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Association of Irritated Residents v. Department of Conservation

California Court of Appeals, Fifth District

May 4, 2017

ASSOCIATION OF IRRITATED RESIDENTS et al., Plaintiffs and Appellants,
v.
DEPARTMENT OF CONSERVATION, Defendant and Respondent AERA ENERGY, LLC, Real Party in Interest and Respondent.

          Pub. Order 5/25/17

         ORIGINAL PROCEEDINGS; petition for writ of mandate. J. Eric Bradshaw, Judge Super. Ct. No. S1500CV283418.

          William B. Rostov and Irene V. Gutierrez for Plaintiffs and Appellants.

          Gibson, Dunn & Crutcher, Jeffrey D. Dintzer, Matthew C. Wickersham and Nathaniel P. Johnson for Real Party in Interest and Respondent.

          No appearance for Defendant and Respondent.

          OPINION

          KANE, Acting P.J.

         Appellants Association of Irritated Residents, Center for Biological Diversity and Sierra Club filed a petition for writ of mandate in Kern County Superior Court challenging the actions of the California Department of Conservation, Division of Oil, Gas and Geothermal Resources (DOGGR) in issuing permits for 214 new oil wells in the South Belridge Oil Field of Kern County. The recipient of the separately issued permits was respondent Aera Energy, LLC (respondent). According to the petition, DOGGR failed to comply with the California Environmental Quality Act (Pub. Resources Code, § 21000 et seq., CEQA)[1] when it issued each individual permit because, allegedly, no CEQA exemption was applicable and DOGGR failed in each instance to conduct any environmental review. Respondent demurred, arguing that res judicata barred the cause of action stated in appellants' petition based on a final judgment entered in a prior action in Alameda County (the Alameda action). The trial court agreed and sustained the demurrer without leave to amend. In their appeal from the ensuing judgment of dismissal, appellants contend that res judicata did not apply because the judgment in the Alameda action was not on the merits but, instead, was due to a finding of mootness following the enactment of a new law known as Senate Bill No. 4.[2] We conclude that appellants are correct, which means the trial court erred in sustaining the demurrer on the ground of res judicata. Accordingly, we reverse the judgment, with directions that the trial court enter a new order overruling said demurrer.

         FACTS AND PROCEDURAL BACKGROUND

         The Alameda Action

         We begin by summarizing the Alameda action, since the judgment in that former litigation was the purported basis for the application of res judicata here.

         On October 16, 2012, several environmental organizations, including Center for Biological Diversity, Earthworks, Environmental Working Group, and Sierra Club filed what we refer to as the Alameda action, which was a complaint for declaratory and injunctive relief against DOGGR.[3] The complaint alleged that DOGGR had engaged in a consistent “pattern and practice” of issuing permits for oil and gas wells in California without complying with CEQA. In particular, the complaint stated “DOGGR's practice of approving permits for oil and gas wells after exempting such projects from environmental review or otherwise issuing boilerplate negative declarations finding no significant impacts from these activities undermines the fundamental review requirements of CEQA.” Allegedly, DOGGR's failure to comply with CEQA was especially “troubling” in light of the well stimulation treatment known as hydraulic fracturing or “fracking” that had become common practice at oil and gas wells throughout the state. The complaint described the nature of fracking and alleged the existence of potentially significant environmental impacts caused by it. According to the complaint, DOGGR “does not even mention, let alone analyze or mitigate, the potential impacts from fracking” when it issues permits. More broadly, the complaint alleged that DOGGR's pattern and practice of permitting oil and gas operations in the absence of appropriate CEQA review “causes permanent and/or long-lasting impacts to water quality, air quality, wildlife, … of the areas affected by oil and gas operations.”

