Reported / Citable
Background
San Joaquin Facilities Management, Inc. (SJFM) operates oil and water injection wells in the Fruitvale Oil Field in Kern County and Bakersfield, where water injection began in 1959. Of the field's 32 water injection wells, only three were drilled before April 5, 1973. SJFM applied in 2018, and again in 2019 after the Project Approval Letter (PAL) requirement took effect, for a PAL from the Geologic Energy Management Division (CalGEM). It sought to drill up to 12 new wells and inject produced water into the Santa Margarita Formation at an average depth of 4,500 feet. CalGEM's CEQA unit concluded the project was not exempt from the California Environmental Quality Act and required an initial study. Internal e-mails rested that view partly on the wells being new and controversial.
SJFM petitioned for a writ of mandate under Code of Civil Procedure section 1085, invoking the statutory exemption for ongoing pre-CEQA private projects, the class 1 exemption for existing facilities, and the class 4 exemption for minor alterations to land. In November 2024 the superior court found the PAL fell within an ongoing pre-CEQA injection project, granted the petition, entered judgment, and issued a peremptory writ. CalGEM appealed. SJFM cross-appealed an August 2023 order that had struck its prayer for attorneys' fees under Code of Civil Procedure section 1021.5.
The Court’s Holding
The Court of Appeal reversed in a published opinion. It reviewed CalGEM's action directly, treating the scope of an exemption as a legal question and CalGEM's factual findings under the substantial evidence test. It called the CEQA unit's stated reasoning largely flawed, including the suggestion that an exempt project may still require an initial study and the reliance on controversy. It nonetheless affirmed CalGEM's result, because a correct decision is not disturbed for a wrong reason. Assuming without deciding that an entire oil field could be a single pre-CEQA project, the court held SJFM could not rely on Guidelines section 15261, subdivision (b)(3), for two independent reasons. First, following Azusa Land Reclamation, the subdivision is invalid because the Office of Planning and Research lacked authority to create an exemption. Second, even if valid, the record showed a PAL involves substantially greater responsibility and control than the 1959 and 1961 approvals, given the expansion of CalGEM's oversight through the 1970 and 1972 amendments and the 2019 PAL rule. The court distinguished North Coast and Nacimiento as public-project cases.
Neither categorical exemption applied. The class 1 exemption concerns negligible expansion of existing facilities, and the record showed SJFM proposed to drill up to 12 new wells. The class 4 exemption, narrowly construed, does not reach multiple drillings to an average depth of 4,500 feet, and Surfrider did not allow the two exemptions to be combined. The court reversed the judgment and directed the superior court to vacate the writ and enter an order denying the petition. It dismissed the cross-appeal as moot and awarded CalGEM its costs. It also granted judicial notice of one unopposed exhibit and denied two others as not germane. It did not reach CalGEM's exhaustion, adequate-remedy, and remand arguments.
Key Takeaways
- Guidelines section 15261, subdivision (b)(3), which limits CEQA's application to post-1973 approvals of pre-1973 private projects, was held invalid as beyond the Office of Planning and Research's authority.
- Even if the subdivision were valid, a modern PAL involves a greater degree of agency responsibility and control over injection wells than the 1959 and 1961 approvals, so the exemption did not apply.
- Drilling new wells is not the operation or minor alteration of existing facilities under the class 1 exemption, and drilling to roughly 4,500 feet is not a minor alteration of land under the class 4 exemption.
- The ruling does not decide whether the project will ultimately require an initial study, negative declaration, or environmental impact report, only that SJFM was not entitled to a writ declaring it exempt.
- Reversal of the writ made SJFM's challenge to the order striking its section 1021.5 fees prayer moot, because it was no longer a successful party.
Why It Matters
As a published decision, this opinion binds trial courts statewide. It confirms that, in this district, the invalidity of section 15261, subdivision (b)(3), is a holding rather than dictum, because the court treated Azusa's two independent grounds as equally controlling. Operators in older fields cannot assume that a pre-1973 injection history exempts new wells from CEQA.
The opinion also shows how courts review a nonexemption finding: under the substantial evidence standard, with categorical exemptions read narrowly. CalGEM's internal reasoning can be imperfect and the decision will still stand if the record supports the result. Open questions include whether an oil field can qualify as a single pre-CEQA project and how the unaddressed exhaustion and remedy arguments would fare.