Sunflower All. v. Cal. Dep't of Conservation

325 Cal.Rptr.3d 209

SUNFLOWER ALLIANCE, Plaintiff and Respondent,

v.CALIFORNIA DEPARTMENT OF CONSERVATION et al., Defendants;

Reabold California, LLC, Real Party in Interest and Appellant.

A167698

Court of Appeal, First District, Division 5.

Filed September 6, 2024

Contra Costa County Superior Court, No. N221503, Hon. Edward G. Weil (Contra Costa County Super. Ct. No. N221503)

Aqua Terra Aeris Law Group, Jason R. Flanders, Sacramento, and Theresa M. Trillo for Plaintiff and Respondent.

Environmental Law Clinic, Deborah A. Sivas, Amanda Zerbe, Luke Norquist, and Kevin K. Wang for Center for Biological Diversity as Amicus Curiae on behalf of Plaintiff and Respondent.

Rob Bonta, Attorney General, Daniel A. Olivas, Senior Assistant Attorney General, Christina Bull Arndt, Supervising Deputy Attorney General, and Leena M. Sheet and

Jackie K. Vu, Deputy Attorneys General, for Defendants.

Paul Hastings LLP, Navi Singh Dhillon, San Francisco, Christopher J. Carr, and Dylan J. Crosby, Fresno, for Real Party in Interest and Appellant.

Alston & Bird LLP, Jeffrey D. Dintzer, Jeffrey P. Carlin, and Ytran L. Hoang, Los Angeles, for Western States Petroleum Association as Amicus Curiae on behalf of Real Party in Interest and Appellant.

BURNS, J.

The California Environmental Quality Act’s regulatory guidelines provide an exemption from CEQA for minor alterations of an existing facility if the project involves only "negligible or no expansion" of the facility’s use. (Cal. Code Regs., tit. 14, § 15301.)¹ The Department of Conservation’s Division of Geologic Energy Management (CalGEM) invoked the exemption in approving a project to convert an oil well, which formerly pumped oil and water from an aquifer, into an injection well, which would pump excess water back into the aquifer. The project requires only minor alterations of the well. The question is whether injecting water, rather than pumping it, constitutes a negligible expansion of the well’s former use.

We conclude that any expansion of the well’s use is negligible because, under the facts here, the environmental risks of injecting the water are negligible. The well conversion project falls within the exemption. Because the trial court concluded otherwise, we reverse.

BACKGROUND

A.

CalGEM oversees California’s underground injection program and, more generally, regulates oil and gas extraction in the state. (Pub. Resources Code, §§ 3000-3359; Cal. Code Regs., tit. 14, §§ 1724.3-1724.13; see Center for Biological Diversity v. Department of Conservation (2018) 26 Cal.App.5th 161, 165-169, 236 Cal. Rptr.3d 729 (Center for Biological Diversity).) Underground injection projects are governed by federal and state law, both of which place strict limitations on the type of injection well at issue here.

The federal Safe Drinking Water Act protects the nation’s drinking water supply. (See 42 U.S.C. § 300f et seq.) Federal regulations bar injection into an aquifer unless the Environmental Protection Agency affirmatively exempts the aquifer from the Safe Drinking Water Act. (40 C.F.R. §§ 144.1(g), 146.4, 144.7(a) (2024).) The agency may only exempt an aquifer when, for specified reasons such as poor water quality, it determines the aquifer will never serve as a source of drinking water. (40 C.F.R. § 146.4(a)-(c) (2024); see also, Pub. Resources Code, § 3131, subd. (a)(2).) Aquifers containing significant quantities of oil are among those aquifers, making them eligible for exemption and injection. (40 C.F.R. § 146.4(b)(1) (2024).)

Oil wells commonly pump several barrels of water (called "produced water") with each barrel of oil. Well operators separate the oil from the produced water, but they then must dispose of the water, which may be very poor quality. One common solution is to inject the water back into an exempt oil-bearing aquifer, using what both federal and state law deem a Class II well. (40 C.F.R. § 144.6(b)(1) (2024); Pub. Resources Code, § 3130, subd. (b).)

CalGEM, in consultation with the State Water Resources Control Board and the Regional Water Quality Control Boards, reviews Class II well applications for compliance with state and federal requirements. (Cal. Code Regs., tit. 14, § 1724.6.) An applicant must demonstrate that the injected water will be confined by the aquifer’s geology and will not escape the exempt aquifer through a well, fault, flaw in the well casing, or other pathway. (Cal. Code Regs., tit. 14, § 1724.7.) This requires a detailed technical review of the aquifer, the proposed injection well, and the other wells in the area, as well as the plan for injection and a monitoring system "to ensure that no damage [to the well] is occurring and that the injection fluid is confined to the approved injection zone." (Cal. Code Regs., tit. 14, §§ 1724.7, subds. (a)-(e), 1724.7.1.)

