BILL ANALYSIS Ó ----------------------------------------------------------------- | | | SENATE COMMITTEE ON NATURAL RESOURCES AND WATER | | Senator Fran Pavley, Chair | | 2011-2012 Regular Session | | | ----------------------------------------------------------------- BILL NO: AB 591 HEARING DATE: June 14, 2011 AUTHOR: Wieckowski URGENCY: No VERSION: May 27, 2011 CONSULTANT: Katharine Moore DUAL REFERRAL: Environmental QualityFISCAL: Yes SUBJECT: Oil and gas production: hydraulic fracturing. BACKGROUND AND EXISTING LAW The Division of Oil, Gas, and Geothermal Resources (DOGGR) exists within California's Department of Conservation. DOGGR's Supervisor (supervisor) has extensive and broad authority to regulate activities associated with the production and removal of hydrocarbons (e.g. oil and gas) from the ground, including the subsurface injection of water and other fluids, and the application of pressure or other means to enlarge existing or create new channels to promote the underground movement of hydrocarbons into production wells (Public Resources Code (PRC) § 3106). This authority is granted in order to prevent damage to life, health, property, natural resources, and underground and surface water suitable for irrigation or domestic purposes. The owner or operator of any oil and gas well must keep, or cause to be kept, a careful and accurate log, core record, and history of the drilling of the well which must periodically be reported to DOGGR (PRC § 3210 et seq.) where it subsequently becomes a matter of public record. "Hydraulic fracturing" or "fracking" of hydrocarbon wells to enhance oil and gas recovery is an increasingly popular subsurface process/technique. One county in Pennsylvania reported roughly twenty-seven times more applications for fracking in 2009 compared to just two years earlier. Due to technological innovations, fracking by itself and in combination with advanced drilling techniques have allowed companies to develop previously uneconomic oil and gas reserves, such as those located in subsurface shale formations throughout the United States. Once an oil or natural gas well is drilled and properly lined, fluids are pumped down to an isolated portion of the well at pressures high enough to cause or enlarge cracks in 1 the subsurface shale formation. These cracks or fractures allow oil and natural gas to flow more freely into the well and then to the surface. The pumped fracking fluid is usually - but not always - comprised almost entirely of water with a small fraction of additional substances (less than a few percent by volume) added to enhance the process. The US Environmental Protection Agency (EPA) has reported that two to five million gallons of fracking fluid may be necessary to sufficiently frack one well in a shale formation - a considerable amount of water. The fluid volume needed, its chemical composition and physical characteristics will vary depending upon the particular conditions of each well. In some instances, additional materials, such as sand, are also pumped into the well to keep the cracks open. Fracking has been a boon to domestic oil and gas production. Its popularity, however, has led to increasing public controversy. Fracking has been associated with groundwater and surface water contamination, as well as other adverse environmental impacts. Several states - including Wyoming and Texas, among others - are starting to investigate and monitor fracking more diligently. New legislation has been proposed and restrictions on the practice considered. At the federal level, the US EPA has undertaken a new comprehensive review of hydraulic fracturing with results expected to be reported in 2014. According to the oil and gas industry, hydraulic fracturing has been used in California for several decades. Wells have been fracked in Kern, Ventura, Santa Barbara and Los Angeles counties, at a minimum. Industry reports suggest that hydraulic fracturing will most likely increase statewide: the Monterey shale formation, which stretches from Northern to Southern California, is considered the largest onshore shale opportunity in the United States, and is receiving increasing attention. Several oil companies have purchased leases covering several hundreds of thousands of acres to drill the Monterey shale. If these investments produce positive returns, the state could see a proliferation of hydraulic fracturing operations by various oil companies in the near future. However, at least one drilling location in Monterey County has already generated significant community concern and opposition to fracking. On January 13, 2011, Senator Pavley wrote the supervisor to inquire about hydraulic fracturing activity in California. On February 16, 2011, the supervisor replied and acknowledged that DOGGR had no reliable information on the extent of hydraulic 2 fracturing activities and has imposed no reporting or permitting requirements on the practice despite the clear regulatory authority to do so. Regardless of several industry and engineering reports to the contrary, DOGGR claimed that hydraulic fracturing does not occur on a large scale in California. DOGGR does not have data on the safety, efficacy, and necessity of hydraulic fracturing as currently employed in California. PROPOSED LAW This bill would: Make a series of legislative findings regarding hydraulic fracturing as used in the development of oil and gas resources in California including: o defining the technique, o recognizing the long history of its application within the state and DOGGR's existing authority to regulate the practice, and o given the state's geologic and seismic complexity, the critical lack of available data necessary to evaluate its impact on the state's natural resources. Require that those engaged in the hydraulic fracturing of a well provide to the well's owner or operator a complete list of the chemical constituents used in the hydraulic fracturing fluid and all of the associated standardized Chemical Abstract Service (CAS) identification numbers. Require that the history of the drilling at the well provided to DOGGR be modified to include: o the source and amount of water used in the exploration or production of the well, o data on the use, recovery and disposal of any radiological components or tracers injected into the well, and o if hydraulic fracturing is used, disclosure of the chemical information data described above. Clarify the reporting requirements of the owner or operator of the well to DOGGR of the history of work performed at the well including copies of all appropriate logs, tests or surveys performed and the hydraulic fracturing data described above. Require DOGGR to make the hydraulic fracturing data collected publicly available on its own web-site on a well-by-well basis. 