Lawsuit: Conspiracy by Gov. Brown, oil companies tainted aquifers
By David R. Baker, June 3, 2015 4:35pm
A conspiracy involving Gov. Jerry Brown, state regulators, Chevron Corp. and the oil industry let petroleum companies inject their wastewater into California aquifers despite the devastating drought, a lawsuit filed Wednesday alleges.
The suit claims that Brown in 2011 fired California’s top oil regulator under pressure from the industry after she started subjecting some of the oil companies’ operations to greater scrutiny, particularly requests to dispose of oil field wastewater underground. Brown then replaced her with someone who promised to be more “flexible” with the oil companies, according to the complaint.
Federal officials have since determined that oil companies have injected billions of gallons of their wastewater into aquifers that should have been protected by law, aquifers that could be used for drinking or irrigation. California regulators have now pledged to end the practice, although some of the injection wells may be allowed to keep pumping until 2017.
“California is experiencing the greatest drought of this generation, and protecting fresh water is of paramount concern,” said R. Rex Parris, lead attorney representing Central Valley farmers on the suit, which was filed in U.S. District Court for the Central District of California.
California’s oil reservoirs contain large amounts of salty water that must be separated from the petroleum and disposed of, usually by pumping it underground. Oil production companies can’t extract oil without some way of handling the left-over water, also known as “produced water.” The urge to boost California oil production prompted the conspiracy, Parris said.
“The fundamental goal of the … conspiracy was to preserve and expand the ability to inject underground chemicals and toxic waste, thereby expanding their oil production and maximizing profits, including tax revenues,” he said.
The governor’s office declined to comment on the suit Wednesday, as did the state’s oil regulating agency, the Division of Oil, Gas and Geothermal Resources. The division is named as a defendant in the suit, as are Chevron, Occidental Oil, two oil industry associations and several state and local officials. A Chevron spokesman said protecting water resources is one of the company’s core values.
The suit marks the latest twist in a long-building problem that burst into the open last year when the division abruptly shut down several wells that it feared could be injecting oil-field wastewater into aquifers already used for irrigation or drinking. Since then, the number of injection wells closed by the state has increased to 23. But the division insists it has not yet found any drinking or irrigation wells that have been tainted by the injections.
The lawsuit argues, however, that at least one Central Valley farmer lost an orchard to contamination from the oil industry’s produced water. Mike Hopkins, one of the plaintiffs in the suit, had to tear out 3,500 cherry trees whose leaves kept shriveling up and turning brown. Tests of the water showed unusually high levels of salt and boron. A former wastewater injection well lay across a rural road from his Kern County orchard.
Much of the suit involves a 2011 episode that until this year received little attention outside Sacramento and the Central Valley’s oil fields.
Oil companies and their political allies complained that the division under its supervisor at the time, Elena Miller, had bogged down the process of applying for underground injection permits. In addition to wastewater disposal, California oil companies need the permits to inject steam or water into aging oil fields as a way of flushing out more petroleum.
Miller had held the position since 2009 and was considered an outsider by the industry. According to the suit, Miller insisted that the law required oil companies to submit detailed engineering and geological studies for each proposed injection well before the division could issue a permit.
The industry balked and took its complaints directly to the governor, urging Brown to fire Miller. A few Central Valley politicians had already done the same. Some environmentalists, meanwhile, had criticized Miller for what they considered her hands-off approach to hydraulic fracturing.
Chevron spokesman Kurt Glaubitz said Wednesday that the company had not urged Brown to remove Miller.
In November 2011, Brown removed Miller. She was replaced by Tim Kustic, who according to the suit dropped the requirement that the companies submit the disputed studies before receiving injection permits. Kustic is also named as a defendant in the suit.
NEXTGEN CLIMATE FOUNDER & PRESIDENT TOM STEYER CALLS FOR ANSWERS FROM BIG OIL ON GAS PRICE SPIKE IN CALIFORNIA
Steyer Says If Oil Company Executives Won’t Answer Questions They Should Face Subpoena
May 5, 2015 3:53 PM
SAN FRANCISCO—NextGen Climate Founder and President Tom Steyer today spoke at a Chevron gas station about the recent gas price spike in California and called on the State Senate to subpoena oil company executives if they refuse to provide answers to basic questions about their pricing and oil refining practices.
