The City’s status as a leading business, trade, and cultural center would not be possible without its industrial past. The discovery of oil near present-day Dodger Stadium at the end of the nineteenth century played a critical role in the City’s development. The ensuing decades brought significant population growth and oil production; by 1930 the City’s population grew to 1.2 million and the State was producing one quarter of the world’s oil output.3 Subsequent drilling overlapped with continued population growth.
Regardless of whether oil and gas wells were drilled in established residential neighborhoods, or residential development followed after the drilling sites were established, the end result was the same. Today, a number of the City’s active, idle, buried, and abandoned oil and gas wells are located in close proximity to homes, schools, hospitals, and other non-industrial sites. Further, many of the wells were initiated and/or abandoned prior to the establishment of modern federal, State, and local regulations.
According to the California Department of Conservation, Division of Oil, Gas, and Geothermal Resources (DOGGR) database, there are more than 5,000 known wells in the City of Los Angeles as of late-March 2018. DOGGR reported the status of those wells as follows:
3 Taylor, Alan. “The Urban Oil Fields of Los Angeles.” The Atlantic, August 26, 2014. https://www.theatlantic.com/photo/2014/08/the-urban-oil-fields-of-los-angeles/100799/
DOGGR data indicates that a small group of companies are responsible for ongoing oil and gas extraction; approximately 77% of active and idle wells in the City are operated by six companies. This group is comprised of the following companies: Warren E&P (224 wells); Freeport-McMoRan Oil & Gas LLC (217 wells); Tidelands Oil Production Company (183 wells); Southern California Gas Company (78 wells); Pacific Coast Energy Company LP (59 wells); and Brea Canon Oil Company (57 wells).
The City’s Municipal Code (LAMC) defines an oil well as “any well or hole already drilled, being drilled, or to be drilled into the surface of the earth which is used or intended to be used in connection with…producing petroleum, natural gas, or other hydrocarbon substances.” The LAMC categorizes oil and gas wells as either production wells (“Class A”) or injection wells (“Class B”). Generally, Class A wells are designed to extract oil and gas substances from subsurface locations and Class B wells are used to inject substances such as oil field waste, gas, water, or other substances into subsurface locations. The graphic below provides an overview of the process by which wells are established, activated, and abandoned.
4 Plugged and abandoned wells have been sealed with cement using techniques outlined by the State. Buried wells are typically older and are not abandoned to current standards and the mapped locations of these wells are sometimes approximate. As of January 2018, DOGGR defines idle wells as wells that have been inactive for a period of 24 consecutive months (i.e., two years) but can still be reactivated.
Los Angeles Fire Department (LAFD) records indicate that there are more than a dozen large drilling sites across the City that include many of the active and idle wells listed in Figure 2. A single drilling site can consist of multiple wells, large pieces of industrial equipment, storage tanks, boilers, pumps, pipelines, pressure vessels, and other types of machinery and equipment.
Oil and gas drilling sites pose unique risks that can jeopardize public health or environmental quality. Once a well has been drilled and easily accessible oil deposits have been extracted, operators may use enhanced recovery techniques that involve the subsurface injection of steam, gases, or chemicals to bring oil to the surface. Depending on the location of the drilling site, these chemicals may be transported through residential neighborhoods. Public health and environmental risks are not limited to active drilling sites; buried and idle wells can leak methane or contaminate drinking water. Given the number and magnitude of risks, several governmental entities are tasked with regulating oil and gas extraction activities.
The U.S. Department of the Interior, Bureau of Land Management oversees oil and gas drilling activities on federal land. However, regulation of oil and gas drilling activities on non-federal land is largely left to the State. DOGGR supervises the drilling, operation, maintenance, and plugging/abandonment of oil and gas wells. Entities seeking to engage in oil and gas activities are required to obtain approval from DOGGR and submit monthly reports detailing the volume of oil and gas that was extracted.
There are additional State-level regulatory agencies tasked with protecting the public from health and environmental risks associated with oil and gas extraction activities. Under the oversight of the California Air Resources Board (CARB), the South Coast Air Quality Management District (SCAQMD) is the air pollution control agency for all of Orange County and the urban portions of Los Angeles, Riverside, and San Bernardino counties. Every piece of stationary equipment in the City that emits or controls air pollution must be permitted by SCAQMD. In March 2017, CARB approved new regulations designed to detect and reduce methane leaks from oil and gas facilities.
