Preview
Superior Court of California
County of Kern
Bakersfield Department 11
Date: 07/12/2021 S1500CV282520
TRC OPERATING COMPANY VS CHEVRON U.S.A.
Courtroom Staff
Honorable: David R. Lampe Clerk: Veronica D. Lancaster
NATURE OF PROCEEDINGS: TENTATIVE RULING
Tentative Ruling
I. Summary
The parties to this action are Plaintiffs and Cross-Defendants TRC Operating Company, Inc. and TRC Cypress Group,
LLC (“TRC”) and Defendant and Cross-complainant Chevron U.S.A. Inc. (“Chevron”).
Permeating this litigation from its inception is whether Chevron may be held liable for TRC’s lost profits or other
economic damages which arise solely as a result of orders by the California Division of Oil, Gas, and Geothermal
Resources (“DOGGR,” now CalGEM) which prohibited certain oil production on TRC’s property from 2011 to 2015
1
due to “surface expressions” occurring on both Chevron’s and TRC’s adjacent lands. This is a scope of liability issue
which is a question of law for the court in the first instance. The court severed this issue for court trial.
As a second issue upon prospective evidence, Chevron moves the court for an order in limine that, absent
independent foundational expert testimony, TRC may not present the DOGGR Orders alone as evidence that
2
Chevron’s conduct caused TRC’s economic harm. This is an issue presented by Chevron’s Motion In Limine No. 13.
The court finds Chevron’s arguments to be the more persuasive on both issues as stated herein.
The following analysis is not intended as a Statement of Decision by the court. A Statement of Decision is not
necessary or appropriate at this stage of the proceeding. A trial court is only required to issue a Statement of
Decision on the trial of a “question of fact.” (Code Civ. Proc., § 632.) The court is not adjudicating any question of
disputed or controverted fact. The issue before the court is solely one of law. Furthermore, the issues for trial are
severed, and no judgment is yet appropriate. Additionally, this ruling constitutes a final ruling upon Chevron’s
Motion In Limine No. 13.
II. Pleadings
1
The court, on its own motion, has severed this issue for trial based upon judicially noticeable or undisputed facts.
The court has issued a separate order upon its motion to sever.
2
The court makes a consolidated ruling upon these two issues. They are discrete questions, but also, as was readily
apparent from the argument at the severed trial and upon Motion In Limine No. 13, the two issues are inexorably
connected.
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This case proceeds to trial upon the Second Amended Complaint by TRC against Chevron for Causes of Action
stated as Negligence, Private Nuisance, and Past and Continuing Trespass. The legal and evidentiary matters
addressed in this ruling apply to all three causes of action.
The case also proceeds upon Chevron’s Cross-complaint for Negligence, Trespass, Nuisance, and Declaratory Relief.
III. Relevant Procedural History
After TRC initially filed its complaint, Chevron demurred. The demurrer was heard by the court on November 5,
2014. The court issued its ruling on December 2, 2014, sustaining the demurrer and also issuing a stay based upon
the doctrine of primary jurisdiction (in light of proceedings then pending before DOGGR). The issue of causation
was first addressed at that time. The court stated:
Fundamentally, the complaint does not assert physical injury to property, nor does it adequately plead
causation, since the act creating the loss is the DOGGR order, not Chevron's conduct. The ordinary course
would be for the court to grant leave to amend for pleading the necessary missing elements of the case,
but the better course in these circumstances, is to grant Chevron's request to stay or abate the action
based upon the authority cited at page 15, subsection g of Chevron's points and authorities.
On December 15, 2016, the court granted TRC’s motion to lift the stay in part, and granted leave to amend. On
January 4, 2017, TRC filed a First Amended Complaint. On January 17, 2017, the parties stipulated to a relief from
stay which the court confirmed by order. On April 4, 2017, the court heard Chevron’s second demurrer. On April
12, 2017, the court overruled the demurrer, except as to the Fourth Cause of Action (for Strict Liability, which the
court sustained without leave). The court also granted Chevron’s motion to strike the allegations regarding the
death of Chevron’s employee David Taylor (which remain in the final amended pleading according to TRC only for
appeal purposes).
On June 11, 2019, the court heard Chevron’s Motion In Limine No. 1 which was the third effort by Chevron to
address the issues presented here. On July 10, 2019, the court denied Motion In Limine No. 1, and stated:
The court denies the motion in limine of defendant and cross—complainant Chevron U.S.A. Inc.
("Chevron") to exclude evidence of damages attributable to orders issued by the Division of Oil, Gas and
Geothermal Resources ("DOGGR"). The motion is, at a minimum, premature. Granting the relief
requested would require resolution of a dispositive question of fact regarding causation-i.e., whether or
not Plaintiff's lost profits and out-of-pocket expenditures were, in fact, attributable to Chevron or DOGGR.
At the June 11, 2019, hearing, the following colloquy took place between the court and counsel for TRC:
THE COURT:· Well, then you're agreeing with the initial point I made when we started this hearing, which
is that -- leave DOGGR aside, DOGGR is incidental.
MR. TAYBACK:· It is incidental.
THE COURT:· But it was informative.
MR. TAYBACK:· Absolutely.· You can't sort of cut the narrative discussion of the case out of it. However, it
is incidental.· What happened here is Chevron caused the harm that prohibited TRC from being able to
safely steam.· And that's our case and that has·been our case.
THE COURT:· And it will be the case presented by your experts independently of what DOGGR has to say.
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MR. TAYBACK:· Independently of what DOGGR has to say.
On July 31, 2020, the court heard Chevron’s Motion for Summary Adjudication of its Fourth Cause of Action for
Declaratory Relief which raised the issues presented here. On September 4, 2020, the court denied summary
adjudication, principally because such a ruling would not dispose of TRC’s claim for damages and because it
remained a triable issue of fact in the court’s view as to whether TRC’s lost profits and expenditures were
attributable to Chevron, based in part upon TRC’s Statement of Additional Material Facts that TRC would cease
steaming wells close to surface expressions as a matter of standard practice. The court stated:
Specifically applicable in the context of Chevron’s motion as to its declaratory relief cause of action, under
Section 437c, “[a] motion for summary adjudication shall be granted only if it completely disposes of a
cause of action . . . .” (Code Civ. Proc. § 437c, subd. (f)(1).) “[I]n keeping with the purposes of Code of Civil
Procedure section 437c, subdivision (f), a grant of summary adjudication in this area must cover the entire
claim. The purpose of the enactment of Code of Civil Procedure section 437c, subdivision (f) was to stop
the practice of piecemeal adjudication of facts that did not completely dispose of a substantive area.”
(Catalano v. Superior Court (2000) 82 Cal.App.4th 91, 97; see also Hood v. Superior Court (1995) 33
Cal.App.4th 319, 323-324.) The Court determines Defendant Chevron has failed to meet its burden as the
moving party.
Despite the passage of time, the Court’s June 10, 2019 ruling on the motion in limine remains applicable.
Finding in Chevron’s favor on its cause of action for declaratory relief would require resolution of a
dispositive question of fact regarding causation—i.e., whether or not Plaintiff’s lost profits and out-of-
pocket expenditures were, in fact, attributable to Chevron or DOGGR.” This remains a fact-intensive issue
that is simply not amenable to summary adjudication. Whether TRC’s damages were proximately caused
by Chevron’s negligence or solely caused by the DOGGR orders is a heavily disputed, fact-intensive
question. Chevron fails to persuade the Court the DOGGR orders unequivocally constitute a superseding
cause, cutting off Chevron’s liability for TRC’s purported damages.
As Chevron notes in its motion, “if the damage…would have occurred even if the DOGGR had not issued
the order, DOGGR’s issuance of the order does not operate to exculpate the wrongdoing party from
liability.” (Motion, page 9:12-13; and see Huang v. The Bicycle Casino, Inc. (2016) 4 Cal.App.5th 329, 348.)