3 ARGUMENTS IN SUPPORT According to the author, "DOGGR does not have specific information about what hydraulic fracturing techniques are being used in the various production areas throughout the state. The extraction of unconventional hydrocarbon resources whether from fracking or other methods of enhanced oil recovery can be extremely water intensive. Because some exploration and production techniques and processing could potentially compromise water resources, it is important that regulators have a clear understanding of what is happening in the field. Given DOGGR's statutory responsibility to balance resource protection with hydrocarbon extraction, the use of water should be considered when looking at permits. Fracking uses a variety of chemicals, including known toxins. These chemicals include diesel fuel and ethylbenzene (both known carcinogens) and ethylene glycol (a chemical associated with birth defects, female and male infertility, and other disorders)." "Exploration and production from oil shale formations is expected to increase in California. Some investors are looking to oil shale in California as one of the largest potential sources of unconventional oil in the U.S. The collection of information required by this bill will allow DOGGR to better assess potential risks." According to the Natural Resources Defense Council, "AB 591 is a very reasonable approach that ensures that the state agency responsible for overseeing oil and gas drilling is regulating fracking and making information about it available to the public." ARGUMENTS IN OPPOSITION AB 591 has been substantially amended since the letters in opposition to the bill were submitted in the Assembly. These amendments at least partially mitigated concerns raised by the opponents, and make it difficult for committee staff to specifically address objections to the current version of the bill. In general, however, opponents maintain that hydraulic fracturing techniques are safe, and not associated with any contamination. While the California Independent Petroleum Association notes that "the concept of full disclosure of hydraulic fluids in the original version of AB 591 was one that Ýthey] did not object to", the others maintain that this is redundant given the information already provided on Material Safety Data Sheets. COMMENTS 4 Is additional authority required to regulate hydraulic fracturing in California ? DOGGR apparently failed to regulate or systematically collect data on hydraulic fracturing in California, despite clearly having the broad authority to do so and regardless of the evidence that fracking has been used in California for decades. AB 591 provides explicit legislative direction to DOGGR to begin, at a minimum, monitoring fracking. State regulation is necessary as the permanent underground injection of chemicals used in hydraulic fracturing is not regulated at the federal level by the US EPA. Congress exempted the use of most fracking fluids - with the exception of diesel - from the Safe Drinking Water Act, although most other subsurface injections are regulated to protect the drinking water supply. Defining hydraulic fracturing : As currently written, this bill includes a legislative finding that provides a definition of hydraulic fracturing. Existing statutory language encompasses this definition, and, as noted elsewhere, already provides DOGGR with the authority to regulate hydraulic fracturing. While the "mix of chemicals" referred to in the findings is sufficiently general to include the variety of materials known to be injected into a well during the hydraulic fracturing process, it neglects that different materials serve varying functions. For example, a liquid compound may be injected to prevent bacterial growth while a solid material is used to help keep the fracture open. For clarity, the committee may wish to provide a definition of hydraulic fracturing in statute (Amendment 1) Report back to the Legislature : While AB 591 calls for rapid on-line reporting of hydraulic fracturing data on DOGGR's web-site, the committee may wish to require DOGGR to compile the collected data into a comprehensive report to facilitate legislative oversight (Amendment 2). Exploratory wells and potentially confidential information: The overarching goals of AB 591 are the collection and (reasonably) rapid public dissemination of hydraulic fracturing data. This is, in part, to help allay concerns regarding the perceived potential impacts of hydraulic fracturing on public health and the environment in the vicinity of fracked wells. The lack of fracking information available to the public likely exacerbated these concerns. At the same time, however, well owners and operators have a legitimate need, long recognized by the state (PRC § 3234), to prevent certain information, such as well log data, gathered from exploratory wells from becoming immediately public. It is important to note that this exclusion applies to exploratory wells only, not to those in production. For onshore 5 exploratory wells, up to two years of confidentiality may be readily granted, upon request. The supervisor has discretion to grant up to an additional two years (for a total of four years) confidentiality in extenuating circumstances without public review. As AB 591 is currently written, the hydraulic fracturing data for exploratory wells are arguably subject to these confidentiality provisions. This is in apparent conflict with the intent of AB 591. The committee may wish to