California's oil industry has withdrawn its controversial ballot proposal against a state law that would impose new restrictions on oil and gas wells within 3,200 feet of homes and schools.

Environmentalists view the industry's decision as a major victory because it removes the obstacle to a law that would ban new drilling and impose safety restrictions on existing wells in communities.

Oil industry associations say environmental groups misrepresented the referendum. They said the rollback bill would destroy jobs, drive up gasoline prices and increase California's dependence on imported oil. Compliance with the law will cost them about $40 million in the first two years, the industry estimates.

The oil industry, which spent $20 million collecting signatures for the November ballot, announced it would instead try to challenge the law in court.

“Power shutoff advocates can make unsubstantiated claims in the press and in paid advertisements, but they cannot make those claims in court without evidence,” Jonathan Gregory, chairman of the California Independent Petroleum Association, which supports the measure, said in a statement. “That's why we are turning from the referendum to a legal strategy.”

The ballot proposal would have asked voters to repeal a 2022 law authored by Sen. Lena Gonzalez, a Democrat from Long Beach, that created buffer zones in residential areas. The law prohibits new oil and gas wells in those areas near homes, schools and other “sensitive” areas such as hospitals. It also requires operators of existing wells to take steps to improve their safety, such as installing leak detection equipment, testing water and controlling dust and other pollutants.

The state's distancing rules now take effect. Operators of existing wells within the buffer zones must develop safety plans by 2025 and implement them by 2027.

The state has approved more than 240,000 oil and gas wells across California, many of them in Kern County, the greater Los Angeles area and the Long Beach/Signal Hill region.

After SB 1137 became law, the oil industry launched a campaign called “Stop the Energy Shutdown” to put the law before voters in November, delaying its implementation. While the new rules were pending, new permits were reportedly being issued to work on existing leaking or unproductive wells in these areas.

“The big oil companies have seen what's coming – and once again caved,” Governor Gavin Newson said in a statement. “No parent in their right mind would vote to allow drilling next to daycare centers and playgrounds.”

The health risks of oil production have been the focus of a campaign for decades to protect families, schoolchildren and the elderly from the impacts of drilling. The growth of the oil and gas industry in many regions began before California's rapid growth, so it is not unusual to find drilling and refining operations directly across the street from residential areas.

More than 2.5 million Californians live within 3,500 feet of an oil or gas well. These neighborhoods are predominantly populated by poor families—nearly 70 percent of residents are nonwhite—which disproportionately burdens health consequences on communities inhabited by people of color.

“Heart disease, respiratory distress, premature developmental disorders, miscarriages,” said Mabel Tsang, policy director for the California Environmental Justice Alliance. “There are generations of families with cancer, there are people who have seen their childhood friend die because of oil drilling. A cycle from the cradle to the grave.”

The withdrawal of the initiative is a victory for environmentalists over oil and gas interests, who had spent around $60 million to lobby against the original bill and launch the referendum.

Rep. Isaac Bryan, a Democrat from Culver City, negotiated with the industry to remove the measure from the ballot. Bryan dismissed the lawsuit the oil producers planned to file, calling it an “act of desperation.”

As part of a deal with the oil industry, Bryan agreed to amend a bill he authored that would require low-producing wells near residential areas to be capped or shut down. He will limit the bill's scope to the Inglewood Oil Field, the largest urban oil field in California, and consider changes that could alter the penalty structure. (Bryan represents Inglewood in his district.)

The oil industry is very concerned about the effort involved in managing or cleaning abandoned wells because of the huge costs involved, and would like to try to improve low-producing wells rather than shut them in.

A number of other oil bills are currently being discussed in parliament, and environmental activists vow to continue the fight.

“We are not giving up,” Tsang said. “We played their game and beat them on their own terms.”

Collaboration: Alexei Koseff.

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