SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF MONTEREY. Petitioner and Plaintiff,

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1 MATT KLINE (S.B. #) BARTON H. THOMPSON (S.B. #) DIMITRI D. PORTNOI (S.B. #1) HEATHER WELLES (S.B. #0) O MELVENY & MYERS LLP Avenue of the Stars Los Angeles, California 00-0 Telephone: () -00 Facsimile: ()- Attorneys for Petitioner and Plaintiff CALIFORNIA RESOURCES CORPORATION ELECTRONICALLY FILED BY Superior Court of California, County of Monterey On //0 1:: PM By: Janet Nicholson, Deputy SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF MONTEREY CALIFORNIA RESOURCES CORPORATION, a Delaware corporation, v. Petitioner and Plaintiff, COUNTY OF MONTEREY, a general law county; and DOES 1 through, inclusive, Respondents and Defendants. Case No. CV0000 VERIFIED PETITION FOR WRIT OF MANDAMUS AND COMPLAINT FOR DAMAGES AND INJUNCTIVE AND DECLARATORY RELIEF JURY TRIAL DEMANDED 0 1 Petitioner and Plaintiff CALIFORNIA RESOURCES CORPORATION ( CRC ) hereby files this Writ of Mandate and Complaint for declaratory relief, injunctive relief, and damages against the COUNTY OF MONTEREY ( County ), and alleges: I. INTRODUCTION 1. An initiative known as Measure Z, titled by its proponents as Protect Our Water: Ban Fracking and Limit Risky Oil Operations Initiative, passed in Monterey County on November, 0. Measure Z s proponents misleadingly focused their political campaign almost exclusively on one provision, which, as this title would suggest, bans fracking, a common name for a technique known as hydraulic fracturing that helps stimulate oil and gas - 1 -

2 production. Given the geology in Monterey County, however, the high-pressure and high-volume hydraulic fracturing technique commonly known as fracking is not used in the region. The other provisions of Measure Z which were all but ignored by its proponents during the campaign, and buried in the measure s findings and purpose seek to block essentially all oil and gas production in Monterey County. One bans new oil and gas drilling altogether, and the other interferes with existing permitted operations by prohibiting injection or impoundment of water produced alongside extracted oil and gas.. Measure Z does not even purport to ban these operations directly, however, because the County lacks the power to regulate oil and gas drilling, injection, impoundment, or well stimulation. Rather, the measure seeks to avoid limits on the County s authority by amending the Monterey County General Plan, the Monterey County Local Coastal Program, and the Fort Ord Master Plan to bar land uses necessary to conduct these activities.. CRC, and its predecessor in interest, has been in the business of conducting oil and gas exploration, development, and production in California for more than a hundred years. CRC holds mineral rights in thousands of acres of land in Monterey County that it intends to use for oil and gas development as part of these business operations. CRC has already invested significantly in Monterey County, including purchasing property, paying property taxes year after year, and engaging in exploration activities. CRC paid more than half a million dollars in property taxes last year alone.. Measure Z runs afoul of the U.S. and California Constitutions and other aspects of California and federal law, imposing significant harm on CRC. As just one example, it will prevent CRC from pursuing any plan to develop its existing mineral rights in Monterey County and will completely eliminate the value of those rights an unconstitutional taking.. To remedy these injuries, CRC seeks a Writ of Mandate compelling the County to vacate the plan amendments as preempted by state and federal law and in excess of the County s authority.. CRC also seeks relief on the following grounds: (1) CRC has a vested right to continue pursuit of its oil exploration activities in Monterey County, culminating in the --

3 production of oil and gas; () Measure Z effects an unconstitutional taking of CRC s private property for public use, in violation of both the California and U.S. Constitutions, and therefore does not apply to CRC by its own terms; () Measure Z violates procedural due process; and () Measure Z purports to regulate outside the proper scope of the initiative process.. This action involves enforcement of important rights affecting the public interest. By pursuing this action, CRC will confer a substantial benefit to the general public. II. PARTIES. JURISDICTION. AND VENUE. CRC is a California corporation engaged in the business of locating, developing, and producing oil and gas. CRC owns mineral rights in Monterey County that are affected by Measure Z.. The County is a general law county formed pursuant to Article XI, section 1 of the California Constitution.. CRC is unaware of the true names and/or capacities of Respondents and Defendants DOES 1 through, inclusive, and therefore sue said Respondents and Defendants by such fictitious names. CRC will amend this pleading to insert the true names and/or capacities of DOES 1 through, inclusive, when the same has been ascertained. CRC is informed and believes and thereon alleges that each such fictitiously named Respondent and Defendant is, in some manner or for some reason, responsible for the damage caused to CRC and is subject to the relief being sought in this pleading.. Venue is appropriate in the Superior Court for the County of Monterey, as Monterey County is a governmental body located in Monterey, Measure Z passed in Monterey County, and CRC s affected property is located in Monterey County. 1. This Court has jurisdiction pursuant to Article I, section of the California Constitution and California Code of Civil Procedure sections 0,, and.. 1. CRC is not required to exhaust any administrative remedy before the County to bring a facial challenge to Measure Z, nor need it bring a claim to seek damages for inverse condemnation under Government Code section