Because of the State’s regulatory authority, the City is preempted from controlling how oil and gas activities are carried out. Nonetheless, the California State Constitution authorizes local governments to “make and enforce within its limits all local, police, sanitary, and other ordinances and regulations not in conflict with general laws [i.e., federal and State].”
Accordingly, the City can use its land use authority to determine where the activities are carried out and ensure that they are performed in accordance with local health and safety codes, as long as those codes do not conflict with federal or State laws.
City Departments’ Roles and Responsibilities
There are several City Departments responsible for a wide range of approval, enforcement, and oversight of activities pertaining to oil and gas drilling. Operators of oil and gas drilling sites are subject to remitting City business and utility taxes, and some City Departments have leases with private companies to operate oil and gas wells on City-owned property. Lastly, the City established an Office of Petroleum Natural Gas Administration and Safety in 2016, intended to coordinate all matters related to the exploration for oil and gas in the City. The specific roles and responsibilities for each of these departments/offices are detailed below.
Land Use Approval to Establish a Drilling Site
In addition to regulatory approval from DOGGR, operators must obtain land use approval from the City before establishing a drilling site. Land use decisions by planning officials related to drilling sites are discretionary and must weigh existing General Plan Policies, Goals, and Objectives along with the interests of the surrounding community.
The City’s land use framework that dictates where and under what conditions oil and gas exploration can occur is outlined in the LAMC. This framework was originally established in 1946, decades after significant oil and gas exploration activity had already occurred within the region. Currently, the LAMC outlines a two-step process for obtaining land use approval from the City: establishment of an oil drilling district; and establishment of an oil drilling site.5
5 According to the City’s zoning code, land use approval to establish a drilling district or site in the M3 Zone (“Heavy Industrial”) is not required unless the activity occurs within 500 feet of a more restrictive zone.
The LAMC divides the City into areas within which oil drilling districts can be established. Each area has a set of standard conditions that establish the minimum size of oil drilling districts, the allowable number and density of drilling sites and individual wells, and fencing and landscaping requirements. The graphic below outlines the process by which the City reviews and approves applications for oil drilling districts.
The City has not established a new drilling district in decades; a review of drilling district
ordinances provided by DCP/OZA showed that the most recent drilling district was established in 1984 and a large number of drilling districts were established in the 1950s and 1960s. Some of these drilling districts were later terminated by the City but are included in Figure 5 to show the large amount of oil and gas exploration activity that occurred during the middle of the twentieth century.6
6 DCP/OZA also provided documents that showed drilling district locations, establishment dates, and ordinance numbers but did not include corresponding ordinance language. These drilling districts may have been established in the 1950s (or prior) but were not included in Figure 5.
Once an oil drilling district has been established by ordinance, anyone seeking to “drill, deepen, or maintain an oil well or convert an oil well from one class to another [e.g., production to injection]” must file an application with DCP/OZA to request a determination of the conditions of approval under which the site can operate. Conditions of approval vary from site-tosite, however, the general purpose is to protect residents and property adjacent to the drilling site and ensure the operation is not a nuisance. If the application is approved, DCP/OZA sends the operator a letter of determination with a list of conditions. According to the Petroleum Administrator, no new drilling sites have been established in recent years; yet a challenge remains in how the City effectively regulates existing (i.e., “grandfathered”) drilling sites.
Historically, DCP/OZA processed applications for modifications to original conditions of approval using a limited review process, which did not require an Environmental Impact Report or public participation. In September 2016, DCP/OZA agreed to follow a more comprehensive review process for (new) applications under the Municipal Code, including environmental review pursuant to the California Environmental Quality Act (CEQA), increased notification requirements to affected stakeholders, and public hearings. DCP/OZA staff indicated that no new applications have been received since the change in the City’s review process.
Oversight of Oil and Gas Drilling Sites
Once a drilling site has been granted land use approval, there are various one-time and ongoing responsibilities assigned to City Departments to ensure that operators are in compliance with conditions of approval and local public safety codes. These functions are primarily assigned to the Department of Building and Safety (DBS) and Los Angeles Fire Department (LAFD).
