BILL ANALYSIS
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| SENATE COMMITTEE ON NATURAL RESOURCES AND WATER |
| Senator Fran Pavley, Chair |
| 2009-2010 Regular Session |
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BILL NO: AB 2453 HEARING DATE: June 22, 2010
AUTHOR: Tran URGENCY: No
VERSION: As Introduced CONSULTANT: Marie Liu
DUAL REFERRAL: Judiciary FISCAL: Yes
SUBJECT: Oil and gas: operations: enforcement actions.
BACKGROUND AND EXISTING LAW
Within the Department of Conservation (DOC) is the Division of
Oil, Gas, and Geothermal Resources (DOGGR), headed by the State
Oil and Gas Supervisor (supervisor). The Supervisor is
responsible overseeing the drilling, operation, maintenance, and
removal or abandonment of tanks, facilities, wells, and certain
pipelines associated with oil and gas production and geothermal
resources as specified in Chapter 1 (commencing with 3000) and
Chapter 6 (commencing with 3800) of Division 3 of the Public
Resources Code, respectively.
The supervisor is required to order tests or remedial work to
prevent damage to life, health, property, and natural resources;
damage to underground oil and gas or geothermal deposits; loss
of oil, gas, or reservoir energy; and damage to underground and
surface waters. These enforcement orders must been in writing
and must specify the conditions that need to be remedied and the
associated necessary work. Within 10 days of the service of an
order, the owner or operator must either begin a good faith
effort to comply with the order or file an appeal to the
director of the DOC (director).
The current appeals process for an order is as follows:
Within 10 days of the service of an order, the operator must
file an appeal of the order to the director by submitting a
written statement to the supervisor. By filing an appeal, the
order is automatically stayed. (3350 for oil and gas and
3762 for geothermal resources)
The director then has 10 days to call for a public hearing of
the appeal. The operator must be given written notice of the
time and location of the hearing at least 20 days before the
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hearing. The operator may be given as little as 10 days notice
if there is an immediate threat to human health and safety or
to the environment. (3351 and 3352 for oil and gas and 3764
for geothermal resources)
After the hearing, the director has 20 days for oil and gas
orders or 10 days for geothermal orders to submit a written
decision that affirms, set asides, or modifies the order. The
director's decision is final and only may be reviewed by the
superior court. (3353 for oil and gas and 3765 for
geothermal resources)
The operator has 10 days from serving of the written decision
to request that the superior court review the director's
decision. No new evidence can be considered by the court, and
the court's review shall be limited to determining whether:
(1) The director acted without or in excess of his
jurisdiction, (2) the order or decision was procured by fraud,
(3) the order, decision, rule, or regulation is unreasonable;
and (4) the order, decision, regulation, or award is clearly
unsupported by the evidence. (3354 and 3355 for oil and gas
and 3766 and 3767 for geothermal resources)
If no judicial review is sought by the operator, or if the
director's decision is affirmed by the court, any charge,
including penalty and interest, imposed by the director will
constitute a lien on real or personal property (3356 for oil
and gas and 3768 for geothermal resources)
The supervisor may impose civil penalties of up to $25,000 for
certain violations under 3236.5 in an enforcement order.
Appeals of the penalties are to be considered in an informal
hearing before the supervisor- the same authority which imposed
the penalty.
Chapter 5 of Part 1 of Division 3 (commencing with Section
11500) of the Government Code establishes the procedures for
judicial review before an Administrative law judge.
PROPOSED LAW
This bill would significantly rewrite the appeals process for
enforcement orders issued by the supervisor pertaining to oil
and gas and geothermal resources by establishing specific due
process requirements, including notice and timelines for
decisions, and the judicial standard of review to the applied.
Specifically, this bill would:
Require that enforcement orders state a "clear and concise"
narration of violations included in the order, including
references to the appropriate statutes and regulations and a
statement of all of the penalties and requirements imposed on
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the operator in connection with the order. The written order
must also notify the operator of its right to appeal.
Create the following appeals process:
o Within 10 days of the service of an order, the operator
must file an appeal by submitting a written statement to
the supervisor. By filing an appeal, the order is
automatically stayed unless the order is for remedial work
or is a cease and desist emergency order. The operator may
seek an order from the superior court to stay an emergency
order.
o The process for hearing the appeal is bifurcated into a
formal or informal appeals process based on the severity of
the enforcement action.
Formal hearing: severe enforcement actions
f The appeal must be heard in a formal hearing before
an administrative law judge (ALJ) pursuant to the
Administrative Procedures Act (APA) is if the order: (1)
requires that a well be plugged and abandoned, (2)
imposes a civil penalty of more than $10,000, (3)
rescinds approval for an injection project that has
already commenced, or (4) imposes life-of-well bond or
life-of-production bond.
f Under the APA, the director shall either adopt or
reject the decision of the ALJ in writing.
Informal hearing: minor enforcement actions
f For all other orders, appeals will be heard in a
hearing conducted by the director.
f The director has 30 days to establish a time and
location for an appeals hearing. The operator must be
given at least 30-days written notice of the hearing, or
10-days notice in the case of an appeal of an emergency
order.
f The director then has 30 days after the hearing to
issue a decision that affirms, set asides, or modifies
the order. The written decision must include the
director's factual findings, legal conclusions, and
rational for the decision.
o Within 30 days of the service of the director's
decision, whether made through the informal or formal
hearing process, the operator may obtain a judicial review
of the director's decision by petitioning the superior
court. The court may not consider new evidence and it's
review must be limited to determining (1) whether the
director acted within his jurisdiction, (2) whether there
was a fair hearing, and (3) whether there was prejudicial
abuse of discretion.