Chevron’s evidence demonstrates the entire issue is unsettled. For instance, Chevron points to a June 10,
2015 DOGGR order that Chevron interprets as placing blame for some of the surface expressions on TRC’s
steaming operations. Unless and until the source and/or cause of the surface expressions are determined,
Chevron’s request for declaratory relief is not possible. (See, e.g., Chevron’s Evidence in Support, Exs. 7
and 19; Genoch Decl., ¶¶ 6 and 8; Request for Judicial Notice, ¶ 4.) Further, Chevron’s motion does not
completely dispose of the issue of damages.
Thereafter, the court ultimately set this matter for jury trial to start August 2, 2021. Due to the considerable trial
issues presented by this case, including the matters addressed in this ruling, the court advanced the start of trial to
June 28, 2021 and has also continued case management in sessions before the court. The court moved to sever the
first issue here presented, and finally ordered severance on June 25, 2021. The severed matter was tried to the
court upon facts submitted for judicial notice on July 1, 2021. The evidentiary issue is raised by Chevron’s Motion
In Limine No. 13.
IV. Questions Presented
A. May Chevron be held liable for TRC’s lost profits or other economic damages which result solely
from DOGGR Orders?
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B. May TRC present the DOGGR Orders alone as evidence that Chevron’s conduct caused TRC’s
economic harm absent foundational expert testimony independent of the DOGGR Orders?
V. Facts
3
The court takes judicial notice of the following facts :
TRC and Chevron own/lease and operate adjacent oil-producing properties in the Midway-Sunset Oil Field in Kern
County, California. Both TRC and Chevron produce oil on their properties from a common diatomite reservoir
underlying both properties using a method called cyclic steaming.
In July 2011, DOGGR began issuing a series of orders that restricted steaming on both TRC’s property and
Chevron’s property in response to observations that fluids were coming to the surface on both properties.
On June 21, 2011, Chevron reported to DOGGR that a surface expression of steam was occurring in the vicinity of
Well 20 and Well K210 in the Midway-Sunset Field (Section 21, T. 32S, R. 23E) on its property. Chevron dispatched
staff to investigate the surface expression and, while investigating, a Chevron employee fell through the surface
and died. The fatality occurred at Midway-Sunset Field at the southeast corner of the Well 20 site and was
reported to DOGGR on June 21, 2011 at 10:45 a.m.
On July 6, 2011, “[a]cting pursuant to Public Resources Code sections 3224 and 3226,” DOGGR (by the State Oil and
Gas Supervisor in Sacramento, Elena M. Miller) issued Order No. 1012. The court takes judicial notice of the
contents of the order. DOGGR stated that Well 20 is a damaged well and surface expressions of fluids and gases in
the vicinity of Well 20 were first reported to DOGGR prior to 2008. DOGGR stated that attempts by Chevron to
plug and abandon Well 20 failed and in Spring 2011, Chevron commenced efforts to construct containment of the
surface expression in the vicinity of Well 20. Order No. 1012 required Chevron to cease steaming operations within
a 150-foot radius of the surface expression near Well 20. The order further required Chevron to increase the shut-
in radius to 300 feet “[i]f after five days steam or fluids continue to come to the surface.” The order indicates that
the Supervisor “has determined that immediate steps must be taken in order to prevent future harm from
occurring as a result of the surface expression.”
On July 19, 2011, DOGGR issued Order No. 1014. The court takes judicial notice of the contents of the order. That
order recites that, “[i]n addition to the surface expression on Chevron's lease, a surface expression on TRC
Operating Company lnc[.],'s (TRC) lease, near well ‘Bull’ 9, also began on June 21, 2011.” DOGGR stated that a
volume of oil and water was coming to the surface from this expression that merited immediate remediation.
3
TRC’s objections to Chevron’s Request for Judicial Notice are overruled. The court may take judicial notice of
“[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate
determination by resort to sources of reasonably indisputable accuracy.” (Evid. Code, § 452(h).) The sources of
judicial notice would not be received in evidence (unless otherwise admitted from the proffer of evidence by the
parties), but merely consulted by the court to determine whether or not to take judicial notice and the tenor of the
matter to be noticed. (Law Rev. Com. Comment to Evid. Code, § 452; see People v. Archerd (1970) 3 Cal.3d 615,
th
638; and see 1 Witkin, Cal. Evid. (5 ed. 2020) Judicial Notice, § 32.)
“In determining the propriety of taking judicial notice of a matter, or the tenor thereof” (Evid. Code, § 454), the
court is free from nearly all of the restrictions of the rules of evidence. Under Evid. Code section 454(a): “(1) Any
source of pertinent information, including the advice of persons learned in the subject matter, may be consulted or
used, whether or not furnished by a party. (2) Exclusionary rules of evidence do not apply except for Section 352
th
and the rules of privilege.” (1 Witkin, Cal. Evid. (5
ed. 2020) Judicial Notice, § 42.)
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DOGGR stated that based on observation and statements by TRC, DOGGR estimated that as much as 100 barrels of
oil and water are coming to the surface each day from the expression near well "Bull" 9. Order 1014 directed TRC
to cease steam injection within 150 feet of Chevron’s Well 20 and TRC’s “Bull” 9 well. This order was likewise
issued “pursuant to Public Resources Code sections 3224 and 3226.” Under the terms of the order, the shut-in
radius would expand to 300 feet if fluids continued to come to the surface after five days. The order states that the
Supervisor “has determined that immediate steps must be taken in order to prevent further harm from occurring
as a result of these surface expressions.”
TRC appealed Order No. 1014, which had the effect of staying enforcement until the appeal was resolved.
On August 5, 2011, DOGGR issued Emergency Order No. 1015 “pursuant to Public Resources Code sections 3224
and 3226.” The court takes judicial notice of the contents of the order. In Order No. 1015 DOGGR stated that (1)
on August 3, 2011, at least two new surface expressions, one of them five feet in radius, began within forty feet of
the existing surface expression in the vicinity of Well 20; (2) on August 5, 2011, a volatile eruption began from the
existing surface expression in the vicinity of Well 20, expelling rocks, other material, and emitting fluid and steam,
and (3) on August 5, 2011, in response to inquiry, TRC reported to DOGGR that it had been conducting cyclic steam
injection into well "Bull” 38 on August 3 and 4, 2011, in the vicinity of Well 20. DOGGR concluded that the eruptive
and continuing surface expressions in the vicinity of Well 20 created an unpredictable, unstable, and dangerous
situation such that life, health, property, and/or natural resources were further at risk. Order 1015 required TRC to
cease steam injection within 500 feet of the surface expression near Well 20. Based on the facts outlined in the
order, the Supervisor “determined that an emergency exists and immediate steps must be taken . . . in order to
protect life, health, property, and natural resources.” Order 1015 also states that injection operations shall not
resume within the vicinity of the surface expression until the State Oil and Gas Supervisor was satisfied that the
cause of the surface expression was determined and remediated.
On August 26, 2011, DOGGR issued Emergency Order No. 1016, which “rescind[ed], supersede[d], and replace[d]”
the prior orders and required Chevron and TRC to cease steam injection within 800 feet of the surface expression
near Well 20 until DOGGR was “satisfied that the cause of the surface expression is determined and remediated.”
The court takes judicial notice of the contents of the order. In the order, which was issued pursuant to sections
3224 and 3226 of the Public Resources Code, DOGGR noted that “the expressions in the vicinity of Well 20 have
increased in size and intensity since August 5.” Further, DOGGR stated that “[t]he fact that the surface expressions
near Well 20 have continued since the issuance of Emergency Order 1015 indicates that the surface expressions
are likely caused or significantly contributed to by cyclic steam injection operations occurring more than 500 feet
away from the surface expressions,” indicating that “both TRC and Chevron have conducted cyclic steam injection
operations on wells within a radius of 800 feet of the surface expressions in the vicinity of Well 20,” with TRC
injecting at wells “as close as 640 feet.” Based on the facts described in the order, the Supervisor “determined that
an emergency exists and immediate steps must be taken . . . in order to protect life, health, property, and natural
resources.”
TRC appealed Emergency Order No. 1016.
On February 21, 2014, DOGGR issued a Project Approval Letter (“PAL”) to TRC. The court takes judicial notice of
the contents of the PAL. Under the terms of the PAL, TRC is required to report “[a]ll surface expressions within 300
feet” of TRC’s property, including “reactivation of historic seeps, or increased flow from existing seeps.”
