State employees are worried higher-ups are helping oil companies take shortcuts

DOGGR, the regulatory agency, says a review 'identified some issues'

DOGGR's programs are funded by a fee on all oil drilled in state

Just as chefs and cleaners use steam to remove stubborn bits of dirt from pots and carpets, oil companies in California use steam injection to extract the state's uniquely heavy, hard-to-pump petroleum.

The process, while effective, is also dangerous and environmentally destructive, experts say. Since a Chevron oil worker died in a boiling sinkhole in 2011, regulations on the practice have gradually tightened.

But employees inside California's embattled Division of Oil, Gas and Geothermal Resources, or DOGGR, say higher-ups are using empty "dummy" files that allow petroleum firms to avoid upfront reviews of the risky projects and keep operations moving. Documents and emails obtained by The Desert Sun appear to back up their assertions.

Oil regulators story update (8.14.19):California Natural Resources secretary probing 'dummy' files at oil and gas agency

Under U.S. EPA's Safe Drinking Water Act and California regulations, they said, when oil companies want to use "cyclic steam" blasting or steam flooding, they're required to submit an "underground injection control," or UIC, application to state regulators.

Oil and water regulators conduct the reviews, which can last a year or more, and if everything is in order, issue a signed Project Approval Letter. Then, and only then, permits to drill can be issued. A normal project folder is stuffed with detailed forms, diagrams and sign-offs.

But DOGGR employees with first-hand knowledge of the process said at least 12 "dummy" project folders appear to have been used over the past several years to wrongly issue permits, including by high-ranking supervisors. The files are also used to store older steam or wastewater injection permits that may have received no prior reviews, they said.

"We tear our hair out when we see this," said one employee, who spoke to The Desert Sun on the condition of anonymity, fearful of being fired if identified by name. A second employee confirmed the "dummy" folders and echoed the concerns about the permits.

Sometimes a "dummy" folder isn't even created, they said, and drilling permits are just issued without UIC paperwork.

In response to questions from The Desert Sun about the so-called "dummy" permits and related emails, a spokeswoman for DOGGR's parent agency said that after a large surface oil spill in Chevron's Cymric field, 35 miles west of Bakersfield, DOGGR began a review of cyclic steam permitting processes under regulations that took effect April 1.

"The review identified some issues stemming from implementation of a new regulatory program and a comprehensive new database system, both of which require significant changes to the way staff conduct permitting and field practices," said Teresa Schilling, a senior spokeswoman with the Department of Conservation, DOGGR's parent agency.

Schilling said use of placeholder Project Approvals (PALS) or “dummy placeholders” was a "temporary method” of data entry prior to the new regulations taking effect, and as a new computerized system was put in place. She insisted those permits "still underwent extensive review." Placeholder numbers were used for five oil producers, including Aera, Chevron, Berry, Crimson, and Sentinel Peak, she said.

Schilling said under the old rules, some types of injection wells were permitted on a well-by-well basis and no overall Project Approval Letter was required. It was not clear which type of wells she meant.

The practice of using dummy folders appears to have been halted in early August, according to an an internal email viewed by The Desert Sun. However, the same email instructed managers to offer oil companies another shortcut that one expert said was legally dubious.

An empty folder

Consider the case of UIC project 46400400. The folder is empty except for one Adobe Acrobat Icon titled "Read Me."

Inside that PDF is an April email exchange between oil and gas engineers at DOGGR's busy Inland District office. A representative of Berry Petroleum Co. had asked for information on an older steam injection permit. An agency manager asked any available associate to "address the request with our friendly neighborhood Berry representative."

A senior engineer responded to the manager, saying, "I looked in the folder. Nothing. Is this a dummy UIC project that was constructed under managements (sic) direction?"

A supervisor replied, saying "this is a placeholder project" for all of Berry's cyclic steam injection projects in their large Midway-South Sunset oil fields in Kern County. Midway-Sunset is home to some of California's oldest oilfields, which experts say contain heavier crude than anywhere else in the world.

"It's like peanut butter," said Briana Mordick, a former oil company geologist who now is a senior scientist with the Natural Resources Defense Council.

Natural gas plants placed in the oil fields produce steam, she explained, which is blasted or poured down well holes to soften and dislodge the thick, gooey oil via techniques known as "cyclic" steam or "steam flooding."

