California’s Department of Conservation is embarking on the largest oil well plugging and abandonment project in the state’s history, and it’s in Santa Barbara County.
The department’s Geologic Energy Management Division (CalGEM) received $34 million from the state to plug 171 abandoned HVI Cat Canyon Inc. wells. HVI—formerly known as Greka Oil Company—spilled approximately 26,584 barrels of crude oil (about 1.1 million gallons) with more than 180 spills for the 15 to 20 years it operated in the county, according to a recent federal lawsuit ruling against the oil company.
The federal lawsuit (filed in 2011) concluded in March when the judge ordered HVI to pay $65 million to various state and federal agencies for oil spills between 2005 and 2010.
“Had HVI complied with these regulations, it likely would have prevented the oil spills or mitigated their impacts and the volumes discharged,” according to the court ruling.
While large U.S. and state agencies celebrate the ruling, calling it a victory, county 4th District Supervisor Bob Nelson said he doubts that HVI will be able to pay the $65 million, and it leaves “good guys” responsible for cleaning up after HVI’s havoc.
Nelson said his first thought about the lawsuit settlement was “good luck collecting.”
“Obviously Greka has been a black eye on the energy industry in Santa Barbara County and is the exception not the rule. It’s done more damage to the oil industry than any environmental nonprofit,” Nelson said. “There’s been a long history, unfortunately. Greka doesn’t listen to anybody and does whatever they want.”
In 2019, the company filed for bankruptcy after the state ordered the company, which already owed international investment bank UBS AG more than $114 million, to pay more than $12 million in fines for failing to comply with oil regulations for a field in Orange County.
He called the wells the company abandoned in Cat Canyon “eyesores.”
“I am hoping these sites are cleaned up, nobody wants those ongoing liabilities that could potentially impact surface owners as well as potentially even the community,” he said.
Nelson added that the site is a public safety risk.
“It’s equipment that’s unmaintained, it’s abandoned, there’s barbed wire hanging all around, it’s just a total mess,” Nelson said. “It’s been an ugly legacy. … Hopefully the lawsuit and the abandonment of these wells or capping these wells is closing that chapter.”
It’s sad to see that “one bad operator can make everybody look bad,” he said, adding that this could impact other oil companies that are already walking a tough line in a county with already-strenuous oil regulations.
“I totally believe in the industry, and it’s a huge economic driver. People can get six-figures without a college degree; it’s a huge economic freedom for families,” he said. “It’s important to keep those avenues available for companies that are doing the right thing.”
Before the judge issued the ruling, the state allocated $200 million in the 2022-23 budget for CalGEM to plug oil wells and decommission facilities in the state, according to the state Legislative Analyst’s Office.
“It may be appropriate for the current oil and gas operators to bear at least some of the cost of remediating the environmental damages from these wells—rather than the general taxpayer through the state general fund,” the office stated.
According to CalGEM’s website, the revenue is coming from industry assessments and fees, and the division received $34.69 million in August for the HVI Cat Canyon State Abandonment project. This project is the first phase of the state abandonment, which will plug approximately 171 orphaned oil wells and facilities.
“In September 2021, CalGEM issued an [o]rder to HVI Cat Canyon, Inc. to plug and abandon the 210 wells in the Casmalia, Cat Canyon, and Santa Maria Valley oil fields, decommission production facilities and restore lease and well sites pursuant to current state regulations,” CalGEM’s project description states. “Most of these wells have been idle since before 2019, some as early as the 1980s.”
When HVI went bankrupt, it left 210 wells and other assets as a liability. Plugging and abandonment is required to mitigate the wells’ danger to life, health and resources, according to CalGEM. The 39 wells that will remain after the first phase of the project will be addressed separately because they will require “more complex remedial work,” the project description stated.
Site investigation, planning, and permitting began in the fall of 2022. CalGEM conducted methane sampling for 65 of the 171 wells and found that 11 that were leaking, according to a presentation from the CalGEM Methane Task Force’s Feb. 21 meeting. The agency contracted with Drilltek Inc. to plug and abandon the wells starting on Jan. 30.
The presentation added that CalGEM anticipates issuing future contracts to conduct state abandonment of the remaining HVI wells in the area.
HVI’s numerous spills and lack of compliance caused the U.S. Justice Department, the U.S. Environmental Protection Agency (EPA), the U.S. Coast Guard, the California Department of Fish and Wildlife, and the California Regional Water Quality Control Board to sue the company in 2011 for violating federal and state laws.
In addition to the $65 million judgment, a federal judge found that 12 of HVI’s oil spills violated of the Clean Water Act and 17 violated state law and the company committed 60 federal regulation violations, according to the 65-page ruling on the lawsuit.
“Even when viewed in isolation, many of the failures amount to an extreme departure from good oilfield industry practices,” the ruling stated. “Viewed in combination, the failures amounted to reckless disregard for HVI’s obligations under the law to prevent and mitigate the spills and to implement effective spill prevention measures.”
Errin Briggs, the County’s Energy, Minerals and Compliance Division supervisor, told the Sun in a previous interview that HVI never corrected its approach as an oil operator in the county.
“Generally speaking, there were a lot of issues at their facilities—spills, pipeline ruptures. It seemed like they didn’t put as much maintenance as the other companies did,” Briggs said. “We had a constant spill of problems from both a compliance standpoint and an operational standpoint.”
“A ray of hope, or ‘small v’ victory is [that] Greka no longer operates oil and gas in this county. That’s a victory,” Briggs said.
The Sun reached out to attorneys for the lawsuit representing HVI for comment, but they did not respond before the Sun’s deadline.
Reach Staff Writer Taylor O’Connor at [email protected].