Brown ordered firing of regulator who took hard line on oil firms

Late last year, Gov. Jerry Brown pushed for a top state regulator to ease key requirements for companies seeking to tap California’s oil. The official balked.

Relaxing rules on underground injection, a risky method of oil extraction common in the state, would violate environmental laws, wrote Derek Chernow, then head of the Department of Conservation, in a memo obtained by The Times.

The process, in which a rush of steam, water and chemicals flushes oil from old wells, had been linked to spills, eruptions and a Kern County worker’s death. The federal government had asked the state to tighten its regulations, but the oil industry complained that the stringent rules were killing jobs.

A week after Chernow wrote his memo, Brown had him fired, along with a deputy, Elena Miller. The governor appointed replacements who agreed to stop subjecting every injection project to a top-to-bottom review before issuing a permit.

Brown’s decision to side with energy interests over his regulators reflects the economic and political pressures on the governor during his return engagement in Sacramento. The economy is still sluggish in the wake of a deep recession, and unemployment remains high.

Although Brown has fought offshore drilling and sued oil companies throughout his career, making him a favorite of environmentalists, he now talks of tossing cumbersome regulations to revive the economy. The oil industry, in particular, employs tens of thousands of Californians, many of them in Kern County, where the jobless rate is 14.5%.

The governor is also seeking support from corporate interests, which complain that California is over-regulated, for his proposed ballot initiative to raise taxes. This month, Occidental Petroleum Corp., the largest onshore crude producer in the continental U.S., gave $250,000 to the signature-gathering effort.

Administration officials said the eased permit rules were part of Brown’s larger effort to streamline regulations and spur job creation. The ousted regulators, they said, had taken a “one-size-fits-all” approach to permitting in a state with vast geological differences, sitting on applications for months and being unresponsive to industry.

“We have to balance good environmental protection and economic growth,” said John Laird, Brown’s secretary of natural resources. “The law allows discretion on how you best protect the environment and move the applications along…. Our goal is to make things run more efficiently.”

Chernow and Miller declined to comment.

Underground injection is used to coax oil from depleted wells. Because California’s oil fields have been heavily worked for decades, the method is responsible for most of the state’s onshore production.

But the procedure came under the scrutiny of Chernow and Miller, who were brought aboard under former Gov. Arnold Schwarzenegger in the wake of a scandal in the oil and gas agency. Officials there had been trading in stocks of the oil companies they regulated, among other violations.

Armed with an internal review that found lax monitoring of injection projects, Chernow and Miller in 2010 stripped field offices of their power to approve permits and strengthened oversight in Sacramento.

Catherine Reheis-Boyd, president of the Western States Petroleum Assn., a lobbying group, said regulators began requesting so much information about every project — “an infinite do-loop” — that they effectively halted production for some operators.

The fight intensified last June, when a Chevron worker died after being swallowed feet-first into a sinkhole of boiling fluids. Investigators for the oil and gas agency blamed the accident on steam injection. Miller issued emergency orders ceasing operations near the damaged well.

In July, the federal EPA added its voice to concerns about underground injection in California. In an audit, it found that regulators were not adequately protecting potential drinking water and urged them to tighten extraction standards.

Oil companies, which wanted to expand work in California after unrest in the Middle East and North Africa had hurt output, were furious over the tighter permit requirements.

“We’ve been in business since the turn of the century, and then all of a sudden everything we do out there is not right,” said Les Clark, executive vice president of the Independent Oil Producers Agency, a trade group. “It starts snowballing, and before too long you’re not going to be in business because the regulations are too costly and too complicated to deal with.”

A handful of state and federal lawmakers from oil-rich Kern County agreed, lobbying Brown and administration officials to intervene.

State Sen. Michael Rubio, a Democrat from East Bakersfield, said in an interview that the permitting process was “broken” and that regulators were taking a “one-sided” approach to underground injection. “In government, we have an obligation to have an open-door policy and have input from all sides,” he said.

Oil contractors began a letter-writing campaign, flooding the administration with complaints that the longer permit process was threatening their livelihoods. Occidental and Berry Petroleum Co. executives groused about the delays to analysts in their earnings calls, and Berry’s chief executive officer said his Denver-based company would redirect investment outside California.

By October, Brown had asked that officials develop a permitting shortcut. According to Chernow’s memo, the administration proposed allowing oil companies to begin drilling and injecting wells after submitting basic documents; they would be required to complete a full engineering review later and correct any problems after the fact.

Chernow argued that the proposal violated state and federal rules requiring a complete review before injection can begin and warned that it could open the state up to lawsuits. Environmentalists, he said, “will argue, correctly, that the laws … are intended to prevent damage before it occurs,” he wrote.

Administration officials said they ultimately abandoned that proposal but agreed to the industry’s request that some projects be green-lighted without a full review. The officials have returned much of the permitting power to district offices, saying Miller’s headquarters mandate caused a backlog and created an unnecessary burden for the agency. They said at least 77 well permits that were on hold as of Nov. 15 have since been approved.

Reheis-Boyd of the Western States Petroleum Assn. praised the agency’s new direction, saying it now has a “clear pathway for people to get permits and proceed with drilling in this state.”

“The communications lines are very open,” she said.

Brown boasted recently about the expedited permits. At a solar energy farm in a Sacramento suburb Jan. 13, he reaffirmed his commitment to all forms of energy development.

“It’s not easy,” Brown said. “There are going to be screw-ups. There are going to be bankruptcies. There will be indictments and there will be deaths. But we’re going to keep going.”

michael.mishak@latimes.com