Warren E&P, Inc. v. City of Los Angeles

On September 6, 2024, a California Superior Court ruled that state law preempted the City of Los Angeles’s ban on new oil drilling. The Los Angeles ordinance also required the discontinuance of existing drilling operations after 20 years. The court found that the Los Angeles ordinance and related guidance “contradict and are implicitly limited by” Public Resources Code § 3106. The court cited a California Supreme Court opinion holding that Section 3106 preempted a local measure prohibiting certain oil production methods altogether because the provision expressly provides that the State Oil and Gas Supervisor “shall approve” all production methods that they deem suitable for “increasing the ultimate recovery of underground hydrocarbons.” The Superior Court further found that the home rule doctrine did not apply to the ordinance because Section 3106 addressed a matter of statewide concern and was “an appropriately tailored means to further the State’s interest in protecting the environment and health of citizens while meeting the energy needs of the State.” On September 25, Governor Gavin Newsom signed <a href="https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240AB3233">AB 3233</a>, which gave localities greater authority to restrict oil and gas operations.

Three related companies that operate a drilling site within Los Angeles City limits filed a lawsuit in California Superior Court challenging the City’s decision to adopt an ordinance making oil wells a nonconforming use, banning the drilling of new wells, and prohibiting maintenance, drilling, re-drilling, or deepening of existing wells. The companies also challenged the City’s related adoption of a Mitigated Negative Declaration and Mitigation Monitoring Program under CEQA. The companies asserted that the City’s actions violated CEQA and the City’s General Plan (which they alleged “clearly contemplates the continued responsible extraction of oil and gas in the City”), and that the actions constituted a taking without just compensation and violated due process under the California and U.S. Constitutions. The companies alleged that the City failed to analyze how the ordinance would increase importation of oil and gas to meet existing demand and therefore lead to increased emissions from oil tankers and trucks used for oil transportation, and that the City ignored the environmental impacts of plugging and abandoning wells. The companies further alleged that they had invested in the conversion of their own operations to 100% electric in order to obtain City approvals to operate the site, and had relied on City approvals when investing in future development at the site.