“As everyone knows, the oil companies have been charging Californians up to $1 billion per month more for gasoline than if we paid the national average,” Steyer said. “It’s time to put an end to the Big Oil giveaway, and start giving Californians a fair shake.”
Steyer also highlighted recent comments made by Chevron during its first quarter earnings call with investors last week. Chevron’s general manager of investor relations, Jeff Gustavson, noted that refining margins “increased earnings by $435 million driven by unplanned industry downtime and tight product supply on the U.S. West Coast.”
As Steyer noted, Chevron is saying for the oil industry, “their problems were good for their profits.” Steyer also highlighted the problem with the lack of transparency into the oil industry’s business practices, saying “we don’t have the facts we need in order to know if we’re paying fair prices based on the market, or if oil companies are deliberately taking actions which lower supplies and drive profits higher.”
Oil company executives had the opportunity to show up for a Senate hearing in March, to answer questions and allow Californians to judge whether they are being unfairly gouged at the pump. But industry executives refused to show up, instead sending a paid economist who then claimed he didn’t speak for the oil companies. If these executives continue refusing to answer for their business practices, the State Senate should subpoena these executives to force them to answer to Californians. Once Big Oil answers this call, we can begin to fix California’s rigged gasoline market and give Californians the fair shake they deserve.
NextGen Climate is focused on bringing climate change to the forefront of American politics. Founded by Tom Steyer in 2013, NextGen Climate acts politically to prevent climate disaster and promote prosperity for all Americans.
In California, Farmers Rely on Oil Wastewater to Weather Drought
By Zoë Schlanger / April 6, 2015 6:54 AM EDT
The wet, white noise of gushing water rises above a background track of twangy guitar. Water is tumbling out of a pipe into a holding pond that looks as though it has sat nearly empty for ages, its sandy sides the color of parched desert. It looks like the California of recent headlines: drought so bad the ground is blowing away. Except now, here, in this promotional video for Chevron, there is water. Lots of it.
“The sound of that water is music to my ears,” David Ansolabehere, the general manager of the Cawelo Water District in Kern County, says in the video, gazing out over the rapidly filling pond. “Chevron is being environmentally conscious, and this is a very beneficial program, and it’s helped a lot of our farmers, helped our district, tremendously.”
The oil fields of Kern County, where Chevron is the largest producer, pump out more oil than those of any other county in the United States. It also happens to be one of the country’s most prolific agricultural counties, producing over $6 billion in crop value every year. But after three years of strangling drought, all that agriculture is on life support.
That’s where Chevron comes in. For every barrel of oil Chevron produces in its Kern River oil field, another 10 barrels of salty wastewater come up with it. So Chevron is selling about 500,000 barrels of water per day, or 21 million gallons, back to the Cawelo Water District—the local water district that delivers water to farmers within a seven-mile slice of Kern County—at an undisclosed amount, but “essentially ‘at cost,’” according to Chevron spokesman Cameron Van Ast. In a time when freshwater in the Central Valley is selling at up to 10 times the typical cost, it’s a good deal for farmers.
The wastewater Chevron is selling flows, without municipal treatment (though the oil products are removed), to 90 local farmers who spread it on their citrus, nut and grape crops. The Cawelo Water District might first mix the wastewater with freshwater, or it might not, depending on what crop the wastewater will be used on—and on how much freshwater is available at the time. In the midst of a drought, there is less freshwater, so the water the farmers get is saltier than in a wet year. But the farmers understand that using the salty wastewater on their crops is an emergency measure. If all goes as planned, when the rains come back the excess salt will be flushed through the soil.
But it’s a risky dance; over time, high sodium can change the properties of the soil, making it impermeable, unable to take in any more water. Trees would start to get “salt burn.” Their leaves would turn yellow, and yields would decline. Eventually, the soil becomes barren.
Ansolabehere says the wastewater mixture sent to farmers is rigorously monitored to keep from salting the soil to that degree. It is tested quarterly for salts and boron, he says. “The only reason this program works is because [Chevron’s] production water is of very good quality,” he says. “So maybe we’ll have a little salt buildup. But the next rain will flush it out.”