Critics such as Mordick say the practices are dangerous because they can tear apart underground formations or push oil up through existing fractures to cause large "surface expression" spills, creating high risks for workers and the environment. The processes also require large amounts of water and energy, and create soot and greenhouse gas emissions.

But steam injection has received less push back than fracking, and is widely used in older oil fields in the San Joaquin Valley, parts of Venezuela and Alberta, Canada, said Deborah Gordon, a Brown University senior fellow who studies oil and climate. She said in places like California's Kern County, where cyclic steam injection and other techniques have been used for more than a century to extract tar-like crude, both the public and regulators have grown used to them, despite the fact that the region has the nation's worst air pollution.

An analysis she led of oil fields around the globe, including 150 in California, "found Midway-Sunset is one of the dirtiest in the whole world." She said while the alleged phantom files don't seem proper, it didn't surprise her to hear of them. "Permits in these legacy oil fields are often given with a wink and a nod, essentially saying, 'keep doing what you've always been doing,' " she said.

If California wants to live up to its reputation as an environmental leader, she said, it would need to modernize its oil operations and oversight. "If they're going to continue to produce from these legacy oil fields, then they need to do it in a much cleaner, safer and socially responsible way," she said.

Asked by The Desert Sun about UIC project 46400400, DOGGR said: "We are not sure which project you are referring to."

Oil workers and others have died in California and elsewhere after falling into sinkholes created by "surface expressions" seeps or "blowouts" from steam injection, as such spills are known. Chevron worker Robert Taylor died in 2011 after a Kern County field he was crossing opened underneath him, and he was sucked into hot, oily fluids. His body was recovered hours later. Due to limited liability laws, his family received $350.

This May, a massive surface expression began in Chevron's Cymric oil field, west of Bakersfield near steam injection wells, according to state officials and environmentalists who have examined records. That blowout has to date sent more than 1.3 million gallons of oil and wastewater gushing to the surface. State staff and federal scientists are investigating the exact cause.

It was not immediately possible to determine if those steam wells had undergone prior safety and environmental project review.

DOGGR's acting supervisor, Jason Marshall, issued notices of violation and an order to cease the flow; however, it has continued to gurgle up to the surface intermittently.

The oil is being pumped into trucks, refined and sold, just as it would be if it was coming from a permitted well. At current prices of about $53 a barrel, that means Chevron could earn upwards of $500,000 off the crude. DOGGR —which receives a fee on all oil extracted in the state — will receive 56 cents for every barrel too.

All of DOGGR's programs, Schilling explained, are funded by the per-barrel assessment, by statute and "under the general policy that regulated entities, not taxpayers, should pay for regulatory activities."

Permits for who and by who?

In the case of UIC project 46400400, created in 2013, records show a list of 174 permits and notices of intent to drill stretching from 1990 through this year associated with the empty folder number, many of them for cyclic steam injection by Berry Petroleum or a predecessor holding company.

Frustrated employees say the file number is being used by DOGGR higher-ups to issue the permits with no project approval letter or other review documents. Thirty more permits have been issued since the new regulations took effect, two employees said, using the file number with no apparent legally required upfront reviews.

"If we see drilling and there's a permit but no UIC documentation or project number, it makes us angry," said one of the employees interviewed by The Desert Sun. "It's higher-ups doing favors for their friends. Why should they and these big companies get to throw their weight around? They should have to follow the law."

Some of the permits were reviewed by The Desert Sun. One was issued by an unknown staffer on behalf of William "Bill" Bartling, currently second in command at DOGGR, on Aug. 31, 2017. Two more were issued on behalf of Cameron Campbell, currently the deputy director in charge of the Inland District office, on April 10, 2019. Neither could be reached for comment.

Three employees said Bartling and Campbell both attended San Diego State University and worked at Chevron, though their LinkedIn pages show they were there at different times. DOGGR insiders were surprised last year when Campbell jumped over several more senior managers to be appointed the deputy in charge of the agency's busiest office. The bulk of California's oil operations are located in Kern County, where the Inland office is located.

When Gov. Gavin Newsom visited the site of Chevron's Cymric oil seep on July 24, Campbell helped acting supervisor Jason Marshall and Chevron officials show the site to him.

Documents reviewed by The Desert Sun show a senior oil and gas engineer has been asked to sign permits on behalf of Campbell. The engineer, who did not provide the documents to The Desert Sun, referred a request for comment to the agency media office. He has questioned the "dummy" permit process in internal emails, after Berry Petroleum said they might need thousands more.