4 ffl. GENERAL ALLEGATIONS A. CRC s Operations in Monterey County 1. CRC currently owns considerable acreage in Monterey County, in both mineral fee and leasehold, and has invested significantly in exploration activities required to further develop these interests. CRC s interests in Monterey County consist of only mineral rights. B. The Measure Z Campaign and Adoption. On or about March, 0, the Monterey County Board of Supervisors considered a proposed moratorium on hydraulic fracturing in Monterey County. The Board rejected even receiving further staff reports on the proposed measure because the California State Legislature was actively engaged in developing legislation governing oil and gas well stimulation and because there was no evidence of an immediate threat to public health, given that no oil and gas operations used hydraulic fracturing in their operations.1 Motion No. 1: A motion was made by Supervisor Jane Parker, seconded by Supervisor Dave Potter the Board of Supervisors to: b. Provide direction to staff to return with information to consider the urgency aspect of a day moratorium related to the Planning Commission s recommendation for an interim urgency ordinance temporarily prohibiting certain oil well stimulation techniques. (Status Report REF01/OH well stimulation treatment regulations, County wide) - (Supervisors Armenta, Salinas, & Phillips Dissented) MOTION FAILED. In response, the Measure Z proponents began an initiative campaign.. On or about June 1, 0, the Monterey County Board of Supervisors accepted the certified results of the initiative petition officially titled Prohibit Fracking and Oil and Natural Gas Well Stimulation Treatments, Prohibit Oil and Natural Gas Wastewater Injection and 1 See Board of Supervisors on 0-0- :00 AM, Monterey County Board of Supervisors, :: :: (Mar., 0), (statement of Board Chair Simon Salinas) (noting that the State was actively pursuing regulation of well stimulation through Senate Bill and that no hydraulic fracturing was occurring in Monterey County, and concluding that regulation of hydraulic fracturing was preempted); id. at :0:-:: (statement of Supervisor John M. Phillips) (concluding that the Board could not make the necessary findings to support a moratorium because there was no current and immediate threat to public welfare, given that no hydraulic fracturing was occurring in Monterey County, and noting that state regulations pursuant to Senate Bill were expected in July); id. at ::-:: (statement of Supervisor Fernando Armenta) (acknowledging the ongoing state activities pursuant to Senate Bill and concluding that hydraulic fracturing posed no immediate threat or demonstrated risk to public health or welfare). --

5 1 Impoundment, and Limit New Oil and Natural Gas Operations in Unincorporated Monterey County. Upon information and belief, Monterey County Counsel prepared the official title and summary.. The Board then voted -1 to place the initiative on the November, 0 ballot.. In the text of the official version of the initiative that appeared on the ballot, the initiative s opening line identified itself as the Protect Our Water: Ban Fracking and Limit Risky Oil Operations Initiative. The measure s purpose and findings sections also primarily address fracking. 0. The measure s proponents produced campaign material promoting Measure Z as a ban on hydraulic fracturing. Campaign signs used to promote the measure read, Protect Our Water: Ban Fracking, and Ban Fracking, Yes on Z, Protect Our Water This ban fracking rhetoric was prominently featured in campaign ads. 0 1