But the National Weather Service doesn’t foresee much rain in the immediate future. In fact, drought conditions may “intensify.”
For local farmers, dwindling water is a noose slowly tightening. Most take relief wherever they can get it, but not Tom Frantz. “I would rather let my trees die” than use the Chevron water, he says. Frantz is a small-time almond farmer who lives about six miles from the oilfields where the wastewater is pumped into mixing basins. His 36 acres are a speck in the shadow of much larger operations; vast orange groves, pistachio trees, rows and rows of almond trees. But Frantz knows farming. He’s been in Kern County, just west of the town Shafter, for all of his 65 years. His grandparents were farmers a few miles away. His parents farmed, too. There’s a generation below him, he says, who look as if they’ll take it up soon.
In normal years, Frantz depends on groundwater pumped from wells, as well as “surface water,” the water held in municipal reservoirs that flows in frigid streams from the melting snowpack in the Sierra Nevada mountains. But with the Sierra snowpack this winter at a paltry 6 percent of its typical heft, there won’t be much to melt. Chevron’s wastewater is an option, but Frantz knows what all farmers know: You can’t grow food with salty water for very long.
“It’s just not sustainable at all to use salty water, no matter how much you dilute it…. We can farm here a long time, if we’re careful about the salts that we apply,” he says. “I’ve seen the farms that have saltier groundwater, and they have severe difficulties after 50 years. That’s very low levels of salts that’ll do that.”
Frantz has little confidence in how oil industry wastewater is regulated in his area, and he is concerned by what still isn’t known about the contents of the wastewater. Recently, there was a scandal over news that state oil and gas officials for years let oil companies inject drilling and fracking wastewater into hundreds of wells in protected aquifers. The water was laden with the benzene, a carcinogen, according to a Los Angeles Times investigation. “What it shows me is that we have to look out for ourselves,” Frantz says.
California doesn’t have statewide regulations for recycling wastewater for agriculture. Instead, nine regional water boards issue permits to local water districts. Once a year, the Cawelo Water District is required to send data about the salt and boron content to the Central Valley Water Board, according to Clay Rodgers, the board’s assistant executive officer. But the district isn’t obligated to test for other components, like heavy metals, arsenic, radioactive materials and chemicals that might be used in the drilling process. Ansolabehere says Cawelo has tested for radioactive elements “a couple of times” over the past 20 years, since “it’s very expensive” to test for, and it isn’t required by the board. Those tests have not turned up any positive results.
Chevron, for its part, says testing last month showed no heavy metals or chemical toxins were present in the water above maximum allowable levels. The arsenic levels were high, however, but “issues related to the arsenic concentrations in the water were fully addressed in the process of obtaining the permit from the Central Valley Regional Water Quality Control Board,” Chevron said in a statement. “Protection of people and the environment is a core value for Chevron, and we take all necessary steps to ensure the protection of our water resources.”
The Central Valley Regional Water Quality Control Board came to the conclusion that the high arsenic in the waste water was acceptable because most of the arsenic appeared in models to get “tied up” in the soil as it made its way down to the water table, says Rodgers. In other words, the Board sees no threat of tainting the groundwater with arsenic, because it largely stays in the soil. But no monitoring is in place to see if that arsenic is building up to unsafe levels in the agricultural soils themselves.
Little to no independent scientific research has been done on this type of water and how it interacts with crops, soil and surrounding bodies of water. Some scientists say there are too many unknowns associated with the wastewater from oilfields. If it is being used on food, and to irrigate land that lies above drinking water aquifers, we need to know more about it, they say—especially in light of the fact that, as Rodgers notes, the Central Valley hopes to expand its use for farm irrigation during the drought.
“There might not be a single risk out there with this practice. But the biggest risk that we have right now is that we just don’t know,” says Seth Shonkoff, an environmental public health scientist and a visiting scholar at the University of California, Berkeley. “So until we know, we definitely have reason for concern. We know that there are compounds being put down oil and gas wells that you would not want in your food.”
