In a letter to Governor Newsom, CIPA CEO Rock Zierman appealed to the state’s executive to veto AB 3233 (Dawn Addis, D-Monterey County) which threatens to upend decades of established law, create regulatory chaos, and impose significant economic and legal risks on California’s local governments.
AB 3233 directly challenges the state’s well-settled authority to regulate downhole oil and gas production, which the California Supreme Court affirmed in 2023.
Section 3106 of the Public Resources Code was specifically designed to ensure that California maintains a unified, expert-led regulatory framework for overseeing the safe and efficient extraction of its valuable mineral resources. AB 3233 seeks to circumvent this framework, allowing local governments – many of which lack the expertise or capacity to manage such complex operations – to impose restrictions and prohibitions on oil production.
On August 3, 2023, the California Supreme Court unanimously ruled in Chevron U.S.A. Inc. v. County of Monterey,15 Cal.5th 135 (2023) (“Monterey”) that local governments are preempted by federal and state law from regulating downhole oil and gas operations. This lawsuit was brought by operators contesting a Monterey County voter initiative that banned certain class II injection activities.
The USEPA granted California primacy over the Underground Injection Control (UIC) program in 1983. With this designation, the state administers the federal Clean Water Act provisions pertaining to Class II injection wells. To obtain primacy, the state was required to undergo a vigorous vetting by the USEPA to ensure the state’s program met the requirements of federal law, had sufficient expertise amongst its personnel to administer the program, and that the state’s goals matched the federal statute. The state is not authorized by the federal government under the Clean Water Act to delegate its UIC authority to local governments.
Besides being illegal, AB 3233 would lead to a patchwork of contradictory local regulations, undermining the state’s comprehensive approach to energy management. AB 3233 does not offer a solution to California’s energy challenges. It introduces uncertainty that will increase operational costs, delay projects, and exacerbate our reliance on imported energy. Local ordinances resulting from AB 3233 could ban or impose unfeasible restrictions on oil and gas exploration, triggering supply disruptions and putting California’s energy security at risk.
AB 3233 exposes local governments to significant legal liabilities under the Takings Clause of the Fifth Amendment to the U.S. Constitution. By effectively stripping operators of their right to develop existing resources from duly permitted operations, local authorities could face compensation claims amounting to billions of dollars. Estimates project potential local government costs as high as $97 billion. This staggering figure should give pause to anyone who believes that a disjointed, locally driven regulatory model on downhole oil and gas operations can safeguard California’s energy future and fiscal health.
Local governments have always had land use authority for surface activities, including oil and gas operations. Whenever we drill a new well, we must either have a conditional use permit from the local jurisdiction or abide by a CEQA-compliant oil and gas ordinance adopted by that jurisdiction. AB 3233 does not change that authority. Instead, it grants local governments authority over downhole operations in violation of the federal Clean Water Act.
Important to note, proponents of the legislation made statements on the floor of the State Senate that AB 3233 gave locals the ability to not only curtail oil and gas operations, but also expand them. Senator Laird, the Senate floor jockey for the bill, explicitly stated that if local governments want to expand operations under AB 3233, the bill authorizes them to do so. Industry intends to vigorously defend that legislative intent.
The California Department of Conservation’s Geologic Energy Management Division is charged with regulating drilling, operation, and abandonment work to ensure public health, safety, and environmental protection. AB 3233 disrupts this oversight and replaces it with a fragmented system that serves no one’s interests – not the public, not the environment, and certainly not the state’s energy needs.
Local governments like Monterey County, whose voter initiative was unanimously overturned by the California State Supreme Court, have little to no experience regulating oil production. AB 3233 offers no contingency plan for increasing production in times of need, making it a dangerous gamble California cannot afford.
CIPA is urging a veto AB 3233 to prevent chaos, legal battles, and regulatory uncertainty throughout the state related to the recovery of oil and natural gas, and the reinjection of fluids into approved aquifers.
California’s energy security depends on a unified regulatory framework that balances environmental protection with responsible resource development. AB 3233 would only undermine that balance.