6 The measure s proponents originally formed a committee named Protect Monterey County, but changed the committee s name midway through the campaign to Protect Monterey County Water and Jobs Yes on Z Ban Fracking. Protect Monterey County, I.D. No., California Fair Political Practices Commission Form Initial (June, 0); Protect Monterey County Water and Jobs Yes on Z Ban Fracking, I.D. No., California Fair Political Practices Commission Form Amendment (Aug., 0).. Crude oil extracted in Monterey County is viscous and requires enhanced recovery methods, generally steam injection. High-pressure hydraulic fracturing does not assist in recovering this crude oil. Upon information and belief, no high-pressure hydraulic fracturing is currently occurring or has been proposed in Monterey County.. Voters passed Measure Z, and the Monterey County registrar of voters certified the results on December, 0. Upon information and belief, the County Board of Supervisors declared final and adopted Measure Z on December 1, 0. Measure Z was set to take effect ten days later, on December, 0, until it was stayed by this Court. The stay order is attached hereto as Exhibit A.. Although advertised as a fracking ban, Measure Z s effects are significantly more wide-ranging. Monterey County currently allows oil and gas extraction within its heavy industry zoning classification, subject to receiving a use permit. See Monterey County Code 1..00(FF). Measure Z amends several land use plans, including the Monterey County General Plan, to prohibit land uses necessary to oil and gas drilling in an effort to eliminate oil and gas extraction activities in Monterey County. Specifically, Measure Z bans land uses related to three activities: (1) well stimulation treatments, including hydraulic fracturing; () injection and impoundment of water produced alongside oil and gas and used in the extraction process; and () drilling new oil and gas wells.. First, Measure Z prohibits the development or use of any above-ground facility or equipment in support of certain well stimulation treatments, that is, treatments that increas[e] the permeability of the formation. The measure specifically includes hydraulic fracturing and acid well stimulation treatments, but excludes steam flooding, water flooding, cyclic steaming, and -- VERIHED PETITION FOR WRIT OF MANDAMUS AND COMPLAINT

7 routine maintenance. However, because the measure also bans injection of oil and gas wastewater, use of any steam- or water-flooding enhancements would become at least significantly more difficult.. Second, the measure prohibits the development or use of any above-ground facility or equipment in support of either injection (whether for storage or disposal) or impoundment (that is, storage or disposal of oil and gas wastewater in depressions or basins in the ground, whether manmade or natural ) of water associated with the oil and gas production process. In order to limit the financial impact of the measure on existing uses, this provision allows them to continue for five years, which may be extended if the Planning Commission makes two determinations: first, that the applicant has a vested right to conduct these activities, and second, that the applicant shows that the five-year period is unreasonable as applied. The measure refers to this as an amortization period. The maximum provided extension is ten years, for a total period of fifteen years.. Third, the measure prohibits any drilling of new oil and gas wells, including all wells drilled for the purpose of exploring for, recovering, or aiding in the recovery of, oil and gas. The provision provides that it does not affect already-drilled wells that have not been abandoned, but does not define abandonment.. Measure Z states that its provisions shall not apply to the extent, but only to the extent, that they would violate the constitution or laws of the United States or the State of California. The Board of Supervisors may grant an exemption if it finds, based on substantial evidence, that both (1) the application of that provision of this Initiative would constitute an unconstitutional taking of property, and () the exception will allow additional or continued land uses only to the minimum extent necessary to avoid such a taking. 0. Pursuant to the stay order issued by this Court the County may develop procedures for and pursue the exemption process. See Ex. A. On information and belief, the County has not yet developed such procedures to allow producers to file for exemption. CRC intends to file an application for an exemption from Measure Z as applied, and will amend and supplement this Petition and Complaint to add an as-applied takings claim if necessary. --

8 C. Measure Z Effects a Taking of Property Without Just Compensation. 1. Measure Z effects a facial taking of CRC s property without just compensation because it eliminates the value of CRC s mineral rights. CRC has invested substantially in purchasing and leasing mineral rights in Monterey County. Under Measure Z, CRC cannot do the necessary work, including drilling exploratory wells, drilling new extraction wells, and injecting or impounding produced water, that would allow it to make a return on that investment.. A regulation that eliminates all economically viable use of private property or causes an unreasonable interference with investment-backed expectations effects a taking under the Fifth and Fourteenth Amendments of the U.S. Constitution and Article I, section of the California Constitution.. Because CRC owns only mineral rights in Monterey and Measure Z effectively prohibits CRC from engaging in the activities necessary to utilize those rights, Measure Z completely or nearly completely eliminates the value of those properties.. Measure Z s amortization period, which is designed to reduce the measure s impacts on current uses, does nothing to offset CRC s losses because CRC does not currently conduct oil extraction operations in Monterey County.. Measure Z also unreasonably interferes with CRC s reasonable investment-backed expectations.. CRC can obtain no return on its investment in mineral rights as a result of Measure Z, causing a severe economic impact. This investment includes payment to the County, year after year, of property taxes on parcels, including more than half a million dollars in 0 alone. Even if CRC could engage in some other activity that would allow it to obtain some value from its rights in some parcels, substantially all value of its property has been eliminated, effectively appropriating its property for public use and ousting CRC from its domain.. Other companies have engaged in oil drilling in Monterey County for decades, and at the time CRC procured its mineral rights, it could not have reasonably anticipated that it would be forbidden from ever obtaining a return on that investment. CRC purchased these mineral rights with the intent and purpose of extracting oil and gas and has never put them to any other --