Require that civil penalties imposed under 3236.5 would also
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follow the above appeals process instead of a hearing before
the supervisor.
ARGUMENTS IN SUPPORT
According to the author, "Because certain procedural safeguards
are not in place for those appealing orders, courts must
independently determine whether certain enforcement actions are
merited, forgoing the regulatory expertise of DOGGR. Legislation
is necessary to clarify the standard of review to be used by
courts in reviewing such actions. This bill will give operators
subject to regulatory action greater protection by providing the
additional due process safeguards not currently in statute."
ARGUMENTS IN OPPOSITION
None received.
COMMENTS
Changes to the appeals process is in response to a recent court
case : Under current law, when the superior court revises a
director's decision, it is directed by statute to use a
"substantive evidence" standard of review. This means that the
court usually is to give deference to DOGGR's expertise by
considering that the facts and law that the director used in
making her decision are correct.
In Termo Company v. Bridgett Luther (2008), 169 Cal. App. 4th
394, the superior court used the substantive evidence standard
of review in considering the director's decision. However, the
California Court of Appeal (4th Dist.) found that the appeals
process set in statute has a number of due process deficiencies,
raising concerns that the defendant may not have had adequate
protections in the appeals process. Because of these
deficiencies, the appeals court found that the lower court erred
in using the substantive evidence standard of review and
instead, the lower court should have reevaluated the facts used
in the director's decision without giving deference to DOGGR's
expertise (i.e. the "independent judgment" standard of review).
Additionally, the appeals court felt that existing statute is
not sufficiently clear in expressing that the substantial
evidence standard should be used.
According to the author, the intent of this bill is to enhance
the due process provisions for the appeals of enforcement orders
so that that a substantial evidence standard of review is valid
and justified and that the statutory mandate for the application
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of substantial evidence review standard is clear. Below is a
summary of the changes to appeals process:
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| Appeals process | Current Law | Proposed law |
| step | | |
|-----------------+-----------------------+-------------------------|
|Enforcement | Order must be in | Increases the |
|order issued | writing and must | information that must |
| | specify the | be included in the |
| | conditions that need | order, including a |
| | to be remedied and | notification of the |
| | the work necessary | operator's right to |
| | | appeal |
|-----------------+-----------------------+-------------------------|
|If the operator | All appeals to be | Orders regarding more |
|chooses to | given an informal | severe violations and |
|appeal an order: | hearing before the | penalties would be |
|director's | director. | given a formal hearing |
|decision. | Appeals of civil | consistent with the |
| | penalties are to be | Administrative |
| | given an informal | Procedures Act. |
| | hearing before the | Orders for more minor |
| | supervisor. | violations would |
| | Filing an appeal | continue to be |
| | automatically stays | considered with an |
| | the order. | informal hearing |
| | | before the director. |
| | | This bill would give |
| | | the director a longer |
| | | timeline to call the |
| | | hearing and to issue a |
| | | written decision but |
| | | would also specify |
| | | more information that |
| | | the director must |
| | | include in the written |
| | | decision. |
| | | Civil penalties would |
| | | follow the same |
| | | appeals process as |
| | | other orders. |
| | | Emergency orders are |
| | | not automatically |
| | | stayed with the filing |
| | |of an appeal |
|-----------------+-----------------------+-------------------------|
|"Appeal" of | Unclear the standard | Clarifies that the |
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|directors | of review that the | judicial review shall |
|decision: | courts should use | use the substantial |
|judicial review | | evidence standard of |
| | | review for all |
| | |reviews. |
| | | |
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Proposed appeals process would increases due process safeguards:
Under current law, all appeals are heard through an informal
hearing process. According to the DOC, while the informal
hearing is less costly and quicker for both parties involved,
formal hearings involve a number of procedural requirements and
mechanisms that are designed to ensure that the respondent has a
meaningful opportunity to be heard, guard against abuse of
process by the respondent, and ensure that thorough and complete
administrative record is available to a reviewing court.
The committee may find that the more extensive formal process is
appropriate when considering appeals of severe penalties, but
the quicker and less costly informal hearing process is
sufficient for more minor violations.
The committee may also wish to find that this bill improves
DOC's informal hearing process by clarifying the hearing
timelines and increasing the specificity of information that
must be included in the director's written decision after the
hearing.
Other state departments use similar bifurcated appeals process:
Several state departments, including the Departments of Food and
Agriculture, Toxics Substances Control, Public Health, and
Pesticide Regulation all employ similar bifurcated appeals
process to allowing for hearings before either the Director of
the Department or an administrative law judge, based on the
severity of the enforcement action. In addition, the Division of
Recycling in the DOC, the sponsor of this bill, utilizes a
similar process for appeals of various penalties and certificate
orders.
Double referral to Judiciary : Should this committee allow this
bill to move forward, this bill will next be considered by the
Judiciary committee who will presumably take a closer look at
the portions of the bill dealing with the courts.
SUPPORT
The Department of Conservation (sponsor)
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Western States Petroleum Association
OPPOSITION
None Received
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