Additionally, the PAL required TRC to suspend steam injection for “every well where the bottom-hole location is
located within a 150-foot radius of the surface expression,” increasing to a 300-foot radius if “the surface
expression continues to flow at a sustained or increased level” after five days until the surface expression ceases to
be active.
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On April 3, 2015, DOGGR issued Emergency Remedial Order No. 1067 to Chevron and issued Emergency Remedial
Order No. 1068 to TRC. The court takes judicial notice of the contents of the orders. Emergency Remedial Order
No. 1068 rescinded and replaced Emergency Order No. 1016 as to TRC. The order states that “[b]ased on
information and belief arising [from] the facts [set forth in the order], and in accord with the legal authorities
described in this Order, the Supervisor determined that an emergency exists and immediate action is necessary to
protect life, health, property, or natural resources.” The order was issued pursuant to sections 3013, 3106, 3222,
3224, and 3226 of the Public Resources Code as well as various provisions of title 14 of the Code of Regulations.
Based on the findings contained in the order, DOGGR modified the steam-ban area and required TRC to stabilize
slope failures on its property and complete its DOGGR-approved work plan.
On April 13, 2015, TRC appealed Emergency Remedial Order No. 1068. Additionally, on May 22, 2015, TRC filed suit
against DOGGR, challenging the validity of the order and seeking to enjoin its enforcement. The court takes judicial
notice of the contents of Exhibit J of Chevron’s Request for Judicial Notice.Specifically, TRC sought a declaration
concerning the enforceability of Emergency Order No. 1068 and a temporary restraining order and preliminary
injunction enjoining DOGGR from enforcing the requirements of Emergency Order No. 1068 pending the outcome
of the hearing on TRC’s administrative appeal.
On July 15, 2015, TRC and DOGGR agreed to terms of satisfaction of Emergency Remedial Order No. 1068. The
court takes judicial notice of the contents of Exhibit K of Chevron’s Request for Judicial Notice. Based on the
agreement, DOGGR found that TRC had “completely satisfied” Emergency Remedial Order No. 1068 and granted
TRC approval “to resume its injection operations” subject to certain conditions. The agreement was incorporated
into TRC’s PAL and included requirements pertaining to slope stabilization efforts on TRC’s property. Among those
additional requirements, TRC was obligated to “continue to stabilize all slope failures on the west and north sides
of [TRC’s] ‘Bull’ lease, and maintain a safe working environment near slope failures, including any new failures[.]”
VI. DOGGR’s Regulatory Authority and Procedure
Division 3 of the Public Resources Code sets forth various requirements related to oil and gas production in
California. The division is to be liberally construed to meet its purposes, and at all relevant times, the Supervisor of
DOGGR (the “Supervisor”) was vested with “all power, including the authority to adopt rules and regulations,
which may be necessary to carry out the purposes of [Division 3].” (Pub. Res. Code, § 3013.)
The Supervisor has the authority to: “supervise the drilling, operation, maintenance, and abandonment of wells
and the operation, maintenance, and removal or abandonment of tanks and facilities attendant to oil and gas
production . . . so as to prevent, as far as possible, damage to life, health, property, and natural resources; damage
to underground oil and gas deposits from infiltrating water and other causes; loss of oil, gas, or reservoir energy,
and damage to underground and surface waters suitable for irrigation or domestic purposes by the infiltration of,
or the addition of, detrimental substances.” (Id. § 3106, subd. (a).) Additionally, the Supervisor is authorized to:
“order such tests or remedial work as in his judgment are necessary to prevent damage to life, health, property
and natural resources; to protect oil and gas deposits from damage by underground water; or to prevent the
escape of water into underground formations, or to prevent the infiltration of detrimental substances into
underground or surface water suitable for irrigation or domestic purposes, to the best interests of the neighboring
property owners and the public.” (Id. § 3224.) When the Supervisor issues an order pursuant to this authority, the
owner or operator “must commence in good faith the work ordered and continue to completion” within 30 days of
service of the order or, if the order is appealed, within 10 days of affirmance of the order. (Id., § 3226.) An owner
or operator may appeal an order, which “operate[s] as a stay of the order” unless the Supervisor determines “that
an emergency exists” pursuant to section 3226 of the Public Resources Code. (Id. §§ 3226, 3350, subd. (b)(1).)
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There is a well-defined statutory process for appeal and review of the administrative orders of DOGGR set out in
Article 6 of Division 3 of the Public Resources Code.
Section 3550 provides the procedure for an operator appeal. This section states that an appeal operates as a stay
of the order, except as to emergency orders. If the order is an emergency order to cease injection, then the
operator shall cease injection as soon as it is safe to do so. Subparagraph (b)(2) of this section provides that
if an emergency order is set aside or modified on appeal, the Supervisor shall refund the reasonable costs incurred
by the operator for whatever work is not required by the set-aside or modified order or shall not impose costs for
work performed by the Supervisor or the Supervisor's agents if the work is excluded from the modified order or
the order is set aside. Only the costs of work performed shall be refunded, and there shall be no reimbursement
for lost profits or increased production costs. Subparagraph (b)(4) of this section provides that If the operator
believes that it will be irretrievably injured by the performance of the work required to alleviate the emergency
pending the outcome of the appeal, the operator may seek an order from the appropriate superior court
restraining the enforcement of the order pending the outcome of the appeal.
Under section 3552, the procedure for appeal of an order is quasi-judicial, and includes provision for conversion to
a hearing under the Administrative Procedures Act:
(a) A hearing conducted by the director shall adhere to the following:
(1) When an order is not issued as an emergency order, within 30 days from the date of the service of the
notice of appeal, the director shall provide to the operator notice of the time and place of the hearing.
The hearing shall take place within 30 days after the date of the director's notice. The notice shall inform
the operator that the director may extend the date of the hearing for up to 60 days for good cause
upon his or her own motion, or an application of the operator or the supervisor.
(2) When an order has been issued as an emergency order, within 10 days from the date of the service of
the notice of appeal, the director shall provide to the operator notice of the time and place of the hearing.
The hearing shall take place within 20 days after the date of the director's notice. The notice shall inform
the operator that the director may extend the date of the hearing for up to 30 days for good cause
upon his or her own motion, or an application of the operator or the supervisor.
(b) The director shall conduct the hearing within the district where the majority of the wells or production
facilities that are the subject of the order are located, or the hearing may be conducted at a location
outside of that district upon application of the operator. The hearing shall be reported by a stenographic
reporter.
(c) The notice of hearing shall inform the operator of its right to file a written answer to the charges no
later than 10 days before the date of the hearing. The notice also shall inform the operator that it has the
right to present oral and documentary evidence at the hearing.
(d) Upon a verified and timely petition of the operator, the director may order the testimony of a witness
at the hearing. The petition shall be served upon the director and the other party within five days after
the filing of an appeal and shall set forth the name and address of the witness whose testimony is
requested, to the extent known; a showing of the materiality of the testimony; and a showing that the
witness cannot be compelled to testify absent an order of the director. The supervisor may file an
opposition to the petition within five days after the petition is served. The director shall either deny or
grant the petition within 10 days after receipt of the petition. Upon granting a petition, the director shall
issue a subpoena pursuant to Section 3357 compelling the testimony of the witness at the
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hearing. Obtaining subpoenas may be considered good cause to extend the date of the hearing under
paragraph (1) or (2) of subdivision (a).
(e) The director may convert a hearing pursuant to this section to a formal hearing conducted in
accordance with Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the
Government Code in any of the following circumstances:
(1) The operator makes a showing satisfactory to the director that the order being appealed is likely to
result in termination of an established oil or gas producing or injection operation.
(2) It appears to the director that the hearing will involve complex evidentiary or procedural issues that
will cause more than minimal delay or burdens.
(3) The operator and the supervisor agree and stipulate to convert the hearing to a formal hearing.