9 use Measure Z prohibits CRC from using the property as intended, rather than promoting the public good through the adjustment of economic burdens and benefits. Measure Z provides CRC with no reciprocal benefits that would offset its harms.. The development of oil and gas from CRC s property violates no background common law principle. 0. CRC has received no compensation from the County in return for Measure Z s impact on its property rights. 1. By its own terms, Measure Z should not apply to CRC s interests, as section of the measure provides that it will not apply if such application would violate the constitution or laws of the United States or the State of California.. Because Measure Z effects an unconstitutional taking of CRC s property on its face, application of section would nullify Measure Z as to CRC. D. Measure Z Is Preempted by State and Federal Law.. Measure Z attempts to enter a field oil and gas drilling regulation fully occupied by state laws regulating oil and gas production operations, including the drilling of wells and the operation and maintenance of those wells. Moreover, state and federal law govern well stimulation, produced water, and wastewater injection. Measure Z also conflicts with state and/or federal laws in each of these areas.. State law grants the California Department of Conservation s Division of Oil, Gas, and Geothermal Resources ( DOGGR ) exclusive authority over drilling, operation, maintenance, and abandonment of oil and gas wells. Cal. Pub. Res. Code (a). To further the elimination of waste by increasing the recovery of underground hydrocarbons, DOGGR must permit well owners and operators to use well stimulation methods that are appropriate in each case, including injecting] air, gas, water, or other fluids for well stimulation purposes. Id. Upon information and belief, the County intends to use Measure Z to prohibit CRC from exercising its rights to produce oil and gas in Monterey County rather than provide such an exemption. However, CRC intends to file for an exemption and will amend this Petition and Complaint as necessary to add an as-applied takings claim. --

10 (b).. Measure Z exceeds Monterey County s authority because it attempts to regulate exploration and production of oil and gas by prohibiting CRC from conducting the necessary activities to continue exploring and developing its mineral interests in Monterey County. Measure Z also creates a conflict with state law because it purports to nullify and render superfluous DOGGR s authority to issue permits for any new oil and gas wells or well stimulation treatments in furtherance of uniform, responsible energy development, which is a matter of statewide and, indeed, nationwide concern. See Jerry Brown Lambasts Republicans for Climate Vote Disgrace, Politico (Dec., 0) (Governor Brown stating that California must shoulder our part of the responsibility for responsible oil production); Secretary Salazar, Governor Brown Expand Partnership to Expedite Renewable Energy Projects in California, Office of the Governor, :0-1 (Jan. 1, 01) (Governor Brown noting that the oil rigs are moving in Kern County, but the sun is also shining in California... We want to use our resources, which are our people, as well as our sun and all of the other sources of power ); see also City of Fort Collins v. Colorado Oil & Gas Ass n, 0 CO,1 0 (holding a local fracking moratorium preempted because it render[ed] the state s statutory and regulatory scheme superfluous and thus materially impede[d] the effectuation of the state s interest in the efficient and responsible development of oil and gas resources ); Barack Obama, State of the Union Address (Feb. 1, 01) ( After years of talking about it, we re finally poised to control our own energy future. We produce more oil at home than we have in years... [N]early everyone s energy bill is lower because of it. ).. DOGGR is also empowered, under both federal and state law, to regulate underground injection of produced water and wastewater. Section 1 of the federal Safe Drinking Water Act ( U.S.C. 00h-l) establishes the Underground Injection Control Program ( UICP ). Under federal regulations implementing that provision, the U.S. Environmental Protection Agency ( EPA ) has designated DOGGR as the federal government s approved climate-vote-disgrace

