Chevron U.S.A. Inc. v. County of Monterey
California’s oil and gas operations are governed by Division 3 of the Public Resources Code (§ 3000 et seq.) and its implementing regulations (Cal. Code Regs., tit. 14, § 1712 et seq.). Division 3 addresses various aspects of oil and gas exploration and extraction, including notices of intent to drill and abandon (§§ 3203, 3229), blowout prevention (§ 3219), repairs (§3225), protection of water supplies (§§ 3222, 3228), and well spacing (§§ 3200-3609). The implementing regulations, in turn, address the process for oil producers and well operators to obtain state approval of “drilling, reworking, injection, plugging, or plugging and abandonment operations” (Cal. Code regs., tit.14, § 1714) and provide instructions and timelines for filing well and safety records with CalGEM. (Id. at § 1724.1.) The regulations are “statewide in application for onshore drilling, production, and injection operations,” and all onshore prospect, development, and service wells shall be drilled and operated in accordance with them. (Id. at § 1712.)
Public Resources Code subdivisions 3106(a) and (b) provide:
“The [state oil and gas] supervisor shall so supervise the drilling, operation, maintenance, and abandonment of wells and the operation, maintenance, and removal or abandonment of tanks and facilities attendant to oil and gas prevention . . . [the supervisor] shall supervise the drilling, operation, maintenance, and abandonment of wells so as to permit the owners or operators of the wells to utilize all methods and practices known to the oil industry for the purpose of increasing the ultimate recovery of underground hydrocarbons and which, in the opinion of the supervisor, are suitable for this purpose in each proposed case. . . . it is hereby declared as a policy of this state that the grant in an oil and gas lease or contract to a lessee or operator of the right or power, in substance, to explore for and remove all hydrocarbons form any lands in the state, in the absence of an express provision to the contrary contained in the lease or contract, is deemed to allow the lessee or contractor, or the lessee’s or contractor’s successors or assigns, to do what a prudent operator using reasonable diligence would do . . . including, but not limited to, the injection of air, gas, water, or other fluids into the productive strata . . . when these methods or processes employed have been approved by the supervisor, except that nothing contained in this section imposes a legal duty upon the lessee or contractor, or the lessee’s or contractor’s successors or assigns, to conduct these operations.”
Thus, the statute directs the supervisor to administer the state’s regulations in a way that serves the dual purpose of ensuring the state has adequate oil and gas resources while protecting the environment.
Monterey County’s Measure Z
In 2016, Protect Monterey County (“PMC”) sponsored, and Monterey County (“County”) votes passed Measure Z. This ordinance bans oil and gas wastewater injection and impoundment and the drilling of new oil and gas wells throughout the unincorporated areas of the County.[1] What is labeled as LU-1.22 of the Measure provides,
“Prohibited Land Uses: The development, construction, installation, or use of any facility, appurtenance, or above-ground equipment, whether temporary or permanent, mobile or fixed, accessory or principal, in support of oil and gas wastewater injection or oil and gas wastewater impoundment, is prohibited on all lands within the County’s unincorporated area.”
LU-1.23 provided:
“Prohibited Land Uses: The drilling of new oil and gas wells is prohibited on all lands within the County’s unincorporated area.”
County’s Zoning Powers; Preemption
The Supreme Court initially discussed the County’s powers under Article XI, section 7 of the California Constitution which provides that a “county or city may make and enforce within its limits all local, police, sanitary, and other ordinances and regulations not in conflict with general laws.” If a local legislation conflicts with state law, it is preempted by the state law and is void. (Sherwin-Williams Co. v. City of Los Angeles (1993) 4 Cal.4th 893, 897; quoting Candid Enterprises, Inc v. Grossmont Union High School Dist. (1985) 39 Cal.3d 878, 885.) The Supreme Court has identified three ways in which a preempting conflict may arise: if the local legislation duplicates, contradicts, or enters an area fully occupied by general law, either expressly or by legislative implication. (Sherwin-Wiliams, supra, 4 Cal.4th at 897.) A contradiction occurs when a local ordinance “prohibits what [a] state enactment demands.” (Quoting City of Riverside v. Inland Empire Patients Health & Wellness Center, Inc. (2013) 56 Cal.4th 729, 743.)
Here, the Court found Measure Z contradicted the statute under section 3106. Whereas the state’s provision assigned the authority to regulate oil and gas production methods to the state supervisor, Measure Z reallocated that authority to the County. The Measure, in explicitly banning certain methods of production, acted contrary to the state supervisor who has the statutory authority and obligation to regulate. Thus, the Measure was preempted by 3106. The Supreme Court was unconvinced by the appellant’s argument that a local regulation prohibiting an activity is not preempted by a statute that authorizes a state authority to permit, rather than demand, that activity. The Court clarified that local prohibition of an activity for which permission is regulated by the state is necessarily preempted. (Citing Cohen v. Board of Supervisors (1985) 40 Cal.3d 277, 293.)
However, the Court also reinforced that nothing in this opinion diminishes local governments’ authority to regulate where oil and gas may be produced within their localities. It expressed the narrowness of this holding by explaining that local regulations requiring permits for oil drilling operations or restricting oil drilling operations to particular zoning districts remain valid.
Conclusion
In sum, Monterey County cannot assert a local ordinance under Measure Z that contradicts Public Resources Code section 3106 because the latter preempts the former. This is consistent with the recent Ninth Circuit decision holding that the City of Berkeley is preempted from implementing a local ban on natural gas piping because, under the Energy Policy and Conservation Act, local governments cannot ban natural gas products. (Cal. Restaurant Ass’n v. City of Berkeley (2023) 65 F.4th 1045.) Thus, while cities and counties have broad zoning powers, local legislation cannot conflict with state or federal law.
[1] The Measure also banned fracking, but the Court determine no petitioner was using or proposing to sue the fracking process banned in Measure Z. Thus, the Court did not have address the fracking provisions of Measure Z.
Patrick Enright is Senior Counsel and Kara Anderson is a law clerk at Abbott & Kindermann, Inc. For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, Inc. at (916) 456-9595.
The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, Inc., or the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.