The Fuse

California Becomes First to Try to Wind Down Oil Production

by Nick Cunningham | April 29, 2021

On April 23, California Governor Gavin Newsom announced plans to begin a gradual phase out of oil production, along with a ban on new fracking permits beginning in 2024.

The announcement is simultaneously modest in scope and also groundbreaking in political significance.

No new fracking after 2024, no more oil in 2045

Gov. Newsom directed California’s Department of Conservation’s Geologic Energy Management (CalGEM) Division to begin a regulatory process that would result in no new permits for hydraulic fracturing beginning in January 2024. He also directed the California Air Resources Board (CARB) to look at phasing out oil extraction no later than 2045.

“The climate crisis is real, and we continue to see the signs every day,” Newsom said in a statement. “As we move to swiftly decarbonize our transportation sector and create a healthier future for our children, I’ve made it clear I don’t see a role for fracking in that future and, similarly, believe that California needs to move beyond oil.”

The announcement came just a few days after a bill that would have banned fracking in the state died a quick death in the state legislature.

The announcement came just a few days after a bill that would have banned fracking in the state died a quick death in the state legislature. That bill, which failed in a committee vote, would have banned new fracking permits by 2027. Also, a bill that would have required state-wide buffer zones for drilling failed last year.

“It’s historic and globally significant that Gov. Newsom has committed California to phase out fossil fuel production and ban fracking, but we don’t have time for studies and delays,” said Kassie Siegel, director of the Center for Biological Diversity’s Climate Law Institute. “Every fracking and drilling permit issued does more damage to our health and climate.”

Gov. Newsom has tried to put the brakes on the oil industry through various ways, but he has also come under fire from environmental groups for approving new drilling permits over the last several years. His measures to date have come up short, particularly in the legislature. Meanwhile, he now faces a recall vote.

His new executive orders are aimed at breaking through the logjam, and California’s announcement is a milestone in global climate politics. It represents one of the first – if not the first – announcements from a government to explicitly call for a phase out of oil production. Most climate policies focus on whittling away at demand over time through shifts to clean energy, but no major government has yet to offer up a plan to wind down supply.

Both sides of the equation are important, and they’re obviously interrelated. Last year, Gov. Newsom also called for the phase out of sales of new gasoline and diesel-powered vehicles by 2035, following in the footsteps of some European countries. That announcement has lent some momentum for similar calls at the federal level.

Critics of the supply phaseout might point to a need to import oil and refined products, but the state’s efforts to make a very aggressive shift to electric vehicles takes some potency out of that argument.

California’s push can cause major changes in the auto market.

On a related note, the Biden administration is moving to restore California’s authority to set its own stricter fuel economy standards for cars and trucks, after a Trump-era rule sought to take it away. More than a dozen states follow California’s lead, adopting their fuel economy standards. Taken together, California’s push can cause major changes in the auto market. A parallel track is unfolding at the federal level, with the Biden administration expected to dramatically tighten fuel economy standards for cars and trucks sold later this decade. That process can be lengthy and will likely unfold over the course of much of President Biden’s first term.

California no longer a huge oil producer

Ultimately, the real tangible impact of Gov. Newsom’s call for an oil phaseout is still relatively modest. Historically, California was an incredibly important oil producer, but that position has been slowly eroding for decades. The state produced more than 1 million barrels per day in the 1980s, but output slid to about half that level in the 2010s. The pandemic whacked production further, with output falling to less than 370,000 barrels per day at the start of this year.

Winding down 370,000 barrels per day of oil production over the next 25 years is hardly a radical move. OPEC+ adds or subtracts that amount on a monthly basis.

Kern County, California, the heart of the state’s oil industry, recently fast-tracked approval for new drilling, which could lead to 40,000 new oil and gas wells over the next 15 years. That approval is now subject to litigation, but it may amount to a last gasp for oil production growth in the state.

“When you look at the science, we can’t be extracting oil after 2045.”

In terms of symbolism and political significance, the announcement carries weight. According to the UN Production Gap report, the world needs to wind down fossil fuel production at a rate of 6 percent per year over the next decade in order to hit climate targets. But countries are on track to expand output at a rate of 2 percent per year. We’re clearly going in the wrong direction. Against that backdrop, it is rather significant that California announced a supply phaseout.

“When you look at the science, we can’t be extracting oil after 2045,” Newsom said. “That’s the only way we are going to achieve our carbon goals is by significantly reducing and ending extraction of oil.”

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