11 regulatory agency for the UICP, and has incorporated the relevant portions of California s Public Resources Code and DOGGR s regulations as part of the federally enforceable UICP in California. See 0 C.F.R..0; Cal. Code Regs tit. 1.. Under the UICP, DOGGR coordinates with the State Water Resources Control Board ( State Water Board ) and its regional boards. Injection well operators must also file reports regarding their plans with the State Water Board. Cal. Water Code 0(a)(), (a). Moreover, the California Legislature recently passed Senate Bill, which requires DOGGR and the State Water Board to report on [t]he number and location of underground injection well and permits and project approvals issued by [DOGGR], among other things related to the UICP. Stats. 0, ch., (a)(1).. Measure Z s prohibition on land uses supporting underground injection is preempted by both the federal Safe Drinking Water Act s exclusive grant of authority to DOGGR and state law granting DOGGR and State Water Board permitting authority. Measure Z is also preempted to the extent it creates a conflict with these laws by attempting to outlaw activities that are specifically allowed under state and federal authority.. The State Water Board permits surface impoundment of produced water. Under Senate Bill, the State Water Board must also prepare status reports on the regulation of produced water. Stats. 0, ch., (c). 0. The State Water Board s authority over produced water impoundment preempts any contrary attempt by Measure Z to outlaw these activities. 1. In addition, the California Legislature has actively established law governing well stimulation treatments. A state law passed in 01 requires well operators to obtain permits from DOGGR prior to conducting any well stimulation treatment. Stats. 01, ch. 1 (codified at Cal. Pub. Res. Code 0(d)(1)). Under the statute, known as Senate Bill ( SB ), DOGGR must promulgate regulations, in coordination with the State Water Board and other relevant state agencies, governing well stimulation activities. Cal. Pub. Res. Code 0(c)(1). The Legislature also instructed the State Water Board to develop model criteria for groundwater monitoring to be implemented by the State Water Board. Cal. Water Code (c), (h). The - -

12 statute provides no role for local agency implementation.. SB preempts Measure Z because it establishes a comprehensive regulatory scheme governing well stimulation activities. Measure Z also conflicts with SB because Measure Z prohibits well stimulation treatments that are allowed under SB and Public Resources Code section (b).. Measure Z does not directly ban well stimulation treatments, injection, impoundment of produced water or wastewater, or new drilling, because the County has no power to do so through land use regulations. Rather, the measure uses a prohibition on any facility, appurtenance, or above-ground equipment in support of these activities as a pretense to disguise its true effect and purpose, which is banning them completely. By doing so, Measure Z prevents mineral rights holders such as CRC from exercising rights that are both protected and governed by state law. E. CRC Has a Vested Right to Develop Its Mineral Rights.. Over many years, CRC and its predecessor in interest have invested significant resources in obtaining mineral rights in Monterey County.. CRC is conducting an ongoing exploration operation to determine how to most effectively exercise its mineral rights.. Monterey County currently allows oil and gas drilling within its Heavy Industry zoning area. See Monterey County Code 1..00(FF). CRC has purchased mineral rights in Monterey County and conducted exploration activities in reliance on its ability to secure permits under State and County permitting procedures for oil and gas drilling and water injection and impoundment.. Measure Z would eliminate CRC s ability to exercise its mineral rights and produce oil and gas.. CRC s exploration activities qualify as a legal nonconforming use because they were legally established but... nonconforming to subsequently adopted land use regulations. Monterey County Code CRC s exploration activities further demonstrate an intent to achieve maximum - 1-

13 feasible development of the entirety of CRC s mineral rights in Monterey County prior to Measure Z s passage. F. Measure Z Violates Procedural Due Process. 0. Measure Z provides a process that allows the County Board of Supervisors to grant an exemption if it finds, based on substantial evidence, that both (1) the application of [a] provision of this initiative would constitute and unconstitutional taking of property, and () the exception would allow additional or continued land uses only to the minimum extent necessary to avoid such a taking. 1. Substantial evidence review is inadequate to provide procedural due process for takings claims.. Measure Z provides that [njothing in this Initiative shall apply to prohibit any person or entity from exercising a vested right, obtained pursuant to State law and that [t]he provisions of this Initiative shall not apply to the extent, but only to the extent, that they would violate the constitution or laws of the United States or the State of California, but provides no decision making process by which such rights would be determined, and specifically prohibits County officials from granting any approval inconsistent with this Initiative.. Measure Z divests County executive officers of authority to grant variances or permits even if required by the California or U.S. Constitutions. G. Measure Z Improperly Restricts the Board s Authority.. Although Measure Z purports to address land use subjects, it improperly interferes with essential government functions.. Measure Z constrains the Board of Supervisors ability to engage in future land use planning and implementation by preventing the Board from amending the County s land use plans and removing authority from both the Board and zoning officials to grant variances that may be required by law. Rather, Measure Z sets up a limited adjudication system that must be run by the Board itself, usurping the Board s authority to set its own agenda and manage its own functions.. Measure Z prevents the Board from taking necessary actions to bring the County s -1- VERIHED PETITION FOR WRIT OF MANDAMUS AND COMPLAINT