         The complaint elaborates that DOGGR allegedly “regularly permits new oil and gas wells without any environmental analysis at all” by categorically excluding such projects from CEQA based on purported exemptions that are wholly inapplicable to such activities. The alleged inapplicable exemptions asserted by DOGGR in permitting new oil and gas wells included purported exemptions for “‘Existing Facilities'” and for minor alterations to land. In instances where DOGGR elected to prepare negative declarations, such documents were allegedly inadequate because they were merely “boilerplate negative declarations that [did] not provide the required environmental review” and failed to describe or evaluate the impacts of hydraulic fracturing. The complaint's allegations included several examples of individual wells permitted by DOGGR in 2011 and 2012, which DOGGR had either deemed to be exempt from CEQA or approved based on allegedly inadequate boilerplate negative declarations.[4]

         Based on the above allegations, the complaint sought declaratory relief that DOGGR's “pattern and practice” constituted a violation of CEQA. The declaratory relief allegations framed the issue as follows: “DOGGR's pattern and practice of approving oil and gas wells without any mention, let alone evaluation or mitigation, of the environmental and public health impacts of oil and gas development, including the effects of hydraulic fracturing, is a violation of CEQA.” The nature of the controversy was set forth in similar terms: “There is a present and actual controversy between Plaintiffs and DOGGR as to the legality of these practices that are of an ongoing nature. DOGGR has prejudicially abused its discretion and not proceeded in a manner required by law in that it repeatedly and as a policy, practice, and/or ongoing conduct issues permits for oil and gas wells without conducting proper CEQA review. [¶] … Such conduct by DOGGR irreparably harms and will continue to irreparably harm Plaintiffs in that DOGGR's actions expose Plaintiffs and the public in general to environmental degradation of the public resources of this state due to its failure to evaluate, understand, and mitigate the impacts of oil and gas development, including the effects of hydraulic fracturing.”

         The only other cause of action in the complaint filed in the Alameda action was for injunctive relief. The complaint sought injunctive relief “prohibiting the approval of new oil and gas wells until DOGGR complies with its legal requirements to evaluate and mitigate the significant environmental and public health impacts caused by hydraulic fracturing at oil and gas wells.”

         On September 20, 2013, while the Alameda action was pending, Governor Brown signed Senate Bill No. 4 into law. Senate Bill No. 4 sought to redress, in a comprehensive fashion, the lack of adequate information, environmental review and regulation of hydraulic fracturing (i.e., fracking) and other well stimulation techniques. (Stats. 2013, ch. 313, §§ 1 & 2; see Sen. Floor Analysis of Sen. Bill No. 4, dated Sept. 12, 2013; Assem. Floor Analysis of Sen. Bill No. 4, dated Sept. 9, 2013.) The passage of Senate Bill No. 4 led defendants in intervention in the Alameda action (i.e., Western States Petroleum Association, California Independent Petroleum Association, and Independent Oil Producers Agency) to seek dismissal of that action on the ground that the pattern and practice issues alleged in the complaint had been rendered moot by the new law. Before discussing the ruling on that motion by the trial court in the Alameda action (the Alameda court), we shall first briefly summarize the nature and import of Senate Bill No. 4.

         The Enactment of Senate Bill No. 4

         In passing Senate Bill No. 4, which took effect on January 1, 2014, the Legislature made findings that included the following: “(a) The hydraulic fracturing of oil and gas wells in combination with technological advances in oil and gas well drilling are spurring oil and gas extraction and exploration in California. Other well stimulation treatments, in addition to hydraulic fracturing, are also critical to boosting oil and gas production. [¶] (b) Insufficient information is available to fully assess the science of the practice of hydraulic fracturing and other well stimulation treatment technologies in California, including environmental, occupational, and public health hazards and risks. [¶] (c) Providing transparency and accountability to the public regarding well stimulation treatments, including, but not limited to, hydraulic fracturing, associated emissions to the environment, and the handling, processing and disposal of well stimulation and related wastes, including from hydraulic fracturing, is of paramount concern.” (Stats. 2013, ch. 313, § 1.)