State law bars any injection well that allows injected water to escape the exempt aquifer or that will harm people or the environment: "An underground injection project shall not cause or contribute to the migration of fluid outside the approved injection zone, or otherwise have an adverse effect on the underground injection project or cause damage to life, health, property, or natural resources." (Cal. Code Regs., tit. 14, § 1724.8, subd. (a); see also, Pub. Resources Code, § 3131, subd. (a).)

B.

In 2020, Reabold California LLC filed an application with CalGEM to convert a former oil well into a Class II injection well. The well is in the Brentwood Oil Field, a large oil and gas field in Contra Costa County. The well was drilled in 1963, operated as an oil well for over 20 years, then plugged. The well is more than 4,000 feet deep.

Since 1963, dozens of wells in the Brentwood field have together pumped over 33 million barrels of water and 3.6 million barrels of oil from the aquifer. In 1982, the Environmental Protection Agency exempted the aquifer from the Safe Drinking Water Act, making it eligible for Class II injection wells. (See 40 C.F.R. § 146.4(b)(1) (2024).) Two wells have been injecting produced water back into the aquifer—about 9.4 million barrels so far.

Reabold operates two nearby oil wells that produce about 300 barrels of water per day from an adjacent oil-bearing aquifer. Currently, Reabold trucks the produced water to a disposal site 32 miles away, 10 times per week. Injecting the water would eliminate these trips.

Reabold proposed minor changes to the proposed injection site—it would remove the well plug, install injection equipment inside the existing well, and use the existing well pad and access road. The site is sparsely vegetated.

Reabold’s application includes a technical report from an engineer, a geologist, and a hydrogeologist, with supporting analyses, data, maps, well logs, lab reports, history, and other information required by CalGEM. The report concludes that the injected water would be confined to the aquifer by thick layers (about 1,000 vertical feet) of shale. In the general area there are 22 wells that supply water for domestic or agricultural purposes, the deepest of which is 500 feet deep. None of them penetrates the oil aquifer (3,938 feet deep) or the protective layers of shale.

Three regulatory agencies—CalGEM, the State Water Resources Control Board, and the Regional Water Quality Control Board—reviewed Reabold’s application. They posed detailed questions and re- quested additional data in several rounds of discussions. Eventually, the Regional Board confirmed that the aquifer is exempt, concluded that all its concerns had been resolved, and allowed the project to proceed. CalGEM also approved the project, with several regulatory conditions.

Regarding CEQA, CalGEM found that the project fits within the Class 1 categorical exemption as a "minor alteration" of an existing facility involving "negligible or no expansion" of the well’s former use. (Guidelines, § 15301.) By regulation, CalGEM has determined that minor well conversions and injection projects may fall within the Class 1 exemption (Cal. Code Regs., tit. 14, § 1684.1). According to CalGEM, the exemption is applied on a case-by-case basis after a fact-intensive inquiry.

In this instance, CalGEM observed, in its notice of exemption, that Reabold’s injection equipment would be installed within the existing well boring and would require no significant surface equipment or new wells. The project would eliminate the need for routine trucking of the produced water, and it would inject water to the aquifer "cleaner than when it was removed."

C.

Sunflower Alliance filed a petition for writ of mandate challenging CalGEM’s use of the categorical exemption. On the merits, the trial court said it was inclined to agree with CalGEM and Reabold that the physical modifications to the well are minor and fit within the exemption. But the court agreed with Sunflower that the Class 1 exemption did not apply because—as injection is a "significantly different use"— it was "not convinced that changing an oil and gas well into a water injection well involves negligible or no expansion of use."

The court entered judgment in favor of Sunflower and issued a peremptory writ of mandate directing CalGEM to set aside its notice of exemption and its approval of the project. Reabold appealed; CalGEM complied with the writ and rescinded both its notice of exemption and its project approval letter.²

DISCUSSION

A.

We begin with a brief overview of categorical exemptions.

[1, 2] CEQA embodies a strong public policy of environmental protection. (Tomlinson v County of Alameda (2012) 54 Cal.4th 281, 285, 142 Cal.Rptr.3d 539, 278 P.3d 803 (Tomlinson).) It establishes a three-step process. First, the lead agency determines whether a proposed action is a "project" within the meaning of the statute. (Id. at p. 286, 142 Cal.Rptr.3d 539, 278 P.3d 803; Pub. Resources Code, § 21065.) If so, in the second step, the agency determines whether the project is exempt from CEQA. (Tomlinson, at p. 286, 142 Cal. Rptr.3d 539, 278 P.3d 803.) If it...