BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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          |SENATE RULES COMMITTEE            |                  AB 2453|
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                                 THIRD READING


          Bill No:  AB 2453
          Author:   Tran (R)
          Amended:  8/17/10 in Senate
          Vote:     21

           
           SENATE NATURAL RES. & WATER COMMITTEE  :  8-0, 6/22/10
          AYES:  Pavley, Cogdill, Hollingsworth, Huff, Lowenthal,  
            Padilla, Simitian, Wolk
          NO VOTE RECORDED:  Kehoe
           
          SENATE JUDICIARY COMMITTEE  :  4-0, 6/29/10
          AYES:  Corbett, Harman, Hancock, Leno
          NO VOTE RECORDED:  Walters

           SENATE APPROPRIATIONS COMMITTEE  :  11-0, 8/12/10
          AYES:  Kehoe, Ashburn, Alquist, Corbett, Emmerson, Leno,  
            Price, Walters, Wolk, Wyland, Yee
           
          ASSEMBLY FLOOR  :  76-0, 6/2/10 - See last page for vote


           SUBJECT  :    Oil and gas:  operations:  enforcement actions

           SOURCE  :     Department of Conservation


           DIGEST  :    This bill clarifies the judicial standard of  
          review for an enforcement action of the State Oil and Gas  
          Supervisor, and expands procedural safeguards for an  
          administrative appeal of an enforcement action, including  
          the use of the Office of Administrative Hearings.

                                                           CONTINUED





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           ANALYSIS  :    

          Existing law: 

          1. Creates the Division of Oil, Gas, and Geothermal  
             Resources in the Department of Corporations (DOC). 

          2. Requires the State Oil and Gas Supervisor (Supervisor)  
             of the Division of Oil, Gas, and Geothermal Resources to  
             supervise the drilling, operation, maintenance, and  
             abandonment of oil and gas and geothermal wells, tanks  
             and facilities, including certain pipelines, 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. 

          3. Requires the Supervisor to order tests or remedial work  
             necessary to prevent damage to life, health, property,  
             and natural resources; to protect oil and gas or  
             geothermal deposits from damage; to prevent the escape  
             of water into underground formations; or to prevent the  
             infiltration of detrimental substances into underground  
             or surface water. 

          4. Requires a lessor, lessee, operator, or owner of a well,  
             rig or derrick, within 10 days of the date of service of  
             an order above, to comply with the order or appeal it to  
             the Director of DOC.  Due process provisions, including  
             timelines for a hearing, written decision, and judicial  
             review are provided. 

          5. Requires any charge, including penalty and interest,  
             imposed by the Director of DOC to constitute a lien on  
             real or personal property if an operator does not seek  
             judicial review of an order or the Director's order is  
             affirmed by a court. 

          This bill:

          1. Makes numerous changes to the appeal process and  
             procedures for operators of oil, gas, and geothermal  
             wells, as specified.








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          2. Requires an order of the Supervisor or a District Deputy  
             to state the factual basis for the order, the statutory  
             and regulatory basis of the action, and the penalties  
             and requirements imposed on the operator. 

          3. Requires a cease and desist order to specify the  
             operations to cease and a detailed explanation of the  
             action to be taken by the operator to permit operations  
             to resume.

          4. Provides for review of an order of the Supervisor  
             imposing a civil penalty by the Director, revises the  
             requirements for filing a notice of appeal, provides  
             that the filing of an appeal does not stay an order for  
             remedial work or a cease and desist order issued under  
             emergency circumstances and, in these circumstances,  
             requires an expedited hearing before the Director. 

          5. Requires the Division of Oil, Gas, and Geothermal  
             Resources in DOC to reimburse an operator for required  
             remedial work if an order is invalidated on appeal, as  
             determined in a hearing before the Director.

          6. Requires all certain appeals to be heard in a formal  
             hearing process before an administrative law judge,  
             instead of in an informal hearing before the Director of  
             DOC, except for certain emergency orders, and specifies  
             certain procedures for an informal hearing before the  
             Director, including the conversion of an informal  
             hearing and imposes specified requirements with regard  
             to an appeal of an emergency order. 

          7. Revises the scope of the judicial review of an appealed  
             order.

           Background  

          Within the DOC is the Division of Oil, Gas, and Geothermal  
          Resources, headed by the State Oil and Gas Supervisor.  The  
          Supervisor is responsible for 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 Section 3000) and  







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          Chapter 6 (commencing with Section 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 DOC.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No

          According to the Senate Appropriations Committee:

                         Fiscal Impact (in thousands)

            Major Provisions      2010-11     2011-12     2012-13     Fund  

           Additional legal costs        $145      $145       
           $145Special*

          According to the Assembly Appropriations Committee, DOC  
          estimates it will need one staff counsel position, at an  
          approximate cost of $145,000 a year, to represent the  
          Division of Oil, Gas, and Geothermal Resources in both  
          informal and formal hearings. 

           SUPPORT  :   (Unable to verify at time of writing)

          Department of Conservation (source)
          Western States Petroleum Association


           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 [Division of Oil, Gas,  
          and Geothermal Resources]. Legislation is necessary to  







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          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."


           ASSEMBLY FLOOR  :
          AYES:  Adams, Ammiano, Anderson, Arambula, Bass, Beall,  
            Bill Berryhill, Blakeslee, Block, Blumenfield, Bradford,  
            Brownley, Buchanan, Caballero, Charles Calderon, Carter,  
            Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon,  
            DeVore, Emmerson, Eng, Evans, Feuer, Fletcher, Fong,  
            Fuentes, Fuller, Furutani, Gaines, Galgiani, Garrick,  
            Gilmore, Hagman, Hall, Harkey, Hayashi, Hernandez, Hill,  
            Huber, Huffman, Jeffries, Jones, Knight, Logue, Bonnie  
            Lowenthal, Ma, Mendoza, Miller, Monning, Nava, Nestande,  
            Niello, Nielsen, Norby, V. Manuel Perez, Portantino,  
            Ruskin, Salas, Saldana, Silva, Skinner, Smyth, Solorio,  
            Swanson, Torlakson, Torres, Torrico, Tran, Villines,  
            Yamada, John A. Perez
          NO VOTE RECORDED:  Tom Berryhill, Lieu, Audra Strickland,  
            Vacancy


          CTW:mw  8/17/10   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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