(f) The conversion of a hearing pursuant to this section to a formal hearing shall be conducted in
accordance with Article 15 (commencing with Section 11470.10) of Chapter 4.5 of Part 1 of Division 3 of
Title 2 of the Government Code. If a hearing for an appeal of an emergency order is converted to a formal
hearing, the supervisor shall endeavor to schedule and notice a formal emergency hearing as soon as
reasonably possible and, notwithstanding Section 11517 of the Government Code, the director shall only
have 30 days from receipt of the administrative law judge's proposed emergency hearing decision to act
as prescribed in subparagraphs (A) to (E), inclusive, of paragraph (2) of subdivision (c) of Section 11517 of
the Government Code.
(g) The director or his or her designee shall permit inconspicuous personal recording devices to be used by
persons during a hearing pursuant to this section to make sound recordings as personal notes of the
proceedings. A person proposing to use a recording device shall provide advance notice to the director or
his or her designee. The recordings may not be used for any purpose other than as personal notes.
Section 3553 provides for written deadlines for written determination of appeals. Section 3554 provides for judicial
review under principles of administrative mandamus. Section 3555 provides the scope of judicial review:
When an operator seeks judicial review of a decision of the director, including a decision following a
hearing conducted in accordance with Chapter 5 (commencing with Section 11500) of Part 1 of Division 3
of Title 2 of the Government Code, the court shall hear the cause on the record before the director or an
administrative law judge. New or additional evidence shall not be introduced in court. The court's inquiry
shall extend to whether the director acted without or in excess of jurisdiction, whether there was a fair
hearing, and whether there is any prejudicial abuse of discretion. Abuse of discretion is established if the
administrative proceeding has not been conducted in the manner required by law, the decision is not
supported by the findings, or the findings are not supported by substantial evidence in light of the whole
record.
VII. Analysis
A. The Court Presumes That There is Substantial Evidence of Chevron’s Negligence for Purposes of
This Analysis
TRC has presented a significant offer of proof in connection with the severed trial which it states is “illustrative,” in
that it does not purport to set forth the entire body of evidence TRC has at its disposal for trial. The offer of proof
demonstrates that TRC is prepared to offer ample evidence to prove that Chevron negligently managed the
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oilfield, that Chevron’s conduct caused the surface expressions to erupt which prompted DOGGR’s orders, and that
Chevron has admitted that the surface expressions caused DOGGR to act. The court presumes that Chevron
vehemently disputes much of what is stated in the offer of proof, and that Chevron is prepared to offer its own
substantial evidence to the contrary.
The offers of proof beg the questions presented. The court will presume that TRC may offer this evidence at trial,
and that Chevron will answer TRC’s evidence with Chevron’s own. The court is not deciding disputed issues of fact.
The question presented by the severed trial is analytically more narrow, although it certainly has weight and effect
upon the trial going forward. Chevron has never argued for the purposes here, nor is the court deciding, whether
TRC may claim lost profits and out of pocket costs caused by injury to TRC’s property if TRC has the requisite
evidence to do so. The availability of any such evidence may be impacted by the second question presented by
Chevron’s Motion In Limine No. 13 and the court’s ruling thereon, but it is not expressly excluded. The issue for
decision in the severed matter is whether TRC may claim lost profits and out of pocket costs caused by the DOGGR
Orders alone. Regardless of the court’s ultimate ruling, the matters in the offer of proof are irrelevant. If the
answer at law is “Yes,” then TRC may proceed with its evidence. If the answer at law is “No,” then the proffer does
not satisfy the issue.
B. The Evidentiary Question
The court chooses to first address the second question presented.
Chevron brings Motion In Limine No. 13 to preclude TRC from introducing argument or evidence that: (i) the
DOGGR Orders constitute evidence of Chevron’s negligence; (ii) Chevron’s conduct caused DOGGR to issue the
orders, or any cause or reason why DOGGR issued the orders; or (iii) Chevron improperly influenced, coerced, or
misled DOGGR to issue the orders. Chevron argues that none of the steam shut-in orders at issue establish
negligence. Chevron points out that none of the statutory provisions referenced in the orders set forth a standard
of care applicable to private parties. Chevron also argues that DOGGR does not make a determination that
Chevron’s (or for that matter TRC’s) actions were negligent in the various orders. As to causation, Chevron argues
that none of TRC’s experts may or do offer any opinion on why DOGGR issued the shut-in orders, and that it is
inappropriate for them to speculate or offer opinion that Chevron’s conduct “caused” DOGGR to issue its orders.
Chevron finally argues that TRC may not assert that Chevron “coerced” DOGGR to issue the orders.
TRC concedes that it does not intend to use the orders as evidence of Chevron’s negligence. TRC states that it will
present evidence that Chevron’s mismanagement of its field created dangerous conditions, resulting in DOGGR’s
orders and the need to shut down operations on TRC’s property. TRC argues the DOGGR orders constitute
evidence that the area was unsafe, and TRC will offer evidence that: (1) Chevron negligently created the unsafe
conditions (such as surface expressions) and (2) TRC could not steam in unsafe conditions.
In reply, Chevron points out that TRC concedes that it is not offering the DOGGR orders to prove negligence.
Further, Chevron argues that TRC’s claim that the relief requested by Chevron would remove the issue of causation
from the jury would only be true if there was no opinion testimony that TRC’s harm was caused by property
damage created by Chevron. However, Chevron reiterates that the motion asks the Court only to preclude
inadmissible evidence in the form of TRC’s witnesses and experts.
The Court determines as follows:
1. The DOGGR Orders Are Not Res Judicata
MINUTES
Page 9 of 23
TRC OPERATING COMPANY VS CHEVRON U.S.A. S1500CV282520
MINUTES FINALIZED BY: Veronica Lancaster ON: 7/12/2021
No claim is made that the DOGGR Orders are quasi-adjudicative after full administrative process and/or court
mandamus proceedings, in order to serve as administrative res judicata. The court is not bound by DOGGR’s
findings and conclusions that the surface expressions on the properties constitute a danger warranting its four-
year shut-in command. (See AICCO, Inc. v. Ins. Co. of N. Am. (2001) 90 Cal. App. 4th 579, 593.) The DOGGR orders
may not be admitted and published to the jury as a prior administrative adjudication.
2. The DOGGR Orders Are Not Rules of General Application
The DOGGR Orders are not rules of general applicability by an administrative agency made in a quasi-legislative
function, such as regulations contained in the California Code of Regulations. As such, these orders cannot serve as
the basis of negligence per se. TRC makes no such contention. The court simply notes that the DOGGR Orders may
not be admitted and published to the jury as a rule of administrative law.
3. The DOGGR Orders Contain Inadmissible Opinion
Portions of the DOGGR Orders are inadmissible if offered to prove the truth of DOGGR’s opinions, beliefs,
determinations, and conclusions. An official record, as an exception to hearsay, is not admissible for opinion.
Under Evidence Code section 1280, the orders may be admitted for proof of an “act, condition, or event.” By way
of example:
The psychiatrist's opinion that the victim suffered from a sexual psychopathology was merely an opinion,
not an act, condition or event within the meaning of the statute. “'... In order for a record to be
competent evidence under that section it must be a record of an act, condition or event; a conclusion is
neither an act, condition or event; it may or may not be based upon conditions, acts or events observed
by the person drawing the conclusion; it may or may not be founded upon sound reason; the person who
has formed the conclusion recorded may or may not be qualified to form it and testify to it. Whether the
conclusion is based upon observation of an act, condition or event or upon sound reason or whether the
person forming it is qualified to form it and testify to it can only be established by the examination of that
party under oath.... It is true that some diagnoses are a statement of a fact or condition, for example, a
diagnosis that a man has suffered a compound fracture of the femur is a record of what the person
making the diagnosis has seen but this is not true where the diagnosis is but the reasoning of the person
making it arrived at from the consideration of many different factors.’” (People v. Williams, 187 Cal.App.
2d 355, 365 [9 Cal.Rptr. 722], quoting People v. Terrell, 138 Cal.App.2d 35, 57 [291 P.2d 155]; see
also Hutton v. Brookside Hospital, 213 Cal.App.