         To accomplish the objectives stated above, Senate Bill No. 4 added a number of new statutory provisions, including sections 3150 to 3161.[5] Sections 3150 to 3159 establish the operative definitions of some of the essential terminology. “‘Hydraulic fracturing'” is defined as “a well stimulation treatment that, in whole or in part, includes the pressurized injection of hydraulic fracturing fluid or fluids into an underground geological formation in order to fracture or with the intent to fracture the formation, thereby causing or enhancing, for the purposes of this division, the production of oil and gas from a well.” (§ 3152.) “‘[W]ell stimulation treatment'” is defined as “any treatment of a well designed to enhance oil and gas production or recovery by increasing the permeability of the formation. Well stimulation treatments include, but are not limited to, hydraulic fracturing treatments and acid well stimulation treatments.” (§ 3157, subd. (a).) “‘Acid well stimulation treatment'” means “a well stimulation treatment that uses, in whole or in part, the application of one or more acids to the well or underground geologic formation. The acid well stimulation treatment may be at any applied pressure and may be used in combination with hydraulic fracturing treatments or other well stimulation treatments.” (§ 3158.)

         Sections 3160 and 3161 contain the relevant substantive terms of Senate Bill No. 4. Under these sections, the Legislature provided for greater disclosure of information, scientific study, and environmental review of well stimulation treatments, including hydraulic fracturing and acid well stimulation. We briefly highlight below some of the particular measures enacted by the Legislature in these sections of Senate Bill No. 4.

         First, by January 1, 2015, the California Natural Resources Agency had to “cause to be conducted, and completed, ” an independent, peer-reviewed scientific study of well stimulation treatments, including hydraulic fracturing and acid well stimulation treatments. The study had to provide an evaluation of “the hazards and risks and potential hazards and risks that [such] well stimulation treatments pose to natural resources and public, occupational, and environmental health and safety.” (§ 3160, subd. (a).)

         Second, by January 1, 2015, DOGGR was required to adopt new regulations specific to hydraulic fracturing and other well stimulation treatments. (§ 3160, subd. (b)(1)(A).)[6] The new regulations were to include, among other provisions, disclosure requirements (such as the composition and disposition of well stimulation fluids), and needed revisions to existing rules and regulations governing construction of wells and well casings to ensure the integrity of wells, well casings, and the geologic and hydrologic isolation of the oil and gas formation during and following well stimulation treatments. (Ibid.)

         Third, Senate Bill No. 4 required that DOGGR prepare a comprehensive environmental impact report (EIR) pursuant to CEQA “to provide the public with detailed information regarding any potential environmental impacts of well stimulation in the state.” (§ 3161, subd. (b)(3)(A).) This EIR had to be certified by DOGGR “no later than July 1, 2015”, and it had to “address the issue of activities that may be conducted as defined in Section 3157 and that may occur at oil wells in the state existing prior to, and after, January 1, 2014.” (§ 3161, subd. (b)(3)(B)(i) & (ii).) In light of the broad scope of this statewide EIR, it appears the Legislature was requiring in this instance the preparation of an overarching or programmatic EIR, as distinguishable from a project-specific review of individual oil and gas wells.[7]

         Fourth, Senate Bill No. 4 created a new and distinct permit requirement for conducting a well stimulation treatment on an oil or gas well. Under Senate Bill No. 4, “prior to performing a well stimulation treatment on a well, the operator[8] shall apply for a permit” from DOGGR. (§ 3160, subd. (d)(1).) Moreover, a well stimulation treatment “shall not be performed on any well without a valid permit.” (§ 3160, subd. (d)(3)(B).) In an application for a well stimulation treatment permit, the operator was to provide certain information and plan specifications, including the well identity and location, the time period during which the well stimulation treatment was planned to occur, a water management plan, a groundwater monitoring plan, and a description of the setting or proximity of the planned well stimulation treatment in relation to other features that may be impacted by the induced fractures or other modifications. (§ 3160, subd. (d)(1)(A)-(G).) “In considering the permit application, the [head of DOGGR[9] shall evaluate the quantifiable risk of the well stimulation treatment.” (§ 3160, subd. (d)(3)(C).)

         If granted, the permit is valid for one year. (§ 3160, subd. (d)(4).) Once the permit is issued, tenants and property owners within a specified radius of the well must be notified, and property owners may request water quality sampling and testing, including baseline and followup measurements, regarding any nearby water well or surface water suitable for drinking or irrigation purposes. (§ 3160, subd. (d)(6) & (7).) The operator of the well must provide 72 hours' advance notice to DOGGR prior to the actual start of the well stimulation treatment in order to allow DOGGR staff to witness the treatment. (§ 3160, subd. (d)(9).)