LAFD is also designated by the State as a Certified Unified Program Agency (CUPA) and is required to apply statewide standards to each facility in its jurisdiction that treats or generates hazardous waste, operates underground storage tanks, or stores hazardous material. Drilling sites with these items must be inspected and permitted to ensure compliance with State requirements.
Oil and Gas Well Bonds
In addition to activities to mitigate operational risks, the City has a system in place that is intended to limit exposure to financial risks associated with oil and gas drilling activities. Well operators seeking to obtain an operational permit from LAFD or land use approval from DCP/OZA are required to file and maintain surety bonds with the City. The purpose of the bonds is to ensure the City has financial resources available in the event the operator is unable to remediate issues related to Fire Code or land use violations. Operators are required to maintain active bonds until LAFD has determined that the well has been plugged and abandoned in accordance with DOGGR requirements.
The process by which bonds are posted and maintained are outlined in the graphic below.
Prior to 2005, the City Attorney was responsible for maintaining the bonds to ensure they were enforceable in the event a claim needed to be filed. Since 2009, the Office of the City
Administrative Officer (CAO) Risk Management Division has maintained an online system
(“Track4LA”) to streamline the processing, tracking, and verification of insurance policies and bonds submitted by contractors, vendors, and permittees.
In addition to the activities described above, the City can exercise local control of oil and gas drilling sites through various revenue generation and cost recovery strategies. Generally, these revenues fall into two categories: (1) taxes applicable to all businesses operating in the City; and (2) industry-specific strategies, including extraction (i.e., “barrel”) taxes; fees to recover local regulatory costs; and revenue sharing agreements with private well operators that allow for oil/gas extraction from subsurface locations where the City owns the mineral rights.
Given the number of City Departments tasked with responsibilities associated with oil and gas drilling sites, the City has established a framework to help ensure these activities are coordinated by a professional with technical and administrative expertise.
Board of Public Works, Office of Petroleum and Natural Gas Administration and Safety
The City hired a full-time Petroleum Administrator in September 2016 to improve oversight of petroleum and natural gas operations. The Petroleum Administrator was placed under the Board of Public Works in the Office of Petroleum and Natural Gas Administration and Safety (OPNGAS). The Los Angeles Administrative Code (LAAC) tasks the Petroleum Administrator with a broad range of responsibilities including:
- coordinating all matters respecting or concerning the exploration for, or production of, petroleum in the City;
- making recommendations concerning matters related directly or indirectly to the exploration for, or production of, petroleum within the City;
- reporting, upon request, to any department, bureau or office of the City regarding the creation of drilling districts;
- establishing rules and procedures for leasing of City-owned property for oil and gas exploration or production;
- administering and determining compliance with all provisions of oil and gas leases; and investigating and making recommendations concerning existing restrictions on exploration for, and production of, petroleum in the City.
The City did not have a full-time, qualified Petroleum Administrator on staff for approximately 30 years and the responsibilities delineated above were handled on an ad hoc basis by analysts who did not have a technical background in oil and gas matters.7 As a result, the effectiveness of local oversight diminished because the City lacked input from a professional with technical and administrative expertise.
During this review, members of the City Council introduced a motion seeking to centralize oversight of oil and gas activity in the City under the Board of Public Works. One of the stated goals of the reorganization is to modernize the City’s oversight structure to “enhance public safety, provide greater efficiency in deliver[ing] high quality public services, improve communications, and strengthen public health protections.” Specifically, the motion tasks the Petroleum Administrator and City Departments with:
- identifying functions performed by City Departments that can be transferred to OPNGAS;
- identifying the budget resources and LAMC amendments to facilitate the transfer of functions to OPNGAS;
- recommending operational improvements such as data management, community participation, and enhanced permitting and inspection activities; and
- recommending methods to integrate workflows and increase interdepartmental and interagency collaboration.
7 The LAAC previously assigned these responsibilities to the Office of the City Administrative Officer (CAO).
In March 2018, members of the City Council introduced a motion requesting that OPNGAS and DCP develop a plan to implement annual compliance checks to ensure oil and gas drilling sites are meeting appropriate regulatory standards and mitigating negative impacts. OPNGAS completed a preliminary assessment of the resources needed for an inspection program and requested funding to perform a fee study.
These efforts indicate that Policymakers are seeking a more defined and enhanced role for OPNGAS moving forward. Issues and recommendations regarding coordination and information sharing are included in Section IV of this report.