Why an Oil Company Plans to Sue County for $1.2 Billion After Voter-Approved Fracking Ban

by Nomad

Following a vote against fracking and other enhanced oil extraction processes, voters and local officials in one California county are learning what happens when you cross an ambitious corporation.

Local government officials in central California's San Benito County have every reason to feel bullied and bruised by recent events in the area. 

Measure J
In a November ballot, a referendum known as Measure J was put before its citizens. That initiative was a proposed ban on all "enhanced petroleum extraction such as fracking, cyclic steaming and well acidizing along with all petroleum activities in rural residential zones."

Supporters argued a so-called fracking ban was necessary to prevent possible environmental impacts. According to Measure J supporters, the toxic chemicals used in the extraction process had the potential to cause cancer and other illnesses through groundwater and watershed contamination. The impact to endangered species in a nearby national park was also cited as a cause for worry. 

The Washington-D.C.-based Center for Biological Diversity pointed out 

“These enhanced recovery methods include steam extraction, acid extraction, and hydraulic fracturing ("fracking"). Although all of these methods involve chemistry not used in traditional oil and natural gas extraction, in California none of them is regulated or tracked any differently than are the traditional methods. Statewide, there is no requirement that companies declare the chemicals used in their extraction operations, or even that they are using enhanced extraction methods. Any regulation on these activities therefore (need to be) enacted at the county level.”

Finally, Measure J supported also noted  in quake-prone California,  the possible impact of fracking  on fault-lines should be matter of grave concern. Even in areas where there is little seismic activity, where fracking has been used, there has been a dramatic increase in the number of tremors. San Benito County already has its risks. The notorious San Andreas Fault runs through the region. 

Opposing the ballot initiative was in Newport Beach- based, Citadel Exploration. The oil company, founded in 2006, was set to begin its Project Indian in the Bitterwater area near Pinnacles National Park. In 2013, the company had received approval from county supervisors, over the objections of environmental groups, for a this limited pilot project.

While still in the testing and initial production stage, the oil drilling project was expected to recover an estimated millions of barrels of heavy (11-14 gravity API) oil. Alongside the oil companies were local farmers ready to sign lucrative real estate deals. The company pointed out that strictly speaking the technique to be used was not fracking

It turned out to be a showdown between environmental groups and powerful corporations which reportedly spent $2 million in advertising to defeat the initiative. That's not surprising. Armen V. Nahabedian, President and CEO of Citadel Exploration. has talked up the project

"Having worked on this project for over seven years, I can't overstate the importance and magnitude of our discovery at Project Indian."

When the measure passed by a strong majority (57.36%) in this month, citizens might have thought that would have been the end of the matter. As of Jan 1 next year, because of the vote, all enhanced extraction practices are to be banned and existing projects would have up to three years to comply with the provisions. 
End of story? 

Not quite.