14 land use regulations into compliance with state and federal laws. By prohibiting activities that have been specifically permitted by the State of California and the federal government, Measure Z on its face demonstrates that it improperly limits the Board of Supervisors authority to prevent conflicts with those laws.. Measure Z interferes with the County s ongoing efforts to execute an existing public policy to establish permitting procedures governing activities related to well stimulation treatments.. Measure Z attempts to regulate well stimulation treatments, water injection and impoundment, and oil and gas drilling, all matters of statewide concern. IV. FIRST CAUSE OF ACTION (Writ of Mandate). CRC realleges and incorporates herein by reference the foregoing paragraphs. 0. CRC seeks a writ of mandate pursuant to Code of Civil Procedure section (a) to require the County to vacate the amendments enacted under Measure Z. To the extent section. may apply, particularly as to any as-applied takings challenge that may be later added, CRC also seeks a writ of mandate pursuant to that section. 1. California and federal law occupy the fields of regulation of drilling of new oil and gas wells, wastewater injection and impoundment, and well stimulation treatments. Measure Z also conflicts with California and federal law governing these areas because Measure Z strictly prohibits activities permitted by those authorities and within the jurisdiction of those authorities, rendering those regulatory schemes superfluous.. By enacting Measure Z, the County has acted beyond the scope of its power, authority, and jurisdiction and has abused its discretion, and has violated its nondiscretionary duty to follow state and federal law.. CRC has a beneficial interest in ensuring that the County does not seek to enforce a measure that is preempted by state and federal law and will eliminate CRC s vested property rights.. CRC is irreparably harmed by the County s enactment of a ballot measure that is -1-

15 preempted by state and federal law and will eliminate CRC s vested property rights.. CRC has no plain, speedy, and adequate remedy at law other than the relief sought to determine the merits of its challenge to Measure Z. The County has provided no administrative remedies that would allow CRC to raise the challenges brought herein. V. SECOND CAUSE OF ACTION (Declaratory Relief Vested Rights). CRC realleges and incorporates herein by reference the foregoing paragraphs.. CRC seeks a declaration that it has a vested right to continue its oil production activities in Monterey County, from continuing its ongoing exploration process through complete production of oil and gas, including any necessary disposal of wastewater and injection of water pursuant to steam flood well stimulation.. A judicial declaration is necessary to resolve whether CRC has a vested right to develop its mineral rights in Monterey County and to ascertain the effects of Measure Z on CRC s rights. VL THIRD CAUSE OF ACTION (Declaratory Relief Taking of Private Property Without Just Compensation). CRC realleges and incorporates herein by reference the foregoing paragraphs. 0. Measure Z substantially impairs CRC s property rights without just compensation. Thus, Measure Z violates Article I, section of the California Constitution and the Fifth and Fourteenth Amendments of the U.S. Constitution. 1. Because Measure Z eliminates CRC s ability to develop its mineral rights in Monterey County, the measure substantially eliminates all economically viable use of CRC s property for the benefit of the public without just compensation and therefore effects a per se taking.. Measure Z also effects an unconstitutional taking under traditional regulatory takings principles. The economic impact on CRC is severe, as CRC will be prohibited from developing any of its mineral interests in Monterey County. Measure Z also interferes with CRC s reasonable investment-backed expectations, as other companies have engaged in oil and --

16 gas drilling in Monterey County for decades, and CRC had no reason to believe that the County would so dramatically alter its longstanding regulatory regime. In imposing a complete ban on the use of CRC s property, the character of the County s action is akin to a physical taking of CRC s property and provides CRC with no countervailing benefits that would offset the costs Measure Z imposes.. Because of these impacts, Measure Z should not apply to any of CRC s property in Monterey County by its own terms.. A judicial declaration regarding the application and validity of Measure Z is necessary and appropriate to avoid the violation of state and federal constitutional rights that would occur if Measure Z were applied to prohibit CRC from developing its mineral rights in Monterey County. VH. FOURTH CAUSE OF ACTION (Declaratory Relief Procedural Due Process). CRC realleges and incorporates herein by reference the foregoing paragraphs.. On its face, Measure Z violates procedural due process.. Measure Z requires the County Board of Supervisors to reach determinations under the measure s takings exemption based on a substantial evidence standard, which is inadequate to protect CRC s property rights.. Moreover, Measure Z abrogates County executive officials power to grant just and necessary variances and permits.. A judicial declaration is necessary to determine whether Measure Z establishes procedures that are constitutionally deficient. YIH. FIFTH CAUSE OF ACTION (Declaratory Relief Improper Initiative Subject) 0. CRC realleges and incorporates herein by reference the foregoing paragraphs. 1. Measure Z improperly interferes with essential functions of the Board of Supervisors and Monterey County government.. Measure Z prohibits the County from taking future action to conform its land use - - VERIHED PETITION FOR WRIT OF MANDAMUS AND COMPLAINT

