DOGGR: State Fines Chevron $2.7 Million for Kern County Spill

Published On: October 2, 2019

California’s Division of Oil, Gas and Geothermal Resources (DOGGR) announced today that it levied a $2.7 million fine on Chevron for illegally allowing releases of large amounts of oil at one of the company’s well sites in the Cymric Oil Field between May and July of 2019.

The size of the civil penalty — the second-largest issued under DOGGR’s new office of enforcement — was attributed to risks created by the leaks, as well as their pervasiveness and the state’s intention of keeping Chevron from benefiting from sales of oil contained in the more than 1.25 million gallons of fluid that, since May, have flowed from the Cymric Oil Field.

DOGGR said the leaks were likely caused by Chevron’s steam injection work near McKittrick. DOGGR noted that the leaks, a historically common phenomenon known as “surface expressions,” became illegal in California in April.

In a statement, Chevron said it was reviewing the state order outlining the penalties.

“Chevron takes very seriously its responsibility to operate safely and in a manner that is protective of public health, the communities where we operate, and the environment. We have made significant progress working with Unified Command to clean up the impacted area, which is nearly complete. It remains our operational goal to prevent seeps consistent with DOGGR’s updated regulations, and we continue to work closely with regulators to address any seeps that occur.”

After the state’s months-long focus on the surface expressions and its dissatisfaction with Chevron’s explanations for what caused them, the fine comes as little surprise. The heads of the state legislative committees that oversee much of California’s oil and gas industry are questioning whether a fine will be effective.

Senator Henry Stern, Chairman of the Senate Natural Resources and Water Committee, said, “I don’t think this fine will change the way Chevron does business. Three million bucks is a drop in the bucket for them. I’m not under any illusion that’s suddenly going to change their behavior overnight. I think we’re going to need a much stronger response from the state.”

Assemblywoman Laura Friedman, Chair of the Assembly Committee on Natural Resources, also questioned the effectiveness of the fine.

“For a company that reports quarterly profits in the billions, I question if a $2.7 million fine is sufficient enough to cause the operator to take all necessary steps to prevent these kinds of disasters. The penalties associated with surface expression regulations and prohibitions are supposed to act as a deterrent for risky behavior. In addition to increasing penalties, we also need to look into what failed on the regulatory side of this issue and strengthen DOGGR’s review process to ensure the formations are stable enough to withstand dangerous steam operations.”

Both committees plan to conduct a joint legislative hearing regarding the spills in the Cymric Oil Field and DOGGR’s work, most likely in December or January, according to Stern’s office.

The leak at the center of DOGGR’s fine began in May and led to the release of about 400,000 gallons of crude into a dry creek bed before finally stopping in August. Since the new regulations went into place, DOGGR has also focused on two other significant spills in the Cymric Oil Field near the town of McKittrick. One involves surface expressions that have continued since 2003, releasing millions of gallons of crude. The other spill is ongoing.  That release began in late August and has spilled more than 184,000 gallons of oil, according to DOGGR.

DOGGR says Chevron will be able to sell more than 7,000 barrels, or some 300,00 gallons, of oil recovered from the spill for about $400,000. The agency also says that for the last 13 years, Chevron’s average annual revenue in California was $3.34 billion.

Chevron can appeal the state’s fine. It’s unclear if the company plans to challenge the penalty.

Senator Stern believes Chevron wants to stop the leaks.

“They’re hungry to be in compliance and try to be the gold standard … of regulated oil companies,” Stern said. “I do think there’s a desire within that company to turn it around.”

About the Author: Jesus Arredondo

Jesus Arredondo is an Energy Industry Analyst and former State of California official. He can be reached at jesus at govreport.org