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Featured, Energy Matters Apr 14, 2021

Local energy producers need more than higher oil prices

California’s permitting process has become unfairly slow and needs improvement, Bartsch says.

California’s permitting process has become unfairly slow and needs improvement, Bartsch says.

Aera CEO Erik Bartsch explains what’s really needed to help restore our economy and put people back to work

By Erik Bartsch, Aera Energy president and CEO                                                               

Aera Energy is often asked about oil prices, particularly when they make a dramatic move. That’s certainly been the case in recent weeks as prices climbed back above $60 per barrel.

Prices for Kern County’s local Midway-Sunset benchmark now stand some 160% over a year ago. That, of course, was when the pandemic and worldwide shutdowns sent the economy crashing and oil prices to historic lows.

The oil market is complicated. Like other commodities, oil prices rise and fall depending on supply, demand and a number of other factors, including what’s happening in oil-producing countries around the world. In fact, geopolitical factors are among the main reasons we believe California’s oil should be produced in California. Local production gives the state more control over how oil is produced. It also gives assurances to the public that production takes place under the most stringent regulations in the world that prioritize protecting public health, safety and the environment.

Most people attribute this year’s oil price rise to the simple economics of supply and demand. The global oil market has been reacting to OPEC production quotas and anticipating a recovery in oil demand as COVID vaccinations roll out, the virus’s case numbers decline and the economy gets moving again.

Even so, as we enter the second quarter of 2021, global demand remains mixed. In some parts of the U.S. and Europe, COVID cases are rising. That’s creating uncertainty in the global demand picture and potential for volatility in oil prices.

Oil and gas producers understand that prices fluctuate. We have to. Oil and gas is a capital-intense business. We make decisions about the amount of capital required to increase oil and gas production based on a long-term forecast for price and cost. Price stability over a long period of time enables companies to increase their levels of activity. And that puts people back to work.

Recovery – and regulatory certainty

Unfortunately, California’s permitting process has become inconsistent, and in our opinion, unreasonably slow. For some permits, the process has lengthened by 300% to 400% in the last year.

Oil’s recovery is vital to California’s economy. The oil and gas industry typically injects $1.5 billion in annual state and local tax revenue to fund vital community services – education, health and public safety. We deliver safe, affordable and reliable energy that fuels cars, heats and cools homes, powers businesses, grows food and produces everyday products. And our industry provides roughly 50,000 high-paying jobs for people from diverse backgrounds. Many across the industry were laid off when the pandemic hit, and oil and gas prices fell last March.

In California, what’s really needed to put people back to work is regulatory certainty and receiving permits at a pace that allows oil production to ramp up. Unfortunately, California’s permitting process has become inconsistent and, in our opinion, unreasonably slow. For some permits, the process has lengthened by 300% to 400% in the last year.

To help put this in perspective, one key type approval for production went from a review period of 76 days in 2019 to 275 days (and counting) in 2020. That’s more than a 300% increase! Another permit review period went from 92 days in 2019 to an average of 457 days last year—a 500% increase. To be clear, we all need solid regulatory review to ensure a safe and responsible industry. But I’m asking myself what has changed to unfairly impact the review periods.

These continued delays have hurt Californians trying to get back to work.

Permitting process needs improvement

Permits are essential to our business and to job creation. All our work takes place under intense scrutiny. We must comply with comprehensive health, safety and environmental regulations implemented and enforced by more than 25 public agencies and local municipalities. By no means am I complaining about this. It’s important to know that Aera supports a system of robust checks to make sure we are planning our work and producing our oil in a way that protects public health.

And I recognize that regulators are trying to do their jobs in a very challenging political environment. But permitting is a controllable element of the business environment that needs improvement. Policymakers, regulatory leaders and the oil and gas industry need to come together to solve this problem. Aera is committed to doing our part. Recovery of the oil industry and the jobs that come with it depend on it.

Even with our many challenges, I’m optimistic. Aera sees demand for California oil and gas production for decades to come. By working with one another, we can restore jobs and the economic stability our state and county desperately need. We can achieve an energy future that maintains our energy independence and tax revenues while balancing the needs of our environment. When we let facts and science guide us, we all win.

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