Oil

Wednesday, Oct 02 2013 04:36 PM

Local oil producers feel effects of federal shutdown

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    Chad Hathaway

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BY JOHN COX Californian staff writer jcox@bakersfield.com

It figures the federal government would shut down this week, just as Chad Hathaway's Highway 65 gas pipeline project was coming up for approval.

Now, with federal workers on furlough, a year's worth of planning, conducting environmental reviews and coordinating contractors is all up in the air.

"It's the one time we really need them," the Bakersfield-based oil and gas producer said Wednesday, "and it's not happening."

But, Hathaway added wryly: "They're still accepting royalty checks."

Since the federal government shut down Tuesday, pending congressional approval of a new budget, staffing at the U.S. Bureau of Land Management has been drastically reduced, halting agency review of drilling and other oil and gas permits.

The BLM has furloughed 86 percent of its California workforce, leaving only 130 employees, including inspectors.

This means that, depending on how long it lasts, the shutdown could have a significant impact on Kern County oil production -- and the money the feds make off their leases and royalties.

The BLM's Bakersfield office manages 450,000 acres of federal mineral estate between the Central Coast and the crest of the Sierra Nevada. Its territory includes parts of the prolific Midway-Sunset and Lost Hills oilfields -- among the federal government's most productive oil and gas leases.

Gabe Garcia, the agency's Bakersfield office manager, spent part of Wednesday at his daughter's gym practice because of the shutdown. He said his team normally receives a couple of permit applications a week for activities like drilling a new well or reworking an older one.

As long as the shutdown ends soon, he said by cell phone from the gym, the furloughs shouldn't pose much trouble for local oil producers. However, he said, "If it lingers on for, you know, several weeks, that will have an effect."

A notice issued by the BLM to oil producers this week states that the "clock is stopped" on project applications, and that it won't restart until the full bureau is back to work.

Production on federal leases with existing permits is allowed to continue. But the lack of permit approvals is already frustrating the industry.

A representative of the Western States Petroleum Association wrote in an email Wednesday that, despite continuing petroleum production on federal land, "it is troubling that producers will be unable to obtain any new permits during this time."

Bakersfield oil production company Aera Energy LLC said in a statement that the company does not expect the shutdown to significantly impact its operations. A spokeswoman noted that the company has no BLM permits pending in the near term.

At the BLM's Bakersfield office, only five inspectors continue to work, roaming oilfields to witness previously permitted well drilling, respond to emergencies such as spills and patrol local oil fields.

Hathaway took note of that -- that the only personnel available are the ones ready to write a citation.

"Those people never go away," he said. "They're always around."

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