Preview
Superior Court of California County of Kern Bakersfield Department 11 Date: 07/12/2021 S1500CV282520 TRC OPERATING COMPANY VS CHEVRON U.S.A. Courtroom Staff Honorable: David R. Lampe Clerk: Veronica D. Lancaster NATURE OF PROCEEDINGS: TENTATIVE RULING Tentative Ruling I. Summary The parties to this action are Plaintiffs and Cross-Defendants TRC Operating Company, Inc. and TRC Cypress Group, LLC (“TRC”) and Defendant and Cross-complainant Chevron U.S.A. Inc. (“Chevron”). Permeating this litigation from its inception is whether Chevron may be held liable for TRC’s lost profits or other economic damages which arise solely as a result of orders by the California Division of Oil, Gas, and Geothermal Resources (“DOGGR,” now CalGEM) which prohibited certain oil production on TRC’s property from 2011 to 2015 1 due to “surface expressions” occurring on both Chevron’s and TRC’s adjacent lands. This is a scope of liability issue which is a question of law for the court in the first instance. The court severed this issue for court trial. As a second issue upon prospective evidence, Chevron moves the court for an order in limine that, absent independent foundational expert testimony, TRC may not present the DOGGR Orders alone as evidence that 2 Chevron’s conduct caused TRC’s economic harm. This is an issue presented by Chevron’s Motion In Limine No. 13. The court finds Chevron’s arguments to be the more persuasive on both issues as stated herein. The following analysis is not intended as a Statement of Decision by the court. A Statement of Decision is not necessary or appropriate at this stage of the proceeding. A trial court is only required to issue a Statement of Decision on the trial of a “question of fact.” (Code Civ. Proc., § 632.) The court is not adjudicating any question of disputed or controverted fact. The issue before the court is solely one of law. Furthermore, the issues for trial are severed, and no judgment is yet appropriate. Additionally, this ruling constitutes a final ruling upon Chevron’s Motion In Limine No. 13. II. Pleadings 1 The court, on its own motion, has severed this issue for trial based upon judicially noticeable or undisputed facts. The court has issued a separate order upon its motion to sever. 2 The court makes a consolidated ruling upon these two issues. They are discrete questions, but also, as was readily apparent from the argument at the severed trial and upon Motion In Limine No. 13, the two issues are inexorably connected. MINUTES Page 1 of 23 TRC OPERATING COMPANY VS CHEVRON U.S.A. S1500CV282520 MINUTES FINALIZED BY: Veronica Lancaster ON: 7/12/2021 This case proceeds to trial upon the Second Amended Complaint by TRC against Chevron for Causes of Action stated as Negligence, Private Nuisance, and Past and Continuing Trespass. The legal and evidentiary matters addressed in this ruling apply to all three causes of action. The case also proceeds upon Chevron’s Cross-complaint for Negligence, Trespass, Nuisance, and Declaratory Relief. III. Relevant Procedural History After TRC initially filed its complaint, Chevron demurred. The demurrer was heard by the court on November 5, 2014. The court issued its ruling on December 2, 2014, sustaining the demurrer and also issuing a stay based upon the doctrine of primary jurisdiction (in light of proceedings then pending before DOGGR). The issue of causation was first addressed at that time. The court stated: Fundamentally, the complaint does not assert physical injury to property, nor does it adequately plead causation, since the act creating the loss is the DOGGR order, not Chevron's conduct. The ordinary course would be for the court to grant leave to amend for pleading the necessary missing elements of the case, but the better course in these circumstances, is to grant Chevron's request to stay or abate the action based upon the authority cited at page 15, subsection g of Chevron's points and authorities. On December 15, 2016, the court granted TRC’s motion to lift the stay in part, and granted leave to amend. On January 4, 2017, TRC filed a First Amended Complaint. On January 17, 2017, the parties stipulated to a relief from stay which the court confirmed by order. On April 4, 2017, the court heard Chevron’s second demurrer. On April 12, 2017, the court overruled the demurrer, except as to the Fourth Cause of Action (for Strict Liability, which the court sustained without leave). The court also granted Chevron’s motion to strike the allegations regarding the death of Chevron’s employee David Taylor (which remain in the final amended pleading according to TRC only for appeal purposes). On June 11, 2019, the court heard Chevron’s Motion In Limine No. 1 which was the third effort by Chevron to address the issues presented here. On July 10, 2019, the court denied Motion In Limine No. 1, and stated: The court denies the motion in limine of defendant and cross—complainant Chevron U.S.A. Inc. ("Chevron") to exclude evidence of damages attributable to orders issued by the Division of Oil, Gas and Geothermal Resources ("DOGGR"). The motion is, at a minimum, premature. Granting the relief requested would require resolution of a dispositive question of fact regarding causation-i.e., whether or not Plaintiff's lost profits and out-of-pocket expenditures were, in fact, attributable to Chevron or DOGGR. At the June 11, 2019, hearing, the following colloquy took place between the court and counsel for TRC: THE COURT:· Well, then you're agreeing with the initial point I made when we started this hearing, which is that -- leave DOGGR aside, DOGGR is incidental. MR. TAYBACK:· It is incidental. THE COURT:· But it was informative. MR. TAYBACK:· Absolutely.· You can't sort of cut the narrative discussion of the case out of it. However, it is incidental.· What happened here is Chevron caused the harm that prohibited TRC from being able to safely steam.· And that's our case and that has·been our case. THE COURT:· And it will be the case presented by your experts independently of what DOGGR has to say. MINUTES Page 2 of 23 TRC OPERATING COMPANY VS CHEVRON U.S.A. S1500CV282520 MINUTES FINALIZED BY: Veronica Lancaster ON: 7/12/2021 MR. TAYBACK:· Independently of what DOGGR has to say. On July 31, 2020, the court heard Chevron’s Motion for Summary Adjudication of its Fourth Cause of Action for Declaratory Relief which raised the issues presented here. On September 4, 2020, the court denied summary adjudication, principally because such a ruling would not dispose of TRC’s claim for damages and because it remained a triable issue of fact in the court’s view as to whether TRC’s lost profits and expenditures were attributable to Chevron, based in part upon TRC’s Statement of Additional Material Facts that TRC would cease steaming wells close to surface expressions as a matter of standard practice. The court stated: Specifically applicable in the context of Chevron’s motion as to its declaratory relief cause of action, under Section 437c, “[a] motion for summary adjudication shall be granted only if it completely disposes of a cause of action . . . .” (Code Civ. Proc. § 437c, subd. (f)(1).) “[I]n keeping with the purposes of Code of Civil Procedure section 437c, subdivision (f), a grant of summary adjudication in this area must cover the entire claim. The purpose of the enactment of Code of Civil Procedure section 437c, subdivision (f) was to stop the practice of piecemeal adjudication of facts that did not completely dispose of a substantive area.” (Catalano v. Superior Court (2000) 82 Cal.App.4th 91, 97; see also Hood v. Superior Court (1995) 33 Cal.App.4th 319, 323-324.) The Court determines Defendant Chevron has failed to meet its burden as the moving party. Despite the passage of time, the Court’s June 10, 2019 ruling on the motion in limine remains applicable. Finding in Chevron’s favor on its cause of action for declaratory relief would require resolution of a dispositive question of fact regarding causation—i.e., whether or not Plaintiff’s lost profits and out-of- pocket expenditures were, in fact, attributable to Chevron or DOGGR.” This remains a fact-intensive issue that is simply not amenable to summary adjudication. Whether TRC’s damages were proximately caused by Chevron’s negligence or solely caused by the DOGGR orders is a heavily disputed, fact-intensive question. Chevron fails to persuade the Court the DOGGR orders unequivocally constitute a superseding cause, cutting off Chevron’s liability for TRC’s purported damages. As Chevron notes in its motion, “if the damage…would have occurred even if the DOGGR had not issued the order, DOGGR’s issuance of the order does not operate to exculpate the wrongdoing party from liability.” (Motion, page 9:12-13; and see Huang v. The Bicycle Casino, Inc. (2016) 4 Cal.App.5th 329, 348.) Chevron’s evidence demonstrates the entire issue is unsettled. For instance, Chevron points to a June 10, 2015 DOGGR order that Chevron interprets as placing blame for some of the surface expressions on TRC’s steaming operations. Unless and until the source and/or cause of the surface expressions are determined, Chevron’s request for declaratory relief is not possible. (See, e.g., Chevron’s Evidence in Support, Exs. 7 and 19; Genoch Decl., ¶¶ 6 and 8; Request for Judicial Notice, ¶ 4.) Further, Chevron’s motion does not completely dispose of the issue of damages. Thereafter, the court ultimately set this matter for jury trial to start August 2, 2021. Due