California Supreme Court Finds County Ordinance Limiting Oil & Gas Development Preempted by State Law
Court Decision May Well Be Correct as a Matter of Law, But Represents Unsound Public Policy
Last week, the California Supreme Court unanimously ruled that an initiative measure that will have imposed severe restrictions on oil and gas development in Monterey County is preempted by state law and subsequently invalid. The choice got here within the case of Chevron U.S.A., Inc. v. County of Monterey.
The Supreme Court’s ruling was predictable, given the Court’s previous preemption decisions. Nevertheless, it’s a disappointment to the initiative’s proponents and to a bigger group of environmental advocates who seek to advertise California’s quick transition from reliance on heavily-polluting and climate-damaging fossil fuels to renewable energy resources. But the excellent news is that this goal can still be achieved through other legal and political strategies.
I wrote an earlier Legal Planet post previewing the County of Monterey case describing the relevant facts and issues before the case was argued before the Supreme Court last May. Briefly, in 2016 a neighborhood environmental group, Project Monterey County, sponsored a voter initiative–titled “Measure Z”–that qualified for the local ballot and was enacted by Monterey County voters by a 56% margin. Measure Z by its terms would have barred the drilling of latest oil and gas wells in Monterey County and prohibited using fracking technology for existing county wells.
Measure Z never took effect. It was promptly challenged on constitutional grounds by a coalition of oil and gas firms led by Chevron U.S.A. The Monterey County Superior Court invalidated the measure, concluding that it was preempted by contrary, longstanding state law. The California Court of Appeal agreed in a 2021 decision.
After the County abandoned its defense of Measure Z on appeal, Project Monterey County stepped in and successfully sought review by the California Supreme Court. But in its August third decision, the Supreme Court justices found Measure Z just as constitutionally deficient as had each lower courts.
Specifically, the justices concluded that Measure Z “contradicts–and thus is preempted by” a virtually century-old system of oil and gas regulation of California’s oil and gas industry administered by state regulators. Their decision focuses specifically on California Public Resources Code section 3106, which grants the California Geologic Energy Management Division (“CalGEM”) broad authority to allow, regulate and condition oil and gas development within the state. Measure Z, concluded the Supreme Court, is way more restrictive of oil and gas development in Monterey County and thus conflicts with the state statute:
Measure Z contradicts, and subsequently conflicts with and is preempted by, section 3106.
The justices similarly determined that the state-administered regulatory system “occupies the sector” of oil and gas development in California, leaving no room for duplicative or inconsistent local regulation:
[H]ere, each section 3106 and Measure Z address the identical topic of how oil producers and well operators needs to be permitted to extract oil.
The Supreme Court’s decision in County of Monterey is a superbly reasonable application of longstanding state preemption principles regarding local regulations that conflict with or are redundant in comparison to established state law.
But this view ignores the indisputable fact that state laws with respect to grease and gas development in California are fundamentally inconsistent with each other. On the one hand, the fundamental system of oil and gas regulation within the Golden State stays largely unchanged for the reason that Legislature first enacted that system within the 1930’s–an era when fossil fuel development was seen as essential to California’s economic and social well-being.
Nevertheless, by the start of the twenty first century the pernicious effects of fossil fuel emissions–when it comes to each conventional air, water and ground pollution and the discharge of greenhouse gas emissions that profoundly disrupt our climate–were well-established and widely acknowledged. Starting in 2002, the California Legislature and state regulators have enacted countless laws to abate those destructive emissions in favor of a pivot to reliance on renewable energy sources. Furthermore, a broad political consensus has emerged amongst Californians that we must abandon our historic dependence upon polluting fossil fuels–the earlier, the higher.
Briefly, California’s state laws concerning fossil fuel development are themselves conflicting to the purpose of being downright schizophrenic. The state’s longstanding, languid system of traditional oil and gas regulation needs to be quickly replaced, if not abandoned altogether.
Reports are that a statewide initiative is being drafted by environmental groups and climate activists that will adopt–on a statewide basis–many restrictions on current and future oil and gas development much like those present in Monterey County’s Measure Z. Such a measure, if it qualified for the state ballot and were enacted by state voters, wouldn’t be subject to preemption challenges like people who wound up nullifying Measure Z. Indeed, the California Legislature could itself adopt such a statewide law to rapidly phase out oil and gas development in favor of reliance on renewable energy sources–thus making an expensive statewide initiative campaign unnecessary.
The California Supreme Court’s decision in County of Monterey is a plausible and comprehensible one, given legal precedents. But that call fosters and enables a fossil fuel industry in a way that represents fundamentally unsound public policy. The Legislature, state regulators and–if obligatory–California voters–should change state law to ban latest and disincentivize continued oil and gas development in California–the earlier, the higher.