1 million gallons.
According to FracFocus data, 97 percent of the well stimulation that was reported for California took place in Kern County.
The Facts about Water
The average amount of water used to hydraulically fracture an oil well in California in 2012
The average amount of water used by a four-person family living for one year. (1)
The amount of water needed to irrigate a golf course in a single day
202 acre feet:
The total amount of water used in California for well stimulation in California in 2012
400,000 acre feet:
The total amount of water used for municipal purposes in Kern County in 2011 (2)
2.7 million acre feet:
The total amount of water used for growing food and fiber in Kern County in 2011 (2)
121.8 billion gallons:
The amount of water produced along with oil and natural gas in California in 2011 (3)
34 million acre feet:
The total amount of water used for agriculture
Oil and natural gas producers in California are experts at managing large amounts of water – much larger than the amounts needed for well stimulation. Vast amounts of water are produced along with oil from deep underground reservoirs or formations. According to the California Department of Conservation’s Geologic Energy Management Division (CalGem), 196 million barrels of oil were produced in Kern County in 2011 and 2.9 billion barrels or 121.8 billion gallons of water came with them.
After producing oil in Kern County and elsewhere in California for more than 100 years, oil companies have a tremendous amount of skill and expertise at safely handling, using and disposing of this so-called “produced water.”
Both well stimulation fluids and produced water are handled in accordance with California’s water quality regulations. Disposal of both are subject to permit requirements. For example, produced water and well stimulation fluids must be stored either in enclosed tanks or lined ponds to prevent leakage to groundwater. They must be tested regularly to determine if they meet state and federal hazardous material criteria and disposed of accordingly.
Approximately 60 percent of the produced water is disposed of in the estimated 25,000 injection wells that are permitted and regulated by CalGem. The remaining produced water is either recycled for enhanced oil recovery purposes or treated and sold for agricultural purposes.
- Class I injection wells are used to dispose of hazardous and non-hazardous wastes including well stimulation fluids below the lowermost underground source of drinking water (USDW). Injection occurs into deep, isolated rock formations that are separated from the lowermost USDW by layers of impermeable clay and rock. The average depth of an injection well in California is about 5,000 feet, or one mile.
- Class II wells are used to inject fluids associated with oil and natural gas production operations. Most of the injected fluid is brine that is produced when oil and gas are extracted from the earth.
Much of the conventional oil production in California uses enhanced oil recovery technologies like steam injection and water flooding. These technologies have been in use for many decades and have dramatically extended the productive life of the state’s oil fields.
Some of these technologies require fresh water with different characteristics than produced water. Oil companies obtain the water needed for oil and gas production from the same sources all other water users utilize. They either use surface or ground water they own as part of their property rights; they purchase water from water agencies with water
for sale; or they purchase water from individuals or corporate entities with water to sell.
Diesel Taxes + SB1 in California
California has the most demanding environmental fuel policies in the world, leading to state and federal diesel taxes totaling 82.71 cents per gallon–66% higher than the US National Average. Here’s how it breaks down:
Source: California Energy Commission, California Board of Equalization, California Legislative Analyst Office, California Tax Foundation
Gas Taxes + SB1 in California
California has the most demanding environmental fuel policies in the world, leading to state and federal gas taxes totaling 74.83 cents per gallon–59% higher than the US National Average. Here’s how it breaks down:
Source: California Energy Commission, California Board of Equalization, California Legislative Analyst Office, California Tax Foundation
Expanding Regulatory Control Over Oil Production in California
Over the past 10 years, dozens of new bills and regulatory rulemakings have been enacted affecting nearly every facet of California’s oil and natural gas producing industry.
State Budget: More Than 330% Growth In Less Than 10 Years
The Department of Conservation’s Geologic Energy Management Division (CalGem) operating budget is funded almost entirely from fees that are assessed on oil and natural gas producers. Those fees are reflected in the cost of production and are likely to impact what consumers ultimately pay for gasoline, diesel, aviation fuels, and other products that depend upon oil and gas for manufacturing and transportation.
Since the 2009/10 budget year, CalGem’s budget has been increased by more than $56 million. The majority of the increase is attributable to new permitting, field inspection, and enforcement staff. Industry has actively supported most of the proposed increases over this period.
The FY 17/18 proposed budget includes another $10 million increase in CalGem’s budget. If approved, CalGem’s budget will have increased 60% in a four-year period.
2015/2016 Budget Highlights:
CalGem: 23 new permanent positions, $3.5 million in funding for well evaluations.
SWRCB: 19 new positions, $2.9 million in funding to inventory oil and gas wells and enforce drinking water standards.