to the considerable trial issues presented by this case, including the matters addressed in this ruling, the court advanced the start of trial to June 28, 2021 and has also continued case management in sessions before the court. The court moved to sever the first issue here presented, and finally ordered severance on June 25, 2021. The severed matter was tried to the court upon facts submitted for judicial notice on July 1, 2021. The evidentiary issue is raised by Chevron’s Motion In Limine No. 13. IV. Questions Presented A. May Chevron be held liable for TRC’s lost profits or other economic damages which result solely from DOGGR Orders? MINUTES Page 3 of 23 TRC OPERATING COMPANY VS CHEVRON U.S.A. S1500CV282520 MINUTES FINALIZED BY: Veronica Lancaster ON: 7/12/2021 B. May TRC present the DOGGR Orders alone as evidence that Chevron’s conduct caused TRC’s economic harm absent foundational expert testimony independent of the DOGGR Orders? V. Facts 3 The court takes judicial notice of the following facts : TRC and Chevron own/lease and operate adjacent oil-producing properties in the Midway-Sunset Oil Field in Kern County, California. Both TRC and Chevron produce oil on their properties from a common diatomite reservoir underlying both properties using a method called cyclic steaming. In July 2011, DOGGR began issuing a series of orders that restricted steaming on both TRC’s property and Chevron’s property in response to observations that fluids were coming to the surface on both properties. On June 21, 2011, Chevron reported to DOGGR that a surface expression of steam was occurring in the vicinity of Well 20 and Well K210 in the Midway-Sunset Field (Section 21, T. 32S, R. 23E) on its property. Chevron dispatched staff to investigate the surface expression and, while investigating, a Chevron employee fell through the surface and died. The fatality occurred at Midway-Sunset Field at the southeast corner of the Well 20 site and was reported to DOGGR on June 21, 2011 at 10:45 a.m. On July 6, 2011, “[a]cting pursuant to Public Resources Code sections 3224 and 3226,” DOGGR (by the State Oil and Gas Supervisor in Sacramento, Elena M. Miller) issued Order No. 1012. The court takes judicial notice of the contents of the order. DOGGR stated that Well 20 is a damaged well and surface expressions of fluids and gases in the vicinity of Well 20 were first reported to DOGGR prior to 2008. DOGGR stated that attempts by Chevron to plug and abandon Well 20 failed and in Spring 2011, Chevron commenced efforts to construct containment of the surface expression in the vicinity of Well 20. Order No. 1012 required Chevron to cease steaming operations within a 150-foot radius of the surface expression near Well 20. The order further required Chevron to increase the shut- in radius to 300 feet “[i]f after five days steam or fluids continue to come to the surface.” The order indicates that the Supervisor “has determined that immediate steps must be taken in order to prevent future harm from occurring as a result of the surface expression.” On July 19, 2011, DOGGR issued Order No. 1014. The court takes judicial notice of the contents of the order. That order recites that, “[i]n addition to the surface expression on Chevron's lease, a surface expression on TRC Operating Company lnc[.],'s (TRC) lease, near well ‘Bull’ 9, also began on June 21, 2011.” DOGGR stated that a volume of oil and water was coming to the surface from this expression that merited immediate remediation. 3 TRC’s objections to Chevron’s Request for Judicial Notice are overruled. The court may take judicial notice of “[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.” (Evid. Code, § 452(h).) The sources of judicial notice would not be received in evidence (unless otherwise admitted from the proffer of evidence by the parties), but merely consulted by the court to determine whether or not to take judicial notice and the tenor of the matter to be noticed. (Law Rev. Com. Comment to Evid. Code, § 452; see People v. Archerd (1970) 3 Cal.3d 615, th 638; and see 1 Witkin, Cal. Evid. (5 ed. 2020) Judicial Notice, § 32.) “In determining the propriety of taking judicial notice of a matter, or the tenor thereof” (Evid. Code, § 454), the court is free from nearly all of the restrictions of the rules of evidence. Under Evid. Code section 454(a): “(1) Any source of pertinent information, including the advice of persons learned in the subject matter, may be consulted or used, whether or not furnished by a party. (2) Exclusionary rules of evidence do not apply except for Section 352 th and the rules of privilege.” (1 Witkin, Cal. Evid. (5 ed. 2020) Judicial Notice, § 42.) MINUTES Page 4 of 23 TRC OPERATING COMPANY VS CHEVRON U.S.A. S1500CV282520 MINUTES FINALIZED BY: Veronica Lancaster ON: 7/12/2021 DOGGR stated that based on observation and statements by TRC, DOGGR estimated that as much as 100 barrels of oil and water are coming to the surface each day from the expression near well "Bull" 9. Order 1014 directed TRC to cease steam injection within 150 feet of Chevron’s Well 20 and TRC’s “Bull” 9 well. This order was likewise issued “pursuant to Public Resources Code sections 3224 and 3226.” Under the terms of the order, the shut-in radius would expand to 300 feet if fluids continued to come to the surface after five days. The order states that the Supervisor “has determined that immediate steps must be taken in order to prevent further harm from occurring as a result of these surface expressions.” TRC appealed Order No. 1014, which had the effect of staying enforcement until the appeal was resolved. On August 5, 2011, DOGGR issued Emergency Order No. 1015 “pursuant to Public Resources Code sections 3224 and 3226.” The court takes judicial notice of the contents of the order. In Order No. 1015 DOGGR stated that (1) on August 3, 2011, at least two new surface expressions, one of them five feet in radius, began within forty feet of the existing surface expression in the vicinity of Well 20; (2) on August 5, 2011, a volatile eruption began from the existing surface expression in the vicinity of Well 20, expelling rocks, other material, and emitting fluid and steam, and (3) on August 5, 2011, in response to inquiry, TRC reported to DOGGR that it had been conducting cyclic steam injection into well "Bull” 38 on August 3 and 4, 2011, in the vicinity of Well 20. DOGGR concluded that the eruptive and continuing surface expressions in the vicinity of Well 20 created an unpredictable, unstable, and dangerous situation such that life, health, property, and/or natural resources were further at risk. Order 1015 required TRC to cease steam injection within 500 feet of the surface expression near Well 20. Based on the facts outlined in the order, the Supervisor “determined that an emergency exists and immediate steps must be taken . . . in order to protect life, health, property, and natural resources.” Order 1015 also states that injection operations shall not resume within the vicinity of the surface expression until the State Oil and Gas Supervisor was satisfied that the cause of the surface expression was determined and remediated. On August 26, 2011, DOGGR issued Emergency Order No. 1016, which “rescind[ed], supersede[d], and replace[d]” the prior orders and required Chevron and TRC to cease steam injection within 800 feet of the surface expression near Well 20 until DOGGR was “satisfied that the cause of the surface expression is determined and remediated.” The court takes judicial notice of the contents of the order. In the order, which was issued pursuant to sections 3224 and 3226 of the Public Resources Code, DOGGR noted that “the expressions in the vicinity of Well 20 have increased in size and intensity since August 5.” Further, DOGGR stated that “[t]he fact that the surface expressions near Well 20 have continued since the issuance of Emergency Order 1015 indicates that the surface expressions are likely caused or significantly contributed to by cyclic steam injection operations occurring more than 500 feet away from the surface expressions,” indicating that “both TRC and Chevron have conducted cyclic steam injection operations on wells within a radius of 800 feet of the surface expressions in the vicinity of Well 20,” with TRC injecting at wells “as close as 640 feet.” Based on the facts described in the order, the Supervisor “determined that an emergency exists and immediate steps must be taken . . . in order to protect life, health, property, and natural resources.” TRC appealed Emergency Order No. 1016. On February 21, 2014, DOGGR issued a Project Approval Letter (“PAL”) to TRC. The court takes judicial notice of the contents of the PAL. Under the terms of the PAL, TRC is required to report “[a]ll surface expressions within 300 feet” of TRC’s property, including “reactivation of historic seeps, or increased flow from existing seeps.” Additionally, the PAL required TRC to suspend steam injection for “every well where the bottom-hole location is located within a 150-foot radius of the surface expression,” increasing to a 300-foot radius if “the surface expression continues to flow at a sustained or increased level” after five days until the surface expression ceases to be active. MINUTES Page 5 of 23 TRC OPERATING COMPANY VS CHEVRON U.S.A. S1500CV282520 MINUTES FINALIZED BY: Veronica Lancaster ON: 7/12/2021 On April 3, 2015, DOGGR issued Emergency Remedial Order No. 1067 to Chevron and issued Emergency