         The permit required by Senate Bill No. 4 for hydraulic fracturing and other forms of well stimulation treatment is separate from and in addition to the permit needed to initially drill (or to redrill) an oil well under section 3203. However, if applied for concurrently, DOGGR has discretion to treat them together as an application for a single, combined authorization. (§ 3160, subd. (d)(2)(A).)

         Fifth, until the new regulations were issued and took effect, and while the statewide scientific study and EIR were being completed, the Legislature established a temporary or interim statutory regime to address well stimulation requests by operators between the effective date of Senate Bill No. 4 on January 1, 2014, and the effective date of the new regulations on July 1, 2015. In this regard, section 3161, subdivision (b), provided as follows:

         “[DOGGR] shall allow, until regulations specified in subdivision (b) of Section 3160 are finalized and implemented, and upon written notification by an operator, all of the activities defined in Section 3157, [i.e., well stimulation treatments, including hydraulic fracturing and acid well stimulation treatments, ] provided all of the following conditions are met: [¶] (1) The owner or operator certifies compliance with paragraph (2) of subdivision (b) of, paragraphs (1), (6), and (7) of subdivision (d) of, and paragraph (1) of subdivision (g) of, Section 3160. [¶] (2) The owner or operator shall provide a complete well history, incorporating the information required by Section 3160, to [DOGGR] on or before March 1, 2015. [¶] (3) [¶] (A) [DOGGR] commences the preparation of an environmental impact report (EIR) pursuant to [CEQA], to provide the public with detailed information regarding any potential environmental impacts of well stimulation in the state.[10] [¶] … [¶] (4) [DOGGR] ensures that all activities pursuant to this section fully conform with this article and other applicable provisions of law on or before December 31, 2015, through a permitting process.” (Italics added.)

         Additionally, until the new regulations became effective on July 1, 2015, DOGGR was required to adopt temporary, emergency regulations to implement the above described interim regime set forth in subdivision (b) of section 3161. (§ 3161, subd. (c).) Among the temporary emergency regulations was California Code of Regulations, title 14, section 1783, subdivision (b) (eff. until July 2015), which stated: “As directed in Public Resources Code section 3161, [DOGGR] must allow, and will allow, well stimulation to proceed if the operator has provided all of the required information and certifications.”

         Sixth, and finally, Senate Bill No. 4 “does not relieve [DOGGR] or any other agency from complying with any other provision of existing laws, regulations, and orders.” (§ 3160, subd. (n).) Presumably, this general provision would mean that Senate Bill No. 4 did not relieve DOGGR of its responsibility to comply with CEQA where applicable.[11]

         The Dismissal Motion and Judgment in the Alameda Action

         Shortly after the enactment of Senate Bill No. 4, defendants in intervention in the Alameda action (i.e., Western States Petroleum Association, California Independent Petroleum Association, and Independent Oil Producers Agency) filed a motion to dismiss or, alternatively, for judgment on the pleadings. The motion was on the ground that the issues raised in the complaint were rendered moot by the passage of Senate Bill No. 4. Among other things, the motion by defendants in intervention argued as follows: “Plaintiffs' Complaint challenges DOGGR's pattern and practice in approving oil and gas wells involving hydraulic fracturing under CEQA. By this manner of alleging their claims, Plaintiffs have not challenged specific, individual approvals, but rather challenge DOGGR's ongoing pattern and practice. The pattern and practice alleged by Plaintiffs in their Complaint has ended as a result of the Legislature's passage of [Senate Bill No.] 4. Any alleged deficiencies in DOGGR's past pattern and practice are irrelevant to its conduct going forward under the new law. Regardless of whether Plaintiffs agree with the new practice set forth in [Senate Bill No.] 4, that practice has been mandated by the Legislature, and therefore, Plaintiffs' claims about DOGGR's prior practice are moot.”

