By Deborah Sivas, Special for CalMatters

"Oil
Oil pumps around the Elk Hills Power Station on March 29, 2024. Photo by Larry Valenzuela, CalMatters/CatchLight Local

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California lawmakers just passed legislation to support the oil and gas industry in an attempt to lower costs for consumers. Below, an environmental scholar argues that making it easier to drill oil won’t lower gas prices. The opposing view: A business professor says the deal is an overdue but also piecemeal approach for such a critical problem.

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California’s demand for gasoline has fallen steadily over the last two decades as state consumers shift to cleaner electric and hybrid vehicles.  

What’s giving some state policymakers heartburn is the fact that falling demand for gasoline means declining demand for in-state petroleum refining. In response, some California refineries have begun consolidating, converting or closing. 

Though this is good news for nearby communities burdened by refinery pollution, state officials worry refining capacity could fall faster than gasoline consumption, driving up pump prices as short-term demand exceeds supply. 

The oil industry has stoked this fear and proposed a dangerous solution: Exempt all new oil and gas drilling from the California Environmental Quality Act, colloquially known as CEQA (pronounced see-kwah). The industry aggressively pushed state legislation for that. What legislators passed last week, Senate Bill 237, didn’t go that far but aims to make it easier to expand drilling in oil-rich Kern County.

Still, the same issues arise from this exemption. Fast-tracking new oil drilling permits will do nothing to affect pump prices.

California has been extracting crude oil for 150 years. By the start of the 20th century, it was the leading oil-producing state in the nation. Helping that boom were natural gas deposits, which create pressure in oil reservoirs that allows crude to flow to the surface. California’s early oil derricks sometimes caused explosive gushers that sprayed oil high into the air, prompting a wave of local regulation.

The days of gushers are gone. With natural gas stores largely depleted, California oil fields now contain mostly heavy crude oil, often tucked into folded geology and difficult to extract. Today’s drillers typically inject steam or hot water to lower the oil’s viscosity and increase its flow. That is energy-intensive and expensive, so drilling in California isn’t as cost competitive as Texas or North Dakota.

These fundamental economics — not environmental laws — largely dictate the level of in-state crude oil production. California already imports most of the crude oil feeding its refineries. Refinery operators understand this and are making decisions based on long-term business projections. 

As the state produces less oil, there is less need for in-state refining. That transition presents an opportunity. Many refineries sit on valuable land that could be repurposed for more sustainable uses.  

Legislation that exempts new oil drilling from environmental quality standards won’t magically change this reality. In fact, current projections by the U.S. Energy Information Administration suggest global oil prices will fall over the next year or two, perhaps to levels that will make most California production uncompetitive. Global market prices are the likely reason many new wells the state approved in recent years haven’t been drilled.   

Gutting environmental regulations would disenfranchise communities trying to protect themselves from potential risks associated with oil production, such as toxic air pollution, water and soil contamination and drilling rig explosions. 

If state officials want to smooth California’s transition from transportation fuel, they should look for solutions such as facilitating port improvements to accommodate increases in oil imports. And state lawmakers must remain vigilant about price gouging as the market consolidates to fewer players.

CEQA requires California’s oil regulators to study, disclose and mitigate potential effects of drilling. Contrary to the industry’s narrative, CEQA is neither the cause of falling gasoline demand nor the solution to price spikes. 

We should celebrate the clean energy path California is blazing, not hastily eviscerate one of its bedrock environmental laws. 

This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.