To Shonkoff’s knowledge, no scientist has ever published a study on what compounds from the oil development process—examples he gives are methanol, biocides and surfactants—might be in oilfield wastewater used on crops. Chevron says these constituents are kept separate from the water delivered to farmers.
Avner Vengosh, a Duke University geochemist, is serving on an expert panel for the U.S. Geological Survey while it begins to look into the quality of produced oil-field water from Kern County. His data are “only preliminary,” but he has found “high levels of vanadium, chromium and selenium” in the samples of wastewater he has tested (although he was unable to say if the water was produced from Chevron’s operations or another of the many operators in the area). Those levels are consistent with data from oil- and gas-produced water from other basins in the U.S., according to Vengosh.
Vanadium, a metal, is classified as “possibly carcinogenic” by the International Agency for Research on Cancer. Certain forms of chromium and selenium, both heavy metals, are associated with myriad health problems, including cancer, from chronic high exposure. Ansolabehere says the Cawelo Water District tested for chromium and selenium once, last year, and found none. It has never tested for vanadium. None of these metals are required to be tested for by the Central Valley Water Board.
Could the crops be absorbing these metals? The California Department of Food and Agriculture says it doesn’t have the jurisdiction to look. The Central Valley Water Board doesn’t sample crop residues where the water is used, either.
For Vengosh, what is most worrisome is the possibility that the water is seeping through the farmland into the water table. “It would end up in underlying groundwater. If the groundwater is moving to a drinking water source, you would end up with that in the drinking water eventually,” he says.
No matter how tough the drought gets, Frantz says, he won’t be taking the Chevron water. “It just doesn’t make sense to ruin something,” he says. “To get through years like this, we have to take some land out of production.”
But for Roy Pierucci, a farmer who manages a 160-acre pistachio farm that falls within the Cawelo Water District, the unknowns about the Chevron water won’t deter him from using it. If the water contains some as of yet unknown elements, “it would be a risk we’d be willing to take,” he says, without hesitation. He’s been using the Chevron water for 10 years and has never seen a problem with his crops. (Pierucci was featured in the Chevron promotional video, though he wasn’t paid for the appearance—he says he participated because he values what the company does for the water district.)
“I’ve really never asked what the analysis of the water is. I just know it’s available. There hasn’t been any complaints about it. I don’t think they recommend drinking it,” Pierucci says. “If [the drought] keeps up year after year, I think it would be a concern. I think the salt levels would be higher. They blend it for a reason.”
The Chevron water is vital to Pierucci’s operation, but it isn’t a game changer. “It’s not going to save us,” he says. Three years of brutal drought have left his pistachio trees teetering on the edge of survival. If the drought persists another two or three years, he says, he’ll have to start ripping out his trees and reducing the number of acres he irrigates. On another property he manages, where there is no pumping well on-site, he imagines he’ll be pulling out trees within a year. “You can’t chase water forever. Sooner or later you’re going to lose.”
This article has been updated to include a statement from Chevron regarding their internal water testing processes and results, as well as information about arsenic monitoring from the Central Valley Regional Water Quality Control Board.
Exxon, Shell, Chevron Pare Back as Rising Production Costs Squeeze Earnings
By Daniel Gilbert and Justin Scheck, Nov. 2, 2014
As crude prices tumble, big oil companies are confronting what once would have been heresy: They need to shrink.
Even before U.S. oil prices began their summer drop toward $80 a barrel, the three biggest Western oil companies had lower profit margins than a decade ago, when they sold oil and gas for half the price, according to a Wall Street Journal analysis.
Despite collectively earning $18.9 billion in the third quarter, the three companies— Exxon Mobil Corp. , Royal Dutch Shell PLC and Chevron Corp. —are now shelving expansion plans and shedding operations with particularly tight profit margins.
The reason for the shift lies in the rising cost of extracting oil and gas. Exxon, Chevron, Shell, as well as BP PLC, each make less money tapping fuels than they did 10 years ago. Combined, the four companies averaged a 26% profit margin on their oil and gas sales in the past 12 months, compared with 35% a decade ago, according to the analysis.
Shell last week reported that its oil-and-gas production was lower than it was a decade ago and warned it is likely to keep falling for the next two years. Exxon’s output sank to a five-year low after the company disposed of less-profitable barrels in the Middle East. U.S.-based Chevron, for which production has been flat for the past year, is delaying major investments because of cost concerns.
