BILL ANALYSIS AB 2453 Page 1 Date of Hearing: May 5, 2010 ASSEMBLY COMMITTEE ON APPROPRIATIONS Felipe Fuentes, Chair AB 2453 (Tran) - As Introduced: February 19, 2010 Policy Committee: Natural ResourcesVote:9-0 Judiciary 10-0 Urgency: No State Mandated Local Program: No Reimbursable: No SUMMARY This bill creates due process safeguards and requires use of certain evidentiary standards as they relate to decisions by the Department of Conservation's (DOC's) Division of Oil, Gas and Geothermal Resources (DOGGR). Specifically, this bill: Relative to Appeals Processes 1)Eliminates current appeals process in which an appeal of an enforcement order issued by the DOGGR supervisor may be made by requesting a hearing to be conducted by the Director of DOC. 2)Establishes a bifurcated process with "formal" and "informal" processes for appealing enforcement actions administratively before seeking judicial review. Relative to Notification and Due Process 1)Requires an order of the DOGGR supervisor to clearly and concisely state the acts the operator is charged with, the statutory basis of the action, the associated penalties and operator requirements, and the right of the operator to appeal the action. 2)Extends the statute of limitations to file a lawsuit by 20 days, to a total of 30 days. 3)For an order that imposes penalties greater than $10,000 or could terminate operations, provides a "formal" hearing to be AB 2453 Page 2 conducted by an administrative law judge subject to the due process requirements of the Administrative Procedures Act. Relative to Evidentiary Standards 1)Requires the court to apply the "substantial evidence" standard to its review the DOC director's decisions. FISCAL EFFECT DOC estimates it will need one staff counsel position, at an approximate cost of $145,000 a year, to represent DOGGR in both informal and formal hearings (special fund). COMMENTS 1)Rationale . DOC-the bill's sponsor-intends this bill to address shortcomings identified by a California appellate court decision, Termo Company v. Luther. The sponsor describes this bill as addressing the procedural concerns raised by the court, as well as similar concerns that might be raised by other courts in the future. 2)Background . The Division of Oil, Gas, and Geothermal Resources within DOC regulates oil, gas, and geothermal well operations throughout the state. The division issues production permits and oversees the drilling, operation, maintenance, as well as the plugging and abandonment of wells. The DOGGR also provides detailed production reports on oil and gas output in the state. As described in the Judiciary Committee analysis: In Termo Company v. Bridgett Luther (2008), 169 Cal. App. 4th 394, the California Court of Appeal (4th Dist.) held that the trial court incorrectly applied a "substantial evidence" standard of review when it upheld an order of the Director requiring an operator to abandon 28 oil wells in Huntington Beach that were allegedly posing a threat to public health and safety and the environment. The Court of Appeal held that the trial court was not justified in departing from the normal "independent judgment" standard of review, required by Code of Civil Procedure Section 1094.5, because the statute at issue (Public Resources Code Sections 3350 et seq.) does not contain sufficient AB 2453 Page 3 procedural safeguards that otherwise might allow the court to employ a "substantial evidence" standard of review (pursuant to Tex-Cal Land Management v. Agricultural Labor Relations Board (1979) 24 Cal.3d 335.) The Court also found that although the applicable Public Resource Code set forth a standard of review to be applied, it does not clearly express a "substantial evidence" standard, and that, in any case, the requisite due process safeguards are lacking that would justify use of that standard. 3)Support . This bill is supported by the Department of Conservation (sponsor) and the Western States Petroleum Association (WSPA), the members of which are subject to DOGGR regulations and actions. 4)There is no registered opposition to this bill. Analysis Prepared by : Jay Dickenson / APPR. / (916) 319-2081