DOC: 21 new positions, $10 million to develop the WELLSTAR public data base.
DWR: $625,000 to improve accessibility to oil and gas well completion reports.
2016/2017 Budget Highlights:
CalGem: Two additional positions, $1.3 million increase for comprehensive training program for CalGem staff.
Pipelines: Ten permanent positions, $1.4 million increase to fund new pipeline oversight positions.
Studies: Two-year limited term funding of $2.5 million to complete additional independent scientific studies.
Orphan Wells: $2 million to remediate hazardous orphan wells.
CARB: $2.3 million and four positions to support neighborhood air quality monitoring near oil and gas facilities and enhance CARB’s emergency response capabilities.
2017/2018 Proposed Budget Highlights:
CalGem: 15 new permanent positions and $1.5 million to implement an idle well program.
OEHHA: $366,000 to evaluate chemicals used in well stimulation operations.
SWRCB: $1 million for to seven positions to support CalGem’s ongoing review of Class II UIC Injection Wells.
CalGem: Additional $45 million over 5 years to implement WELLSTAR public data base
New Legislative Mandates
2008 – AB 1960 (Nava): Expanded CalGem’s regulatory authority over oil field facilities, imposed new repair and maintenance requirements on small pipelines, and required installation of new facilities that contain and prevent oil field related spills.
2010 – SB 550 (Florez): Imposed new landowner notification requirements for specified activities.
2010 – SB 855 (Kehoe): Directs DOC to report on CalGem’s permitting and enforcement activities.
2012 – AB 1966 (Ma): Imposes new landowner notification requirements for drilling related activities.
2013 – SB 4 (Pavley): Established a comprehensive permitting and regulatory structure and mandated landowner notification for well stimulation treatments including well stimulation operations.
2013 – AB 665 (Wolk): Increases bonding obligations on oil and gas operators.
2014 – SB 1281 (Pavley): Requires comprehensive reporting of how and where water is produced, treated and used as part of oil production operations.
2014 – SB 861 (Budget): Imposed new oil spill program training and notification requirements on operators in the San Joaquin Valley and other inland areas.
2015 – AB 1420 (Salas): Imposes new requirements on natural gas production pipelines in urban areas.
2015 – AB 864 (Williams): Requires incorporation of Best Available Technology for pipelines near the Coastal Zones.
2016 – AB 2729 (Williams): Imposes increased bonding requirements and new testing requirements for idle wells.
2016 – AB 2756 (Thurmond): Provides Supervisor expanded authority and latitude to determine civil penalties on oil and gas operators.
State Budget 2014 – 2017: Increased CalGem budget by 60% to pay for new regulations, oversight, enforcement and permitting staff. Increases paid entirely by oil and natural gas producers.
Major Agency Rulemakings & Initiatives
- Comprehensive update of underground injection related regulations
- New regulations for cyclic steaming operations
- $55 million data management modernization effort
- Expanded field inspection and enforcement staffing
- Annual injection project reviews
- SB 4 permitting and program regulations
2. U.S. EPA
- Comprehensive technical and geologic review of approved injection boundaries for all oil fields
3. State and Regional Water Quality Control Boards
- New regulations and permitting requirements for produced water pits and ponds
- Eliminated specified surface disposal operations
- New regional groundwater monitoring requirements
- Expanded review of injection related permit applications
- Scientific review of use of produced water in agricultural operations
- Increased chemical use monitoring and reporting
4. California Air Resources Board
- Oil and Gas Production GHG Methane Reduction Rule (most stringent in nation)
- New oil field air monitoring and sampling program requirements related to well stimulation operations
5. Kern County
- New drilling and facility installation permitting requirements
- New air, traffic, and public safety impact fee assessments
- New regulatory goals for water recycling
- New landowner notification and collaboration requirements
Additional Agencies with Regulatory Oversight over Petroleum Production in California:
- Department of Conservation
- Department of Toxic Substances Control
- Office Environmental Health Hazard Assessment
- California State Lands Commission
- Regional Air Districts
- Local City and County Governments
- State Fire Marshall
- California Fish and Wildlife
- U.S. Fish and Wildlife
- California Office of Spill Prevention and Response
- California Coastal Commission
- California Department of Water Resources
- California Energy Commission
- California Department of Public Health California
- Department of Industrial Relations
AB 159: Costly, Redundant and More Unnecessary Government Regulation
Petroleum Powers Nevada Schools
Oil and gas exploration leases contribute $1.7 Million to the Nevada Distributive School account, contributing to:
- Basic support for School Districts and Charter Schools;
- Special Education; and
- Class-size Reduction Efforts
Passage of AB 159 threatens that fund in future increases for school funding by eliminating production opportunities in Nevada without any research, public review or input.