17 plans to state and federal law, imposes procedural restrictions on future actions by the County to regulate relevant land uses, and interferes with the County s existing effort to establish permitting procedures and rules for well stimulation activities.. Measure Z effectively regulates oil and gas drilling, wastewater injection and impoundment, and the use of well stimulation treatments, all matters of statewide concern.. A judicial declaration is necessary to determine whether Measure Z improperly seeks to regulate outside the proper scope of the initiative process. IX. SIXTH CAUSE OF ACTION (Inverse Condemnation Taking of Private Property Without Just Compensation). CRC realleges and incorporates herein by reference the foregoing paragraphs.. CRC owns both leasehold and fee rights in minerals within Monterey County.. CRC has a vested right to pursue drilling operations within Monterey County.. Because Measure Z eliminates CRC s ability to develop its mineral rights in Monterey County, the measure substantially eliminates all economically viable use of CRC s property for the benefit of the public without just compensation and therefore effects a per se taking.. Measure Z also effects an unconstitutional taking under traditional regulatory takings principles. The economic impact on CRC is severe, as CRC will be prohibited from developing any of its mineral interests in Monterey County. Measure Z also interferes with CRC s reasonable investment-backed expectations, as other companies have engaged in oil and gas drilling in Monterey County for decades, and CRC had no reason to believe that the County would so dramatically alter its longstanding regulatory regime. In imposing a complete ban on the use of CRC s property, the character of the County s action is akin to a physical taking of CRC s property and provides CRC with no countervailing benefits that would offset the costs Measure Z imposes. 0. As a direct and proximate result of the County s unconstitutional taking of CRC s property in violation of Article I, section of the California Constitution and the Fifth and Fourteenth Amendments of the U.S. Constitution, CRC has suffered damages in an amount that -- VERIHED PETITION FOR WRIT OF MANDAMUS AND COMPLAINT

18 exceeds the jurisdictional minimum, plus interest, in a precise amount to be determined at trial. X. PRAYER FOR RELIEF WHEREFORE, Plaintiff and Petitioner prays for the following relief: 1. For a writ of mandate directing the County to vacate the plan amendments enacted under Measure Z and compelling the County to refrain from enforcing Measure Z;. For a declaration that Measure Z violates CRC s vested rights;. For a declaration that Measure Z effects an unconstitutional taking in violation of Article I, section of the California Constitution and the Fifth and Fourteenth Amendments of the U.S. Constitution;. For a declaration that, by its own terms, Measure Z does not apply to any of CRC s property in Monterey County;. For a declaration that Measure Z violates procedural due process;. For a declaration that Measure Z constitutes an improper subject for an initiative;. For a preliminary and permanent injunction enjoining the County from enforcing Measure Z;. For just compensation, according to proof, for the temporary and permanent taking of CRC s property;. For reasonable attorney s fees pursuant to California Code of Civil Procedure section 1.,, or other law and for costs to the extent allowed by law;. For such other and further relief as the Court deems just and proper

19 Dated: March 1, 0 MATT KLINE BARTON H. THOMPSON DIMITRI D. PORTNOI HEATHER WELLES O MELVENY & MYERS LLP Matt Kline Attorneys for Petitioner and Plaintiff CALIFORNIA RESOURCES CORPORATION

20 VERIFICATION I, Adam Smith, am Managing Counsel of California Resources Corporation ( CRC ), and I am authorized to execute this Verification on behalf of CRC. I have read the foregoing FOR DAMAGES AND INJUNCTIVE AND DECLARATORY RELIEF, and know the contents thereof. The matters stated therein are true and correct to my own personal knowledge, except those matters which are stated on information and belief, and as to those matters I believe them to be true. I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct, and that I have executed this Verification on this rd day of March, 0, in Los Angeles, California Adam Smith VER1FIED PETITION FOR WRIT OF MANDAMUS AND COMPLAINT

21 EXHIBIT A

22 TERESA A. RISI FILED 1/1/0 CLERK OF THE SUPERIOR COURT y: DEPUTY Nicholson, Janet SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF MONTEREY AERA ENERGY LLC, a California limited liability company, vs. Petitioner and Plaintiff, COUNTY OF MONTEREY, a municipal corporation; and DOES 1 through, inclusive, Respondents and Defendants. Case No. CV000 JOINT STIPULATION AND ORDER AND STAY JOINT STIPULATION AND ORDER AND STAY

