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California Governor Fires Two Over Drill Permitting Row

Two high-ranking state oil/gas drilling officials were fired by California's Gov. Jerry Brown for putting too many roadblocks in the state's permitting process, it was reported Monday. The move brought immediate praise from the exploration/production (E&P) industry, which has increasingly been critical of what its leaders viewed as an overly arduous process for obtaining permits to drill new wells.

Brown fired Derek Chernow, acting director of the California Department of Conservation, and Elena Miller, oil and gas supervisor at the department's Division of Oil, Gas and Geothermal Resources, according to Richard Stapler, a spokesperson for the California Natural Resources Agency.

In recent earnings and other industry conference calls, E&P companies, including operators such as Occidental Petroleum Corp. (Oxy), have said they couldn't make any predictions on new permits, given what they considered the uncertain state of obtaining permits for new wells.

Late last month Oxy CEO Stephen Chazen said his company would like to drill up to 300 wells in shale annually in California, but given the current state of permitting he was only counting on continuing at current levels (about half of the target through the 30 rigs currently operating in the state). Chazen said it was difficult to predict what the state might do (see Shale Daily, Oct. 31).

The number of permits granted for new drilling projects declined 73% since 2008, the last year before Miller took over. That decline came during a fourfold increase in applications as energy companies sought to tap the vast potential of the Monterey Shale, which could hold more than 15 billion bbl of oil, according to the U.S. Energy Information Administration.

Catherine Reheis-Boyd, president of the Sacramento-based trade group Western States Petroleum Association, said oil companies were very happy with Brown's action, which included replacing Chernow with Cliff Rechtschaffen, a senior energy adviser in the governor's office. A replacement for Miller has not been named yet.

Oxy has the highest rig count in the state with 25-30 in place, but other active E&P operators include Plains Exploration & Production Co., Berry Petroleum Co. and Venoco Inc. Venoco's CEO was very vociferous in an October industry conference in criticizing the slow permitting process in California.

Brown was credited with making "the right decision" by Les Clark, executive vice president of the Independent Oil Producers Agency, another industry trade group, as quoted in business media reports. He said continuing to turn down permits that involve the oil industry eventually takes its toll.

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