direct committee staff to continue working with the author's office to explore this issue, should this bill pass the committee (discussed further below). This bill is a work in progress : The author's office is actively engaged in discussions with various stakeholders, including the opponents, on the bill's specific content. While the motivation underlying the bill is clear, the appropriate language is evolving (for example, Amendment 3 deletes a reference that has changed). The committee may wish to ask for the author's commitment to include committee staff in the on-going discussions and direct committee staff to continue working with the author's office, should this bill pass this committee, on aspects of the bill relevant to this committee's jurisdiction. Should significant changes be subsequently proposed, the committee may also wish to bring this bill back to committee for review. Recent Budget history : DOGGR has been relatively underfunded in recent years, given its extensive obligations and responsibilities. To help rectify this and improve DOGGR's regulatory program activities, the Legislature approved 17 new positions in the 2010 - 2011 budget year. According to the Legislative Analyst's Office, these positions have only recently been filled and it is not yet possible to evaluate how these additional staff will impact DOGGR's performance. Nevertheless in the 2011 - 2012 budget year, the Department of Conservation requested an additional 36 positions to improve DOGGR's environmental compliance, underground injection control and construction site review. Eighteen positions and an additional $2.3 million were approved in the relevant Budget sub-committees of both houses. Additional budget control language was approved in the Assembly sub-committee's agenda to express the intent of the Legislature that some of the funds appropriated be used to collect and disseminate information to the public regarding hydraulic fracturing activities in California. Is fracking safe ? It is impossible to answer that question for California today given the lack of available information. 6 Nationwide, however, there is considerable evidence that suggests the increasing concern about the potential public health and environmental impacts of the practice is warranted. For example, in Pennsylvania there was a report that tens of thousands of gallons of toxic fracking fluid leaked onto residential property, resulting in dead trees and contaminated water. Also in Pennsylvania, other evidence shows that waste fracking fluids were substantially contaminated with radioactive materials that accumulated in the fluids as they moved through the subsurface formations. The US EPA has reported that two water wells in Texas were contaminated by gas released by hydraulic fracturing. Just a few weeks ago, a peer-reviewed study in the prestigious Proceedings of the National Academies of Science (SG Osborn et al., doi:10.1073/pnas.1100682108) used multiple sophisticated chemical analytical techniques to show that methane contamination of some Pennsylvanian drinking water is strongly associated with the fracking of wells in a shale gas formation, although no evidence of fracking fluid contamination was found. For each fracked well, the range of potential impacts will depend critically on the specific conditions present. Plausible mechanisms exist for significant subsurface fluid and/or gas migration, including breaches of the integrity of the well-casing or reservoir. Furthermore, according to a recent congressional report, from 2005 - 2009 oil and gas companies throughout the US used fracking products containing 29 chemicals that are (1) known or possible human carcinogens, (2) regulated under the Safe Drinking Water Act for their risk to human health, or (3) listed as hazardous air pollutants under the Clean Air Act. In some cases, companies injected fluids containing chemicals that they themselves could not identify-they did not have access to proprietary information about products purchased "off the shelf" from chemical suppliers. In some instances, radioactive tracers may be injected into wells in order to observe the extent and success of the hydraulic fracturing. SUGGESTED AMENDMENTS AMENDMENT 1 Page 6, before line 25, add: "SEC. 1. Section 3011 of the Public Resources Code is added to read: 3011. "Hydraulic fracturing" means a technique used in preparing a well that typically involves the pressurized injection of water and a mix of chemicals, compounds and materials into an underground geologic formation in order 7 to fracture the formation, thereby causing or enhancing, for the purposes of this division, the production of oil or gas from a well." AMENDMENT 2 Page 7, after line 37, add: "(c) The supervisor will prepare and transmit a comprehensive report to the Legislature on hydraulic fracturing in the exploration and production of oil and gas resources in California using the data provided pursuant to subdivision (b) of section 3213 and including relevant additional information as necessary including, but not limited to the disposition of water used in the process. The first report is due on January 1, 2013 and annually thereafter." AMENDMENT 3 Page 7, line 32, delete "paragraph (1) of" SUPPORT Environmental Working Group (sponsor) Earthworks (co-sponsor) Board of Supervisors of the County of Los Angeles California Coastal Protection Network (previous version) California League of Conservation Voters California Water Association (previous version) Clean Water Action (previous version) Environment California (previous version) Food and Water Watch Natural Resources Defense Council Supervisor Jane Parker, Monterey County Board of Supervisors (previous version) Planning and Conservation League (previous version) Rural Coalition of Southern Monterey County (previous version) Sierra Club California (previous version) Ventana Conservation and Land Trust Water Replenishment District of Southern California OPPOSITION American Chemistry Council (previous version) California Independent Petroleum Association (previous version) Western States Petroleum Association (previous version) 8 9