Business

Tuesday, Feb 28 2012 05:34 PM

State loosens 'fracking' ban near Taft

BY JOHN COX Californian staff writer jcox@bakersfield.com

Under new leadership, state regulators have loosened restrictions imposed on a Denver-based oil company last summer to prevent ground subsidence and seepage near Taft.

The changes that Berry Petroleum Co. announced Tuesday in a Securities and Exchange Commission filing relate to steam fracking, or cyclic steaming. The practice injects steam underground at high pressure to break up the area's porous soil and release oil.

The state Division of Oil, Gas and Geothermal Resources lifted a ban Friday that had prohibited the company from steam fracking within 150 feet of any seeping wells at the prolific Midway-Sunset field. Before it can resume the practice, the company must show that the steam does not cause oil and other fluids to seep to the surface.

Further, according to a letter DOGGR sent to Berry on Friday, the company will have to conduct mechanical integrity testing of its Midway-Sunset oil wells once every five years "or upon request by the Division." Such testing was to be done at least once a year under a list of restrictions DOGGR imposed on Berry in a letter dated July 22.

The division sent that letter one month and a day after a Chevron employee was killed when a sinkhole opened beneath him at Midway-Sunset. DOGGR has since linked the sinkhole to steam fracking and seepage of oil field fluids. It has banned the practice near the site of the accident, which it continues to investigate.

Even before the sinkhole, DOGGR and the U.S. Environmental Protection Agency advocated closer regulation of steam fracking at Midway-Sunset as a way of protecting future drinking water sources. Industry representatives call that overprotective, saying the underground water in that area is undrinkable.

Berry did not respond to a request for comment Tuesday.

In a brief written statement, State Oil and Gas Supervisor Tim Kustic said, "Berry made slight modifications to its operating plan. DOGGR's conditions of approval, set down in a letter sent to Berry on February 24, reflect those modifications."

Since being named DOGGR's chief on an interim basis in November, Kustic, a former oil field engineer, has signaled a willingness to work collaboratively with oil producers. This approach contrasts sharply with that of his predecessor, lawyer Elena Miller, whom Gov. Jerry Brown ousted in early November amid criticism by Kern County lawmakers that her tight scrutiny of underground injection work was holding up investment and chasing away jobs.

People involved in the campaign that ultimately unseated Miller have said Berry's statements to Wall Street likely played a role in her ouster. President and CEO Robert Heinemann told analysts in an October earnings conference that the company was redirecting its capital expenditures to "make up for" a slowdown of project approvals in California.

Berry shares closed nearly 7 percent higher at $55.74 -- near the top of its 52-week range -- in moderate trading Tuesday, the same day theflyonthewall.com reported that SunTrust had upgraded the company's stock to "buy" from "neutral."

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