Nevada Already Has Stringent Water Safety Standards
Any future production would be regulated by comprehensive and stringent regulations already in place and working in Nevada. These policies would ensure the safety and environmental soundness of well stimulation in Nevada.
A landmark 2004 study by the U.S. Environmental Protection Agency concluded there was “little to no risk of fracturing fluid contaminating underground sources of drinking water during well stimulation.”
“The Water Boards generally consider well stimulation a low threat to groundwater.” —Thomas Howard, Executive Director, State Water Resource Control Board
Oil Production Uses Proven Technologies & Best Practices
well stimulation to produce oil has been safely used to enhance the production of domestic energy resources for more than 60 years.
well stimulation “has been around for decades, and there’s a tremendous amount of misinformation out there about it, a lot of fear that I think is unfounded.” —Lisa Jackson, former Secretary, U.S. Environmental Protection Agency
“There’s nothing inherently dangerous in well stimulation that sound engineering practices can’t accomplish.” —Gina McCarthy, former Administrator, U.S. Environmental Protection Agency
Injection Wells in California
Crucial Backbone of Oil Production
How it Works
Injection wells have been used for decades in California to assist in oil production – to increase oil recovery and safely dispose of water produced with oil and gas.
When oil is pumped from underground, it comes out co-mingled with water – called “produced water.” That water is either treated and used for enhanced oil recovery (EOR) or disposed of by injecting it back underground. A small portion is treated and provided for agricultural purposes, providing a critical source of irrigation water during the drought. This water must meet specific water quality standards and permit requirements dictated by local regulators.
Produced Water Ponds: Essential to Meeting California’s Energy Needs
When oil is recovered in California, the produced water is disposed of via underground injection or unlined produced water disposal pond, where the water is disposed through evaporation and percolation. Each barrel of oil is produced with aapproximately 15 barrels of water
California oil production, most heavily regulated in the nation
- California’s energy producers operate under the nation’s most rigorous laws to ensure environmental protection and accountability.
- All water disposal practices are currently overseen by the California Department of Conservation’s Department of Conservation’s Geologic Energy Management Division (CalGem), the State Water Resources Control Board (State Water Board), and the local Regional Water Quality Control Boards (Regional Water Board).
- Disposal ponds are permitted only when the local Regional Water Board determines that they will not adversely impact water that has current or potential future beneficial uses.
- Permitted disposal ponds undergo routine inspections to ensure compliance with waste discharge requirements (WDRs).
“The ability to recycle the water or dispose of this water is crucial to energy production in the state.”
Need for an accurate inventory, clear definition of “ponds”
- The Regional Water Board undertook a review, assessing CalGem’s records and aerial imaging of California’s energy production facilities in an effort to systematically inventory all of the region’s produced water disposal ponds.
- However, the Central Valley Board’s inventory is not an accurate representation of the region’s “ponds.” The current inventory mistakenly includes structures such as: stormwater management basins, secondary containment basins and lined temporary storage sumps and pits. Additionally, the current inventory includes a number of ponds and secondary containment basins that no longer exist today. Although a number of non-energy industries use secondary containment, the current inventory only includes secondary containment by energy producers.
- The Central Valley Board needs to maintain its focus to produced water disposal ponds, as originally envisioned.
“California’s energy producers operate under the nation’s most rigorous laws created to ensure environmental protection and energy production accountability.”
Also included in the current “ponds” inventory:
- Storm water management basins retain runoff to prevent flooding and improve water quality in neighboring supply sources
- Lined storage facilities are used to hold water supplies until they can be reintroduced into the energy production process, treated and used for agriculture, or transported and disposed
- Secondary containment basins are required control measures that surround storage containers, pumps and other equipment to capture fluid from emergency loss.
Recommendation: Establish appropriate regulatory oversight for California oil production and maintain focus on ponds only
- WSPA recommends that the Central Valley Board revise the applicability of the indefinite prohibition on the use of sumps, pits and ponds for produced water from a well that has undergone WST so that it does not create a de-facto ban on WST operations.
- Requiring the monitoring and reporting of all chemicals used in all aspects of oil production is overreaching and not necessary. Existing laws are in place to ensure that groundwater pollution does not occur from discharge into a surface pond.
- Monitoring and reporting programs established for each General Order need to be appropriate and feasible while continuing to protect water quality and the environment.