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OHCA Proposes Material Updates to CMIR Regulations

Jonathan Barr, Jimmy Fokas and Maria Luevano Author Article for Corporate Governance Advisor

In 2016, through a voter initiative called Measure Z, the people of Monterey County, California, enacted a ban on two features of oil and gas operations. One was a ban on injecting or impounding wastewater from operations. The other was a ban on drilling new wells.

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Oil field operations occur inland from the coast of the county. The oil produced there is notoriously viscous, requiring producers to inject steam to dilute the oil to allow it to flow to producing wells. Producing operations require the periodic drilling of additional wells to inject the steam into new parts of the reservoirs. The goal of the proponents of Measure Z was to stop –much sooner rather than later – oil production in the county.

Companies headed by Chevron U.S.A. Inc. (Chevron) challenged Measure Z on multiple grounds. The litigation eventually settled on one issue: whether Measure Z was preempted by the California Constitution for being in conflict with state legislation. Both the Monterey County Superior Court and the California Court of Appeal ruled in Chevron’s favor. On Aug. 3, the California Supreme Court unanimously affirmed. <em>Chevron U.S.A. Inc. v. County of Monterey</em>, ___ P.3d ___; ___ Cal. Rptr.3d ___; 2023 WL 4940263 (Aug. 3, 2023).

California Public Resources Code § 3106(b) directs the state’s supervisor of oil and gas operations to permit operators to “utilize all methods and practices” the supervisor thinks will increase “the ultimate recovery of underground hydrocarbons[.]” The Supreme Court concluded that “[b]y providing that certain oil production methods may <em>never</em> be used by anyone, anywhere, in the County, Measure Z nullifies – and therefore contradicts – section 3106’s mandate[.]” 2023 WL 4940263 *4.

The Seven-Year Saga of Monterey County’s Measure Z Comes to a Close

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