Remedial Order No. 1068 to TRC. The court takes judicial notice of the contents of the orders. Emergency Remedial Order No. 1068 rescinded and replaced Emergency Order No. 1016 as to TRC. The order states that “[b]ased on information and belief arising [from] the facts [set forth in the order], and in accord with the legal authorities described in this Order, the Supervisor determined that an emergency exists and immediate action is necessary to protect life, health, property, or natural resources.” The order was issued pursuant to sections 3013, 3106, 3222, 3224, and 3226 of the Public Resources Code as well as various provisions of title 14 of the Code of Regulations. Based on the findings contained in the order, DOGGR modified the steam-ban area and required TRC to stabilize slope failures on its property and complete its DOGGR-approved work plan. On April 13, 2015, TRC appealed Emergency Remedial Order No. 1068. Additionally, on May 22, 2015, TRC filed suit against DOGGR, challenging the validity of the order and seeking to enjoin its enforcement. The court takes judicial notice of the contents of Exhibit J of Chevron’s Request for Judicial Notice.Specifically, TRC sought a declaration concerning the enforceability of Emergency Order No. 1068 and a temporary restraining order and preliminary injunction enjoining DOGGR from enforcing the requirements of Emergency Order No. 1068 pending the outcome of the hearing on TRC’s administrative appeal. On July 15, 2015, TRC and DOGGR agreed to terms of satisfaction of Emergency Remedial Order No. 1068. The court takes judicial notice of the contents of Exhibit K of Chevron’s Request for Judicial Notice. Based on the agreement, DOGGR found that TRC had “completely satisfied” Emergency Remedial Order No. 1068 and granted TRC approval “to resume its injection operations” subject to certain conditions. The agreement was incorporated into TRC’s PAL and included requirements pertaining to slope stabilization efforts on TRC’s property. Among those additional requirements, TRC was obligated to “continue to stabilize all slope failures on the west and north sides of [TRC’s] ‘Bull’ lease, and maintain a safe working environment near slope failures, including any new failures[.]” VI. DOGGR’s Regulatory Authority and Procedure Division 3 of the Public Resources Code sets forth various requirements related to oil and gas production in California. The division is to be liberally construed to meet its purposes, and at all relevant times, the Supervisor of DOGGR (the “Supervisor”) was vested with “all power, including the authority to adopt rules and regulations, which may be necessary to carry out the purposes of [Division 3].” (Pub. Res. Code, § 3013.) The Supervisor has the authority to: “supervise the drilling, operation, maintenance, and abandonment of wells and the operation, maintenance, and removal or abandonment of tanks and facilities attendant to oil and gas production . . . so as to prevent, as far as possible, damage to life, health, property, and natural resources; damage to underground oil and gas deposits from infiltrating water and other causes; loss of oil, gas, or reservoir energy, and damage to underground and surface waters suitable for irrigation or domestic purposes by the infiltration of, or the addition of, detrimental substances.” (Id. § 3106, subd. (a).) Additionally, the Supervisor is authorized to: “order such tests or remedial work as in his judgment are necessary to prevent damage to life, health, property and natural resources; to protect oil and gas deposits from damage by underground water; or to prevent the escape of water into underground formations, or to prevent the infiltration of detrimental substances into underground or surface water suitable for irrigation or domestic purposes, to the best interests of the neighboring property owners and the public.” (Id. § 3224.) When the Supervisor issues an order pursuant to this authority, the owner or operator “must commence in good faith the work ordered and continue to completion” within 30 days of service of the order or, if the order is appealed, within 10 days of affirmance of the order. (Id., § 3226.) An owner or operator may appeal an order, which “operate[s] as a stay of the order” unless the Supervisor determines “that an emergency exists” pursuant to section 3226 of the Public Resources Code. (Id. §§ 3226, 3350, subd. (b)(1).) MINUTES Page 6 of 23 TRC OPERATING COMPANY VS CHEVRON U.S.A. S1500CV282520 MINUTES FINALIZED BY: Veronica Lancaster ON: 7/12/2021 There is a well-defined statutory process for appeal and review of the administrative orders of DOGGR set out in Article 6 of Division 3 of the Public Resources Code. Section 3550 provides the procedure for an operator appeal. This section states that an appeal operates as a stay of the order, except as to emergency orders. If the order is an emergency order to cease injection, then the operator shall cease injection as soon as it is safe to do so. Subparagraph (b)(2) of this section provides that if an emergency order is set aside or modified on appeal, the Supervisor shall refund the reasonable costs incurred by the operator for whatever work is not required by the set-aside or modified order or shall not impose costs for work performed by the Supervisor or the Supervisor's agents if the work is excluded from the modified order or the order is set aside. Only the costs of work performed shall be refunded, and there shall be no reimbursement for lost profits or increased production costs. Subparagraph (b)(4) of this section provides that If the operator believes that it will be irretrievably injured by the performance of the work required to alleviate the emergency pending the outcome of the appeal, the operator may seek an order from the appropriate superior court restraining the enforcement of the order pending the outcome of the appeal. Under section 3552, the procedure for appeal of an order is quasi-judicial, and includes provision for conversion to a hearing under the Administrative Procedures Act: (a) A hearing conducted by the director shall adhere to the following: (1) When an order is not issued as an emergency order, within 30 days from the date of the service of the notice of appeal, the director shall provide to the operator notice of the time and place of the hearing. The hearing shall take place within 30 days after the date of the director's notice. The notice shall inform the operator that the director may extend the date of the hearing for up to 60 days for good cause upon his or her own motion, or an application of the operator or the supervisor. (2) When an order has been issued as an emergency order, within 10 days from the date of the service of the notice of appeal, the director shall provide to the operator notice of the time and place of the hearing. The hearing shall take place within 20 days after the date of the director's notice. The notice shall inform the operator that the director may extend the date of the hearing for up to 30 days for good cause upon his or her own motion, or an application of the operator or the supervisor. (b) The director shall conduct the hearing within the district where the majority of the wells or production facilities that are the subject of the order are located, or the hearing may be conducted at a location outside of that district upon application of the operator. The hearing shall be reported by a stenographic reporter. (c) The notice of hearing shall inform the operator of its right to file a written answer to the charges no later than 10 days before the date of the hearing. The notice also shall inform the operator that it has the right to present oral and documentary evidence at the hearing. (d) Upon a verified and timely petition of the operator, the director may order the testimony of a witness at the hearing. The petition shall be served upon the director and the other party within five days after the filing of an appeal and shall set forth the name and address of the witness whose testimony is requested, to the extent known; a showing of the materiality of the testimony; and a showing that the witness cannot be compelled to testify absent an order of the director. The supervisor may file an opposition to the petition within five days after the petition is served. The director shall either deny or grant the petition within 10 days after receipt of the petition. Upon granting a petition, the director shall issue a subpoena pursuant to Section 3357 compelling the testimony of the witness at the MINUTES Page 7 of 23 TRC OPERATING COMPANY VS CHEVRON U.S.A. S1500CV282520 MINUTES FINALIZED BY: Veronica Lancaster ON: 7/12/2021 hearing. Obtaining subpoenas may be considered good cause to extend the date of the hearing under paragraph (1) or (2) of subdivision (a). (e) The director may convert a hearing pursuant to this section to a formal hearing conducted in accordance with Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code in any of the following circumstances: (1) The operator makes a showing satisfactory to the director that the order being appealed is likely to result in termination of an established oil or gas producing or injection operation. (2) It appears to the director that the hearing will involve complex evidentiary or procedural issues that will cause more than minimal delay or burdens. (3) The operator and the supervisor agree and stipulate to convert the hearing to a formal