From oil prices to politics and the permitting process, our ability to rebound from 2020’s downturn depends largely on outside forces
After 2020’s tumultuous events, people want to know what to expect from 2021. We’re all trying to make sense of the many challenges we have faced and are still dealing with: COVID-19’s impacts, the struggling economy and the recent political demonstrations and violence in Washington, D.C.
I understand people are concerned. The issues, challenges and divisions our country is facing are significant. However, I believe it is at times like these, we must all hold true to the values that unite us. At Aera, our employees reflect society and hold a range of political views. One thing we all agree on is that, wherever we land on the political spectrum, respect, kindness and unity in our purpose together is core to what we are about—especially when the times are tough.
COVID and the depressed economy continue to be a challenge for our country, but there is cause for optimism, and potentially a significant rebound in California as COVID subsides. That said, there are some areas that I’ll be watching closely as we move through the new year.
Economic recovery is critical to the state
If there is one thing the pandemic has shown us, it’s what happens when society is confronted with abrupt change—and I believe that the full cost of real human suffering is not yet visible. Lives and livelihoods were lost in the past year—from the pandemic, and some would even argue from the effects of climate change. While I sympathize with the voices out there that are frustrated about the pace of energy transition, moves toward a future energy mix need to be made thoughtfully and carefully as we recover, so that we don’t add to the pain that people have felt. I’m not saying the energy mix won’t or shouldn’t change—through history it always has as opportunities emerge and customers’ preferences change. But we must undergo that change wisely to take care of all Californians—including those who work in oil and gas.
Last year, we were forced to make the tough decisions and laid down drilling rigs as a result of what we call the triple whammy—COVID, historically low oil prices and stalled permitting. Like many others across the state, oil and gas workers lost jobs and families were dealing with lost finances at the worst time.
Some of the pain came from macro-economic conditions—and was uncontrollable—and some of it, regrettably, was controllable.
A rebound in oil demand after COVID recedes is likely. When it comes to economic recovery in this state, what keeps me up at night is whether we will have support from the state to put people back to work. Permitting is the controllable element that we’ll need for economic recovery, and it still hasn’t been fixed.
Permits equal jobs
Permits are essential to our business and to job creation. All our work takes place under regulated permits that comply with comprehensive health, safety and environmental regulations currently 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 to the highest standards and within established regulations.
One key type permit went from a review period of 76 days in 2019 to 275 days (and counting) in 2020. That’s more than a 300% increase!
Unfortunately, the state’s permitting process for oil and gas production has been inconsistent and unreasonably slow in the last year. For example, one key type permit 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.
The additional review time did not mean better, safer operations, just lost opportunity. This is not only detrimental to the operations of an industry California has deemed “essential,” but to hard-hit workers who have lost their jobs, and unless the status quo changes, these working families will miss out on the economic rebound we desperately need. Policy makers, regulators and industry need to come together to solve this problem—and Aera is committed to do its part.
2021 political landscape brings some optimism
With the increased pressure on the Newsom Administration to curtail state oil production, the legislative session just convened has the potential for unhelpful and counter-productive legislation impacting oil and gas in the state. Take, for example, the anticipated anti-fracking bill promised by Senator Scott Wiener from San Francisco.
Fracking was debated in 2013 and the resulting enactment of SB4 has led to transparency, with reporting and monitoring requirements that are the most stringent in the nation. In fact, Aera’s activities have undergone independent scientific review by some of the brightest minds in the world at the Lawrence Livermore National Laboratory. They concluded that our activities meet all the requirements for safe execution. Eliminating fracking will not make us safer (it is safe) and will not address the urgent problem of climate change. We all need to come together to find a path to fuel the economy of this great state, while continuing to protect public health.
Oil and gas products will continue to play a vital role in California for decades to come.
Pre-COVID, Californians typically consumed more than 58 million gallons of fuel every day to help support our economy. The latest projections suggest oil and gas products will continue to play a vital role in California for decades to come, even as we make the shifts the energy transition demands.
So, the choice is not whether we will require oil and gas, but where do we want it to come from? It matters how we answer the question, since the alternative is more oil from South America and the Middle East, places that don’t necessarily uphold our same human-rights and environmental standards.
Joe Biden certainly understands this. He says that when he thinks global warming, he thinks jobs, which is why he said that there is “no rationale to eliminate” fracking right now. I agree. There is no independently reviewed data that says this cannot be done safely in California, as it has been for more than 60 years. I urge policy makers in California to help us deliver our energy through the use of safe and well-regulated technologies.
One area of policy making and regulatory support that I’m optimistic about is on Carbon Capture, Utilization and Storage (CCUS). This technology reduces carbon emissions by removing CO2 from sources that might otherwise get into the air and pumps it safely underground. It’s a proven technology and borrows from much of the know-how that drives Aera’s business today. In fact, many of the most “shovel ready” CCUS projects in the state are being undertaken by the oil and gas industry. We as a state need to urgently move on climate change, and CCUS is a big lever. I am thankful regulators are working to streamline key steps in this process to enable a good idea to become a reality in the state.
Carbon Capture, Utilization and Storage is a proven technology and borrows from much of the know-how that drives Aera’s business today.
Delivering for California
Going forward, Aera is focused on delivering on our mission of responsibly delivering energy and unsurpassed value, creating success for those we touch. This is more important today than ever.
So even with all of the challenges we’re facing in society today, I’m optimistic about our future. California is counting on all of us, especially those in demanding roles who must leave home every day to keep our state running.
We’re committed to doing our part to ensure affordable, safe, reliable energy for all Californians so that when things get back to normal, we can all hit the ground running. Indeed, let’s build back better. I hope we can count on you to help us continue to fuel prosperity for California.