After spending more than $25 million on campaigning and political ads, California's oil and gas industry announced it was rescinding a hotly contested November referendum that sought to roll back restrictions on drilling near homes and schools.

The California Independent Petroleum Association announced this week that its members would abandon a costly effort to overturn Senate Bill 1137, a state law that would ban the drilling of new oil and gas wells within 3,200 feet of homes, schools, parks and hospitals in 2022. Shortly after the bill passed, oil and gas companies organized an effort to gather enough signatures to put the state law on the ballot in the Nov. 5 general election.

But the petroleum association has acknowledged in recent months that polls show the referendum doesn't have enough support, and it has also encountered stiff resistance from a well-funded opposition campaign that has featured Gov. Gavin Newsom, former Gov. Arnold Schwarzenegger and Hollywood star Jane Fonda.

And in perhaps one of the final attempts to broker a compromise, Rep. Isaac Bryan (D-Los Angeles), who said he had recently engaged in negotiations with the fossil fuel industry, vowed to limit financial penalties in a separate bill if they withdraw the ballot initiative.

The oil industry's decision to withdraw the proposal marks an unexpected end to one of the state's most costly political battles. Environmentalists say defending setback laws is essential to phasing out fossil fuels that contribute to global warming and protecting residents who live near toxic gases emitted by drilling sites in a state with more than 100,000 shuttered oil and gas wells.

Nearly one-third of these wells are located within 3,200 feet of homes, schools and other sensitive areas, exposing approximately 3 million people to cancer-causing contaminants. In addition to limiting new drilling, the law would prohibit maintenance and re-drilling and ensure that older wells remain shut down.

“This is a massive, historic victory,” said Kacie Siegel, senior adviser to the Center for Biological Diversity. “Victories like this don't come along every day. The oil industry has just suffered a total defeat and setback.”

Siegel described the situation as a last-ditch effort for oil and gas production.

“This industry is going to disappear,” she said, “and what the state needs to do is monitor this continued decline in a way that minimizes the additional damage it does as this declining industry disappears.”

But state petroleum associations refuse to admit defeat and have vowed to fight California's well-shutdown law and similar laws in court.

“Californians don't want to become more dependent on expensive foreign oil when California workers can produce energy locally under the most stringent regulations in the world,” said Jonathan Gregory, president of the California Independent Petroleum Association. He added that they are pivoting from a referendum to a legal strategy because “it is a violation of the U.S. Constitution for the government to illegally take private property, especially an operation that has been duly authorized by the government and has been mitigated in every way.”

The oil industry has called the 3,200-foot setback “arbitrary,” but the distance was set by a 15-person panel of health experts convened by the Newsom administration that concluded there was a strong association between higher rates of asthma, heart disease and poor birth outcomes in people living within the radius of oil and gas development.

This legislation is expected to provide enormous health benefits in Southern California, home to some of the largest oil fields adjacent to highly populated areas. Enacting these protections was very important to Senator Bryan, whose district includes the Inglewood Field, the largest urban oil field in the country, located beneath Baldwin Hills, Culver City, Inglewood and Ladera Heights.

“I think this oil well will be completely retired within the next 15 years,” Bryan says, “and the health impacts to the surrounding communities will be enormous — longer life expectancies, lower rates of heart disease and childhood asthma, and an opportunity to live and thrive without the toxicity of an oil well right next to their homes.”

Bryan said he has used Assembly Bill 2716 to this end in negotiations with the oil and gas industry. The bill, which he co-authored, would impose a $10,000 fine for operating low-productivity wells within 3,200 feet of a danger zone. During the negotiations, Bryan said that if the ballot measure was repealed, he would revise Assembly Bill 2716 so that the one-day fine would only apply to the Englewood field.