         In its written order of January 29, 2014, the Alameda court agreed with the moving parties that the issues raised in the complaint had become moot or otherwise nonjusticiable by virtue of the enactment of Senate Bill No. 4, and on that basis it granted the motion to dismiss and/or for judgment on the pleadings. The Alameda court clarified in its order that it was granting the motion on grounds of both mootness and lack of ripeness: “The Industry Groups[, i.e., defendants in intervention, ] frame the motion as presenting issues of mootness. The court agrees that the issue is one of justiciability generally, but finds that it concerns both ripeness and mootness.”

         In its ruling, the Alameda court delineated which claims it considered to be moot and which it considered to be unripe for adjudication. It did so by dividing its justiciability analysis into four parts: (1) DOGGR's policy or practice before January 1, 2015; (2) DOGGR's policy or practice after January 1, 2015; (3) DOGGR's review of individual wells before January 1, 2015; and (4) DOGGR's review of individual wells after January 1, 2015.[12] As to DOGGR's policy or practice before January 1, 2015, the court held the “Motion to dismiss as moot is GRANTED.”[13] (Italics added.) The Alameda court found all such claims were moot because, under section 3161, subdivision (b), “[DOGGR] ‘shall allow' all of the activities defined in Section 3157[, i.e., fracking, ] provided certain conditions are met.” Because this new provision gave “clear directions to issue permits if the requirements of [section] 3161[, subdivision ](b) are met, ” the complaint's challenge to DOGGR's policy or practice “before 1/1/15” under the prior legal setting was found to be moot. As to DOGGR's policy or practice “after 1/1/15, ” the Alameda court granted the motion to dismiss because the claims were “not ripe.” (Italics added.) The Alameda court held these claims were not ripe for adjudication because the future practices of DOGGR regarding the issue of fracking would presumably be impacted by the results of the scientific study, the EIR, and the future new regulations. At the time of the ruling, the studies and EIR were not completed and new regulations were not in effect. Finally, as to DOGGR's review of individual wells, whether before or after January 1, 2015, the Alameda court granted the motion to dismiss because “[t]he complaint never sought relief based on DOGGR's review of individual wells.”

         Based on the above analysis, the Alameda court granted the motion and held “[t]he case is DISMISSED.” On January 29, 2014, a judgment in the Alameda action was entered in favor of defendants in intervention and DOGGR. No appeal was taken from that judgment.

         The Present Action Filed in Kern County

         On November 12, 2014, appellants filed a petition for writ of mandate in the Kern County Superior Court. The petition alleged that during the period between July 2014 and the filing of the petition, DOGGR had issued “214 individual permits to [respondent] to drill new wells in the South Belridge Oil Field … without completing the environmental review required by CEQA.” According to the petition, respondent subsequently notified DOGGR of its intention “to use hydraulic fracturing (commonly known as ‘fracking') techniques on at least 144 of these wells, ” and DOGGR has allegedly allowed respondent's use of fracking on said 144 wells. However, the petition was not concerned solely with fracking, and it alleged that there were potential adverse environmental impacts with oil drilling and production in general. The petition alleged that DOGGR serves as the “lead agency” for CEQA purposes regarding all oil wells in Kern County. Further, the petition alleged that DOGGR was required to comply with CEQA for each approval of the 214 drilling permits by conducting adequate environmental review in each instance, but it failed to do so. Allegedly, no exemptions to CEQA were applicable. In the prayer for relief, appellants' petition requested that the trial court set aside its approvals of the 214 drilling permits and order DOGGR to comply with CEQA for each and every one of the 214 drilling permits.

         Respondent and DOGGR separately demurred to the petition on distinct grounds. Respondent's demurrer was on the ground of res judicata, based on the judgment in the Alameda action. Alternatively, respondent argued that Senate Bill No. 4 precluded all of appellants' CEQA claims because, during the interim statutory regime under section 3161, subdivision (b), well stimulation requests by operators would have to be allowed. DOGGR's demurrer took a different approach. DOGGR demurred on the ground that exemptions to CEQA were applicable to the permits in question. Although DOGGR's demurrer is not at ...


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