On July 24, the same day Newsom visited the nearby spill, a Berry Petroleum manager emailed a timetable for future operations to the engineer, predicting 1,598 more cyclic steam flood well bores by this October, and at least 1,500 more to come in 2020.

The Berry manager also wrote that he was pleased with the way the process was working. "Post our March meeting with DOGGR management, we have been very satisfied with the response and communication from the associated DOGGR team," the manager said.

The DOGGR engineer forwarded the timeline to a supervisor, asking if normal UIC approvals should be sought first, or if the "dummy" project practice should be applied for thousands more permits.

"Currently, injection is approved without a UIC approval process and the well is put into a dummy project," he wrote on July 29. "Do you want us to continue with this practice or terminate approval until the UIC proposals have been approved?"

The Berry manager, reached by phone by The Desert Sun, recalled the email and confirmed they had thousands of potential well bores in the works, but referred questions to a company spokesman.

In an email, Berry's manager of investor relations and administration, Todd Crabtree, said: "We understand and appreciate the need for Underground Injection Control (UIC) project approval letters. From our perspective the UIC approval process is data and labor-intensive and very technical, with multiple layers of review internally and externally requiring both DOGGR and Regional Water Board approval before it is issued."

He attached a copy of a signed 2018 agreement between the two agencies laying out an extensive required review timeline.

Another document obtained by The Desert Sun showed a Berry UIC project application had been under review for 567 days as of Aug. 1, and was still not complete.

As for the "dummy" project process and the empty folder, Crabtree said, "We prefer not to comment on any regulatory authority's internal operating procedures."

Asked if the company had done anything wrong or potentially illegal, he repeated that Berry didn't want to comment on regulatory procedures, but added, "What I can say is that Berry is committed to operating in compliance with all regulations and protecting our employees, the public and the environment."

Schilling, the spokeswoman for DOGGR, said: "Projects and permits require extensive review at multiple levels — no one person has authority or discretion to approve permits. There is a clear and transparent process for project approval developed in conjunction with the State Water Resources Control Board. The fundamental goal of this process is to ensure that projects and permits meet environmental and safety regulatory standards."

Schilling did say DOGGR’s review "found there has been inconsistency in entering project approval numbers for well permitting."

"In a few cases," she said, "DOGGR has found permits for wells issued after April 1 under placeholder" numbers. In those cases, she said, the agency was telling operators not to inject it has secured approvals that meet the April 1 requirements.

Practice halted, but a new shortcut?

Word of the potentially illegal practice has evidently reached the agency's legal counsel.

On Monday, Aug. 5, according to correspondence reviewed by The Desert Sun, another senior engineer emailed fellow managers and said, "We should not issue any permits to drill injectors that are not covered by a (Project Approval Letter). In other words, dummy permits will need applications, review, and approval letters before any (new ones) are permitted for drilling."

But even as he said the "dummy" process would be halted, he urged the managers to let the oil companies know there was an alternative: apply for a standard oil and gas permit, known as an OG, rather than a time-consuming UIC permit. That would allow an applicant to go full steam ahead and inject during reviews. Regular OG permits typically only require a 10-day notice of intent to drill.

"Please," he wrote, "give them the option to change the proposed well type to OG and later potentially convert the well type if a PAL (project approval letter) is issued."

It's not clear if he meant steam injection could proceed under a regular permit. The author of the e-mail was not the person who provided it to The Desert Sun. He did not return a phone call from a reporter seeking comment.

Asked about the language in the Aug. 5 memo, Mordick, the NRDC scientist, said: "It's hard not hear that as circumventing the UIC process." She said while DOGGR has come a long way in recent years in terms of reforms, she was troubled by the "dummy" process. "It certainly doesn't sound right."

Separately, numerous agency supervisors who reported holding shares in oil companies are being reviewed by the state secretary of Natural Resources. Newsom also ordered the firing of DOGGR's oil and gas supervisor, Ken Harris, after learning from the Desert Sun that the number of well stimulation permits, including for fracking, had doubled without his knowledge during his first six months in office compared to last year.

Janet Wilson is senior environment reporter for The Desert Sun and authors USA TODAY's Climate Point. She can be reached at @janetwilson66 or janet.wilson@desertsun.com