BP has pared back the most sharply, selling $40 billion in assets since 2010, largely to pay for legal and cleanup costs stemming from the Deepwater Horizon oil spill in the Gulf of Mexico that year.
To be sure, the companies, at least eventually, aim to pump more oil and gas. Exxon and Chevron last week reaffirmed plans to boost output by 2017.
“If we went back a decade ago, the thought of curtailing spending because crude was $80 a barrel would blow people’s minds,” said Dan Pickering, co-president of investment bank Tudor, Pickering, Holt & Co. “The inherent profitability of the business has come down.”
It isn’t only major oil companies that are pulling back. Oil companies world-wide have canceled or delayed more than $200 billion in projects since the start of last year, according to an estimate by research firm Sanford C. Bernstein.
In the past, the priority for big oil companies was to find and develop new oil and gas fields as fast as possible, partly to replace exhausted reserves and partly to show investors that the companies still could grow.
But the companies’ sheer size has meant that only huge, complex—and expensive—projects are big enough to make a difference to the companies’ reserves and revenues.
As a result, Exxon, Shell and Chevron have chased large energy deposits from the oil sands of Western Canada to the frigid Central Asian steppes. They also are drilling to greater depths in the Gulf of Mexico and building plants to liquefy natural gas on a remote Australian island. The three companies shelled out a combined $500 billion between 2009 and last year. They also spend three times more per barrel than smaller rivals that focus on U.S. shale, which is easier to extract.
The production from some of the largest endeavors has yet to materialize. While investment on projects to tap oil and gas rose by 80% from 2007 to 2013 for the six biggest oil companies, according to JBC Energy Markets, their collective oil and gas output fell 6.5%.
Several major ventures are scheduled to begin operations within a year, however, which some analysts have said could improve cash flow and earnings.
For decades, the oil industry relied on what Shell Chief Financial Officer Simon Henry calls its “colonial past” to gain access to low-cost, high-volume oil reserves in places such as the Middle East. In the 1970s, though, governments began driving harder bargains with companies.
Oil companies still kept trying to produce more oil, however. In the late 1990s, “it would have been unacceptable to say the production will go down,” Mr. Henry said.
Oil companies were trying to appease investors by promising to boost production and cut investment.
“We promised everything,” Mr. Henry said. Now, “those chickens did come home to roost.”
Shell has “about a third of our balance sheet in these assets making a return of 0%,” Shell Chief Executive Ben van Beurden said in a recent interview. Shell projects should have a profit margin of at least 10%, he said. “If that means a significantly smaller business, then I’m prepared to do that.”
Shell late last year canceled a $20 billion project to convert natural gas to diesel in Louisiana and this year halted a Saudi gas project where the company had spent millions of dollars.
The Anglo-Dutch company also has dialed back on shale drilling in the U.S. and Canada and abandoned its production targets.
U.S.-based Exxon earlier this year allowed a license to expire in Abu Dhabi, where the company had pumped oil for 75 years, and sold a stake in an oil field in southern Iraq because they didn’t offer sufficiently high returns.
Exxon is investing “not for the sake of growing volume but for the sake of capturing value,” Jeff Woodbury, the head of investor relations, said Friday.
Even Chevron, which said it planned to increase output by 2017, has lowered its projections. The company has postponed plans to develop a large gas field in the U.K. to help bring down costs. The company also recently delayed an offshore drilling project in Indonesia.
The re-evaluation has also come because the companies have been spending more than the cash they bring in. In nine of the past 10 quarters, Exxon, for example, has spent more on dividends, share buybacks and capital and exploration costs than it has generated from operations and by selling assets.
Though refining operations have cushioned the blow of lower oil prices, the companies indicated that they might take on more debt if crude gets even cheaper. U.S. crude closed Friday at $80.54 a barrel.
Chevron finance chief Patricia Yarrington said the company planned to move forward with its marquee projects and is willing to draw on its $14.2 billion in cash to pay dividends and repurchase shares.
“We are not bothered in a temporary sense,” she said. “We obviously can’t do that for a long period of time.”
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