While reporting a big increase in 4Q2011 and full-year profits, Occidental Petroleum Corp. (Oxy) CEO Stephen Chazen on Wednesday said the permitting process for drilling in California had been streamlined, and he credited Gov. Jerry Brown for the turnaround.
Chazen’s positive remarks about permitting in California were in stark contrast to his complaints on earnings conference calls last year, and it comes after Brown surprised some in the industry last November by firing two top state oil/gas drilling officials for allegedly putting too many roadblocks in the state’s permitting process (see Daily GPI, Nov. 10, 2011).
At the time, Sacramento-based trade group Western States Petroleum Association said oil companies were very happy with Brown’s action replacing the acting director of the California Department of Conservation and the state’s oil and gas supervisor at the department’s Division of Oil, Gas and Geothermal Resources.
“The governor is very pro-jobs and industry, and he has been someone who understands that industry adds a fair number of jobs here in California,” Chazen said. “He is very interested in this [industry] and employment here in the state, so we’re pleased with the governor’s help.”
Separately on Wednesday, Brown announced a package of reforms in the stringent California Environmental Quality Act (CEQA) that he promised will “simplify and expedite” approvals for key job-creating projects. Brown’s action is part of the implementation of two new laws he signed (SB 226 and AB 900) to streamline the CEQA process in the state.
Noting it is easier to speed up permits in existing defined oil/gas fields, Chazen said California is moving back to its “historic rules” for the permitting of wells. Because of delays in the recent past, the state, which is a major production area for Oxy, has a large backlog of permitting requests from a number of operating companies.
“There will probably be other rules that aren’t quite as historical, but I am not really concerned about that,” Chazen said. “As long as we understand the rules, we’ll abide by them. It is just of a matter of the rules having to be clear to us.”
Occidental plans this year to spend a little more than 20% of its $8.3 billion in capital spending in California where its rig count is expected to stay stable at 31, indicative of the fact there has been “significant improvement” in the permitting process, said Chazen, noting that Oxy received by the end of last year both permits and rules for injection and drilling locations within existing fields. “The regulatory agency is responsive and committed to working through the backlog of permits.”
Chazen said Oxy has received injection permits for the first time in a long time, and the oil company is noticing “a real change in attitude” by the state. “The question is where do you get the permits as opposed to how many you get,” he said. “Based on current trends, I think by mid-year we should have a sizable opportunity and we feel pretty good about [the permitting] at this point.
“Once we get rolling and permits start coming at a more normal rate, the rig count [in California] will pick up. But we still now have to wait until the permits are in hand.”
Chazen said he is confident the company eventually will begin getting the permits for new, greenfield drilling as well as for wells in existing fields. The permits in current fields allows Oxy to have a “decent and predictable” drilling program, he said, but there are always going to be “things that aren’t perfect for us. Nevertheless, overall, we’re pretty encouraged right now.”
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