23 1 1 1 JOINT STIPULATION Aera Energy LLC ( Aera ) and the County of Monterey ( County ) (collectively, the Parties ), through their undersigned counsel, hereby stipulate and agree as follows: WHEREAS, on November, 0, the voters in the County of Monterey voted on an initiative identified as Measure Z and titled Initiative to Prohibit Fracking and Oil and Natural Gas Well Stimulation Treatments, Prohibit Oil and Natural Gas Wastewater Injection and Impoundment, and Limit New Oil and Natural Gas Operations in Unincorporated Monterey County ( Measure Z ); WHEREAS, the results of the November,0, election are currently awaiting final certification and declaration of the vote by the County of Monterey, which is expected to take place on or around December 1,0; WHEREAS, Measure Z amends the Monterey County General Plan, Local Coastal Program, and Fort Ord Master Plan to prohibit, among other things, any drilling or well stimulation activities within the County of Monterey; WHEREAS, Measure Z will be effective ten days after the final vote is declared by the Board of Supervisors, per section 1 of the Elections Code; WHEREAS, after declaration of the final vote and prior to the effective date of Measure Aera will initiate legal proceedings challenging the enactment and implementation of Measure 0 Z; WHEREAS, Aera believes that it will be irreparably harmed by Measure. Z and that Aera 1 is legally entitled to an injunction to preserve the status quo while this matter is addressed in the Courts; WHEREAS, the County believes that, consistent with Sections (B) and (1) of Measure Z, this Stay is necessary to provide it with sufficient time to allow this matter to be addressed by the Court and to develop, approve and implement procedures required by portions of Measure Z, while also protecting existing rights and operations of the Parties; and WHEREAS, in an effort to conserve their and the Court s resources, the Parties have agreed and hereby stipulate that the Court should enter an Order and Stay in the form set forth JOINT STIPULATION AND ORDER AND STAY

24 herein. NOW THEREFORE, IT IS HEREBY STIPULATED by and between AERA ENERGY LLC and the COUNTY OF MONTEREY, by and through their counsel of record, as follows: 1. The Parties agree that a Stay shall be issued in the form set forth herein, subject to the Court s approval;. The Parties agree to waive any requirement for a bond or undertaking prior to effectiveness of this Stay; and. All Parties acknowledge that nothing in this Stipulation shall constitute an admission by either Party relating to any matter at issue in this action Dated: December 1_.0 Dated: December ^.0 STIPULATED AND AGREED, MANATT, PHELPS & PHILLIPS, LLP 'Attctfbeys for Petitioner and Plaintiff AERA ENERGY LLC BEST BEST & KRIEGER, LLP Gene Tanaka Attorneys for Defendant/Respondent COUNTY OF MONTEREY JOINT STIPULATION AND ORDER AND STAY

25 S ORDER AND STAY in CV000 UPON GOOD CAUSE SHOWN, IT IS ORDERED that: The effective date for the "Initiative to Prohibit Fracking and Oil and Natural Gas Well Stimulation Treatments, Prohibit Oil and Natural Gas Wastewater Injection and Impoundment, and Limit New Oil and Natural Gas Operations in Unincorporated Monterey County adopted by the voters of Monterey County on November,0 and designated as Measure Z ( Measure Z ), is stayed effective immediately. During the pendency of the Stay, all oil and gas operators within Monterey County shall refrain from applying for or obtaining any well stimulation treatment ( WST ) permit from the Division of Oil, Gas and Geothermal Resources ( DOGGR") in the California Department of Conservation, as required by Article of Chapter 1 of Division of the Public Resources Code, as added by Senate Bill No., to conduct any well stimulation treatment to the extent that Article or DOGGR s regulations would require a WST permit as of December 1,0; The County is not stayed from developing and approving procedures necessary to implement Measure Z, including, but not limited to, procedures to implement the exemption process contained in Section of Measure Z, and, once procedures are developed and approved by the County, from accepting applications for and implementing the exemption process set forth in Measure Z; This Stay shall remain in effect as provided therein or until otherwise ordered by the Court The County may, in its discretion, elect to terminate this Stay by providing Plaintiffs/Petitioners and the Court with written notice of termination. This Stay shall be automatically lifted 0 days after the Court and the Parties receive such written notice from the County, unless, on proper motion of any affected party, the Court finds that a temporary restraining order or preliminary injunction should issue enjoining implementation and enforcement of Measure Z; and JOINT STIPULATION AND ORDER AND STAY

26 In stipulating to the Stay and seeking this Order, no Party has waived any rights with respect to any claims or defenses that may be asserted in any legal or administrative proceeding challenging the validity of Measure Z or seeking an exemption from its effect. IT IS SO ORDERED,'0 CV Dated: December 1_, 0 01 l I I 'y Ajkige of the Superior Court Monterey County Superior Court JOINT STIPULATION AND ORDER AND STAY