hearing. (f) The conversion of a hearing pursuant to this section to a formal hearing shall be conducted in accordance with Article 15 (commencing with Section 11470.10) of Chapter 4.5 of Part 1 of Division 3 of Title 2 of the Government Code. If a hearing for an appeal of an emergency order is converted to a formal hearing, the supervisor shall endeavor to schedule and notice a formal emergency hearing as soon as reasonably possible and, notwithstanding Section 11517 of the Government Code, the director shall only have 30 days from receipt of the administrative law judge's proposed emergency hearing decision to act as prescribed in subparagraphs (A) to (E), inclusive, of paragraph (2) of subdivision (c) of Section 11517 of the Government Code. (g) The director or his or her designee shall permit inconspicuous personal recording devices to be used by persons during a hearing pursuant to this section to make sound recordings as personal notes of the proceedings. A person proposing to use a recording device shall provide advance notice to the director or his or her designee. The recordings may not be used for any purpose other than as personal notes. Section 3553 provides for written deadlines for written determination of appeals. Section 3554 provides for judicial review under principles of administrative mandamus. Section 3555 provides the scope of judicial review: When an operator seeks judicial review of a decision of the director, including a decision following a hearing conducted in accordance with Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, the court shall hear the cause on the record before the director or an administrative law judge. New or additional evidence shall not be introduced in court. The court's inquiry shall extend to whether the director acted without or in excess of jurisdiction, whether there was a fair hearing, and whether there is any prejudicial abuse of discretion. Abuse of discretion is established if the administrative proceeding has not been conducted in the manner required by law, the decision is not supported by the findings, or the findings are not supported by substantial evidence in light of the whole record. VII. Analysis A. The Court Presumes That There is Substantial Evidence of Chevron’s Negligence for Purposes of This Analysis TRC has presented a significant offer of proof in connection with the severed trial which it states is “illustrative,” in that it does not purport to set forth the entire body of evidence TRC has at its disposal for trial. The offer of proof demonstrates that TRC is prepared to offer ample evidence to prove that Chevron negligently managed the MINUTES Page 8 of 23 TRC OPERATING COMPANY VS CHEVRON U.S.A. S1500CV282520 MINUTES FINALIZED BY: Veronica Lancaster ON: 7/12/2021 oilfield, that Chevron’s conduct caused the surface expressions to erupt which prompted DOGGR’s orders, and that Chevron has admitted that the surface expressions caused DOGGR to act. The court presumes that Chevron vehemently disputes much of what is stated in the offer of proof, and that Chevron is prepared to offer its own substantial evidence to the contrary. The offers of proof beg the questions presented. The court will presume that TRC may offer this evidence at trial, and that Chevron will answer TRC’s evidence with Chevron’s own. The court is not deciding disputed issues of fact. The question presented by the severed trial is analytically more narrow, although it certainly has weight and effect upon the trial going forward. Chevron has never argued for the purposes here, nor is the court deciding, whether TRC may claim lost profits and out of pocket costs caused by injury to TRC’s property if TRC has the requisite evidence to do so. The availability of any such evidence may be impacted by the second question presented by Chevron’s Motion In Limine No. 13 and the court’s ruling thereon, but it is not expressly excluded. The issue for decision in the severed matter is whether TRC may claim lost profits and out of pocket costs caused by the DOGGR Orders alone. Regardless of the court’s ultimate ruling, the matters in the offer of proof are irrelevant. If the answer at law is “Yes,” then TRC may proceed with its evidence. If the answer at law is “No,” then the proffer does not satisfy the issue. B. The Evidentiary Question The court chooses to first address the second question presented. Chevron brings Motion In Limine No. 13 to preclude TRC from introducing argument or evidence that: (i) the DOGGR Orders constitute evidence of Chevron’s negligence; (ii) Chevron’s conduct caused DOGGR to issue the orders, or any cause or reason why DOGGR issued the orders; or (iii) Chevron improperly influenced, coerced, or misled DOGGR to issue the orders. Chevron argues that none of the steam shut-in orders at issue establish negligence. Chevron points out that none of the statutory provisions referenced in the orders set forth a standard of care applicable to private parties. Chevron also argues that DOGGR does not make a determination that Chevron’s (or for that matter TRC’s) actions were negligent in the various orders. As to causation, Chevron argues that none of TRC’s experts may or do offer any opinion on why DOGGR issued the shut-in orders, and that it is inappropriate for them to speculate or offer opinion that Chevron’s conduct “caused” DOGGR to issue its orders. Chevron finally argues that TRC may not assert that Chevron “coerced” DOGGR to issue the orders. TRC concedes that it does not intend to use the orders as evidence of Chevron’s negligence. TRC states that it will present evidence that Chevron’s mismanagement of its field created dangerous conditions, resulting in DOGGR’s orders and the need to shut down operations on TRC’s property. TRC argues the DOGGR orders constitute evidence that the area was unsafe, and TRC will offer evidence that: (1) Chevron negligently created the unsafe conditions (such as surface expressions) and (2) TRC could not steam in unsafe conditions. In reply, Chevron points out that TRC concedes that it is not offering the DOGGR orders to prove negligence. Further, Chevron argues that TRC’s claim that the relief requested by Chevron would remove the issue of causation from the jury would only be true if there was no opinion testimony that TRC’s harm was caused by property damage created by Chevron. However, Chevron reiterates that the motion asks the Court only to preclude inadmissible evidence in the form of TRC’s witnesses and experts. The Court determines as follows: 1. The DOGGR Orders Are Not Res Judicata MINUTES Page 9 of 23 TRC OPERATING COMPANY VS CHEVRON U.S.A. S1500CV282520 MINUTES FINALIZED BY: Veronica Lancaster ON: 7/12/2021 No claim is made that the DOGGR Orders are quasi-adjudicative after full administrative process and/or court mandamus proceedings, in order to serve as administrative res judicata. The court is not bound by DOGGR’s findings and conclusions that the surface expressions on the properties constitute a danger warranting its four- year shut-in command. (See AICCO, Inc. v. Ins. Co. of N. Am. (2001) 90 Cal. App. 4th 579, 593.) The DOGGR orders may not be admitted and published to the jury as a prior administrative adjudication. 2. The DOGGR Orders Are Not Rules of General Application The DOGGR Orders are not rules of general applicability by an administrative agency made in a quasi-legislative function, such as regulations contained in the California Code of Regulations. As such, these orders cannot serve as the basis of negligence per se. TRC makes no such contention. The court simply notes that the DOGGR Orders may not be admitted and published to the jury as a rule of administrative law. 3. The DOGGR Orders Contain Inadmissible Opinion Portions of the DOGGR Orders are inadmissible if offered to prove the truth of DOGGR’s opinions, beliefs, determinations, and conclusions. An official record, as an exception to hearsay, is not admissible for opinion. Under Evidence Code section 1280, the orders may be admitted for proof of an “act, condition, or event.” By way of example: The psychiatrist's opinion that the victim suffered from a sexual psychopathology was merely an opinion, not an act, condition or event within the meaning of the statute. “'... In order for a record to be competent evidence under that section it must be a record of an act, condition or event; a conclusion is neither an act, condition or event; it may or may not be based upon conditions, acts or events observed by the person drawing the conclusion; it may or may not be founded upon sound reason; the person who has formed the conclusion recorded may or may not be qualified to form it and testify to it. Whether the conclusion is based upon observation of an act, condition or event or upon sound reason or whether the person forming it is qualified to form it and testify to it can only be established by the examination of that party under oath.... It is true that some diagnoses are a statement of a fact or condition, for example, a diagnosis that a man has suffered a compound fracture of the femur is a record of what the person making the diagnosis has seen but this is not true where the diagnosis is but the reasoning of the person making it arrived at from the consideration of many different factors.’” (People v. Williams, 187 Cal.App. 2d 355, 365 [9 Cal.Rptr. 722], quoting People v. Terrell, 138 Cal.App.2d 35, 57 [291 P.2d 155]; see also Hutton v. Brookside Hospital, 213 Cal.App.