The highest level of local government now faces constitutional concerns of California Resources Corp., raising flags over Measure J, the voter-approved measure which calls for a ban of enhanced oil and gas extraction methods in San Benito County.
CRC, a spin-off of Occidental Petroleum Corp., told the San Benito County Board of Supervisors in writing this week that in the event Measure J’s ban is applied to the company’s lands — including 30,000 acres of mineral interests in San Benito County — that regulation will obliterate the value of such stakes, and expose the county to risk possibly tied to the United States Constitution.
CRC’s letter, according to a person familiar with the oil and gas industry, is among several others to the county concerning private mineral interests there.
“Given the recent adoption of Measure J, we are deeply concerned about our ability to access our valuable mineral resources,” said Russell Ledbetter, a minerals and an exploration manager with CRC, in a letter dated Jan. 26 to county supervisors, and later reviewed by BenitoLink.
“If that ban is applied to our lands, then it will eliminate the value of our mineral interests,” claimed the CRC. “Under the state and federal constitutions, the county would be required to compensate CRC completely for that loss.”
In a statement to BenitoLink, CRC confirmed the letter’s authenticity. The California oil producer, whose market capitalization reportedly exceeds $1.8 billion, also raised doubt over the authority of the exemption process under Measure J. The company said that in the event of a rejected request, “we would be forced to consider all available options and remedies given the substantial value of our mineral interests.”
An approved request, however, potentially could allow local government to reach around rights under the Fifth Amendment.
Citadel Exploration Inc., whose market capitalization reportedly is roughly $2.5 million, already claimed $1.2 billion for damage done by what the company called a “regulatory taking” — an alleged result of Measure J, which last November received the approval of the majority of San Benito County’s voters.
Measure J language addresses unconstitutionality
“The letter from CRC appears to ask for information that is already publicly available,” said Armen Nahabedian, the CEO of Citadel, in a statement to BenitoLink. “Procedures were outlined in a preemptive ordinance adopted by the county prior to the measure’s passage. The exemption procedures for any illegal law enacted by the county are largely irrelevant, however the fact that loopholes were created is telling. The county is clearly attempting to avoid liability but has in fact only further compromised their defense in doing so,” he said. Nahabedian noted that the letter by CRC does not concern him.
“Citadel Exploration is a very small oil company facing a comparatively large government organization in San Benito County,” he said. “We have very little financial resources and only two employees but we will defend our rights aggressively.”
CRC is one of the largest oil and gas producers in the state, according to Nahabedian. He said that it did not surprise him that the company could defend its own interests.
Deep in Measure J — in the fifth section, according to public record — concerns surfaced over unconstitutionality. The initiative included an ordinance for exemptions by the county’s Board of Supervisors that potentially could diminish federally protected rights.
The Supremacy Clause of the U.S. Constitution provides that federal rules, such as the Bill of Rights, will remain the supreme law of the land.
Regulatory action that constitutes a per se taking under the Fifth Amendment, according to the opinion of the Supreme Court in Lingle v. Chevron, includes a categorical rule against regulation depriving an owner of all “economically beneficial use” of her property. Outside that categorical rule, according to the nation’s highest court, “the economic impact of the regulation on the claimant” — along with the particular “extent to which the regulation has interfered with distinct investment-backed expectations” — could constitute unconstitutional regulation.
Supervisor Robert Rivas confirmed that the county had received CRC’s letter.
“Constitutional issues are always going to be a main concern,” said Rivas in an interview with BenitoLink. “At this point, because we have not been challenged in court, this is an issue that we have not fully addressed. Obviously, we’re facing a takings claim. As far as specific legal challenges, we won’t know how we’re going to defend Measure J until we have to.”
Rivas said that county staff has had preliminary dialogue with a number of organizations and agencies.
Supervisor Jerry Muenzer, who represents the district where Citadel launched its pilot program after the board’s approval, declined a BenitoLink request for a comment.
Supervisor Margie Barrios, who opposed Measure J, told BenitoLink in an interview Friday that constitutional rights were big among concerns.
“Any time you talk about people’s properties, people’s rights, there has to be a really in-depth look at the provisions we make, because they may affect those rights,” she said. “We never did a fiscal analysis of how Measure J could affect us. I feel that if we had done that, we may have looked at this a little differently.”
“These folks appear to have valid questions,” Barrios added. “They want answers. I’m hoping that we can provide that.”
State law, federal ground
Last July, after a shutdown of Project Indian, California Superior Court Judge Thomas W. Wills directed San Benito County to set aside the board’s approval of a conditional use permit for Citadel’s pilot program. The judge’s decision detailed failures over a broad range of environmental risks, according to previous reports by BenitoLink.
As a result of that decision in favor of the Center for Biological Diversity, which had filed the initial complaint in the case, the county agreed in a settlement to pay a legal fee of $262,500. The Hollister Free Lance reported that that debt belonged to Citadel, whose permit for Project Indian included indemnification as a condition of approval by the Board of Supervisors.
That approval, however, remains impermissible.