California Comeback? Oil Producers Optimistic for Streamlined Permits

California's evolving regulatory climate has California Resources and Berry Corp. optimistic about building permit inventory and supplying plugging and abandonment services, the companies said in second-quarter 2025 earnings calls with analysts.

Velda Addison | Hart Energy | Tue, 08/12/2025 - 10:37 AM

Data from the U.S. Energy Information Administration show California field production of crude oil has dropped from about 320 MMbbl in the 1990s to about 104 MMbbl in 2024. (Source: Shutterstock)

Oil production in California has steadily declined as stricter state policies and environmental regulations have made it challenging for producers.

Restrictions aimed at slowing climate change, including a goal to phase out oil extraction by 2045, halted new permits for oil and gas.

However, change appears to be on the horizon for oil producers in the state as regulatory reform is pushed-fueled in part by pending refinery closures and the possibility of fuel price volatility.

The evolving regulatory climate was a topic of discussion for California Resources and Berry Corp. during second-quarter 2025 earnings calls with analysts. California Governor Gavin Newsome has proposed oil permitting reform, and Kern County regulators approved a revised oil and gas rezoning ordinance.

Sidetracks and workovers that have kept oil flowing in California could give way to new wells.

"Recent improvements in the state's oil and gas regulatory environment provide confidence that we will continue to build our permit inventory through several avenues later this year," California Resources CEO Francisco Leon said on the company's latest earnings call.

Berry Corp. President Danielle Hunter called the tone the most constructive she's seen in California in the last five years, stoking both excitement and encouragement.

"Berry stands to benefit on multiple fronts from these reforms, including even greater ability to unlock value in our extensive inventory across our world-class asset base, but we are not dependent on them," Hunter said. "We have a proven ability to navigate California's complex environment, evidenced by a robust sidetrack program and having the permits in hand today to deliver over the next few years irrespective of the Kern County EIR [environmental impact review] or other legislative measures."

'Healthy ramp up'

Shifting from efforts to stifle oil drilling in the state, Newsom proposed in July a draft bill that would streamline the permitting process for new oil wells in the state, according to media reports. The proposal would allow companies to drill new wells without requiring individual permits from the California Geologic Energy Management Division and exempts certain environmental permits. For every new well drilled, two others would be required to be plugged and abandoned.

Data from the U.S. Energy Information Administration show California field production of crude oil has dropped from about 320 MMbbl in the 1990s to about 104 MMbbl in 2024. The state relies heavily on oil imports and has some of the highest gasoline prices in the U.S.

Supportive permitting policies not only support in-state production but could also benefit business segments such as Berry's C&J Well Services.

The proposed plug-to-drill requirements outside of Kern County, plus the increased plugging and abandonment requirements for all operators that went into effect on Jan. 1, would increase demand for C&J's services in the state, Hunter said.

"If this new measure passes, it should lead to a healthy ramp up in activity and margin expansion for C&J in the near future. And of course, having access and price control over an increasingly important part of our supply chain is a competitive advantage to our E&P operations," she said.

California legislators reconvened in August and oil permitting reform is expected to be up for discussion. Hunter said the company is optimistic the policies will be adopted in the coming weeks.

"Regardless of timing, these efforts reinforce the growing consensus that in-state oil production is vital to California's energy security. As you've heard, Berry stands to benefit on multiple fronts from these reforms, including even greater ability to unlock value in our extensive inventory across our world-class asset base, but we are not dependent on them," Hunter said. "We have a proven ability to navigate California's complex environment, evidenced by a robust sidetrack program and having the permits in hand today to deliver over the next few years irrespective of the Kern County EIR or other legislative measures."

(Source: U.S. Energy Information Administration)

Awaiting court decision

In Kern County, the state's top oil-producing area, the Board of Supervisors approved a revised oil and gas rezoning ordinance that could allow nearly 2,700 new oil wells to be permitted annually.

The revisions established updated standards and measures related to E&P activities such as environmental impacts of pre-drilling exploration, well drilling and other oil and gas operations including completion, stimulation, injection and plugging and abandonment. The board also certified a revised EIR as required by the California Environmental Quality Act (CEQA).

A court decision on the county's request to resume issuing new drill permits for areas without an existing CEQA-compliant EIR is expected before year's end, Hunter said.

"We already have the permits in hand to support development activity into 2027. So having the current county EIR back in effect provides additional upside and optionality and we'll streamline future development projects," Hunter said.

Leon said Kern County is expected to adopt a revised EIR later this year to address deficiencies identified by the court.

"We expect some resolution and progress towards the second half of the year," Leon said on the company's earnings call. "But at the same time, we're doing what's called a conditional use permit, which is an alternative route with a different agency, where we have about 90% of our proved and developed reserves in four fields, and we're developing a field-specific permitting process around those."

He added there is a need for more local production. Now there is a "much better understanding than in the past that the solution to affordability and cutting emissions is local production, and we want that to be a CRC barrel."

Leon, however, was not ready to guide on production in an unconstrained permitting environment despite the optimism given to its new assets post-merger with Aera Energy.

"We're bigger and we have all these new assets to work with. The team has continued to deliver … the oil production, very little decline quarter-over-quarter with very little capital," he said. "So, what that means is that the blocking and tackling of surveillance, workovers and sidetracks is working extremely well."

California Resources reported it produced on average 137,000 boe/d during the second-quarter 2025, mostly oil, compared to 76,000 boe/d a year earlier.

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