BILL ANALYSIS Ó AB 591 SENATE COMMITTEE ON ENVIRONMENTAL QUALITY Senator S. Joseph Simitian, Chairman 2011-2012 Regular Session BILL NO: AB 591 AUTHOR: Wieckowski AMENDED: May 27, 2011 FISCAL: Yes HEARING DATE: June 27, 2011 URGENCY: No CONSULTANT: Peter Cowan SUBJECT : HYDRAULIC FRACTURING SUMMARY : Existing law : 1) Establishes the Division of Oil, Gas, and Geothermal Resources (DOGGR) within California's Department of Conservation and grants its Supervisor (supervisor) broad authority over activities related to the recovery of oil and gas (Public Resources Code §3106). 2) Authorizes the supervisor to publish any publications, reports, maps, or other printed matter relating to oil and gas, for which there may be public demand (§3109). 3) Requires the owner or operator of any oil and gas well to 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 (§3210 et seq.). 4) Under the federal Safe Drinking Water Act (SDWA) requires the US Environmental Protection Agency (EPA) to set minimum federal requirements for all below ground injection processes, but excludes natural gas storage and hydraulic fracturing injections (unless they contain diesel fuels). 5) Authorizes Regional Water Quality Control Boards (RWQCBs) to regulate evaporation ponds that are near or above usable groundwater (Water Code §13260 et seq.). This bill : AB 591 Page 2 1) Requires those who carry out the hydraulic fracturing of a well to 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. 2) Requires that the history of drilling at the well provided to DOGGR be modified to include: the source and amount of water used in the exploration or production of the well, a description of the use, recovery and disposal of any radiological components or tracers injected into the well, and if hydraulic fracturing is used, disclose the chemical information data described above. 3) Clarifies 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. 4) Requires DOGGR to make the hydraulic fracturing data collected publicly available on its own website on a well-by-well basis. COMMENTS : 1) Purpose of Bill . According to the author AB 591 "will serve to provide the public, property owners, and water purveyors with important information regarding what chemicals are to be injected into wells and the source and amount of water used in the İhydraulic fracturing ] process. İAB 591] is intended to keep regulators ahead of the increased use of hydraulic fracturing so that we don't experience water quality and other problems that have occurred in states including Pennsylvania, New York, Texas, and Wyoming." 2) Hydraulic fracturing , or "fracking" is a well treatment for increasing oil or gas (hydrocarbon) recovery. As the name implies the hydraulic fluid is pumped at immense pressure into a well where it escapes through perforations in the well lining and causes the surrounding rock to fracture. AB 591 Page 3 The "fracturing fluid" is comprised primarily of water with a small fraction of other chemicals as well as a proppant such as sand that hold fractures open after they've been created. These cracks or fractures allow oil and natural gas to flow more freely into the well where they are pumped to the surface. Depending on the type of well and the target rock formation being fractured, the quantity and constituents chemicals and proppants will vary. According to the EPA as much as two to five million gallons of water are used to conduct the hydraulic fracturing treatment. Typically conducted after the initial well drilling or when a well is reworked, hydraulic fracturing is common practice in both vertical wells where the bore goes straight down into the target rock layer and in horizontal bores where the well turns and runs horizontally though the target rock strata for as much as several thousand feet. Recent advances in the use of hydraulic fracturing and horizontal drilling have made shale gas recovery and coal bed methane recovery much more economical. As a result areas such as Pennsylvania, Texas, and Wyoming have seen dramatic increases in well applications and the use of hydraulic fracturing. 3) Use in California . Currently DOGGR does not track hydraulic fracturing activities, thus the full extent of its use is unknown. However, according to oil and gas industry experts, hydraulic fracturing has been used in California for several decades. Wells in Kern, Ventura, Santa Barbara and Los Angeles counties, and potentially other counties have been hydraulically fractured. Industry reports suggest that hydraulic fracturing will most likely increase statewide. The Monterey shale formation, which stretches from Northern to Southern California, is receiving increasing attention. Several oil companies have purchased leases covering several hundreds of thousands of acres to drill the Monterey shale. According to industry experts and a 2008 Society of Petroleum Engineers (SPE) article, hydraulic fracturing has potential to increase output from many Northern California gas reservoirs including gas sands. If these investments produce positive returns, the state could see a proliferation of hydraulic AB 591 Page 4 fracturing operations in the near future. However, at least one drilling location in Monterey County has already generated significant community concern and opposition. 4) Current regulation . The below ground injection of most chemicals is subject to the minimum regulations of SDWA and are permitted through the underground injection control program to ensure that "Injection well owners and operators may not site, construct, operate, maintain, convert, plug, abandon, or conduct any other injection activity that endangers underground source of drinking water." The federal Energy Policy Act of 2005 modified SDWA to exclude "the underground injection of fluids or propping agents (other than diesel fuels) pursuant to hydraulic fracturing operations related to oil, gas, or geothermal production activities" from the definition of "underground injection". Nonetheless a congressional investigation found that between 2005 and 2009 26,466 gallons of hydraulic fracturing fluids containing diesel were injected into California wells, yet no underground injection permits had been sought or granted for this activity, in apparent violation of SDWA. On February 16, 2011, in reply to an inquiry from Senator Pavley the DOGGR supervisor acknowledged that DOGGR had no reliable information on the extent of hydraulic fracturing activities in California and has imposed no reporting or permitting requirements on the practice despite the clear regulatory authority to do so. 5) Fracturing fluid . As indicated above, in many instances, the fluids used in hydraulic fracturing are water-based. There are some formations, however, that are not fractured effectively by water-based fluids because clay or other substances in the rock absorb water. For these formations, complex mixtures with a multitude of chemical additives may be used to thicken or thin the fluids, improve the flow of the fluid, or even kill bacteria that can reduce fracturing performance. According to a congressional report, between 2005 and 2009, AB 591 Page 5 oil and gas companies throughout the United States used hydraulic fracturing products containing 29 chemicals that are: (a) known or possible human carcinogens, (b) regulated under the SDWA for their risk to human health, or (c) listed as hazardous air pollutants under the Clean Air Act. In some cases, companies injected fluids containing chemicals that they themselves could not identify as they did not have access to proprietary information about products purchased "off the shelf" from chemical suppliers. Fracturing fluids may also contain radiological tracers used to determine well integrity and the extent of the rock fracturing. Currently no disclosure of the quantities or constituents of the fracturing fluids is required. AB 591 requires that a list of chemical constituents be supplied to DOGGR and that DOGGR post that information on its webpage. However, AB 591 does not require reporting of the total amount of fracturing fluid used. While the chemical constituents list provides information about the type of risks posed, it does not indicate the potential magnitude of that risk. A more protective reporting requirement would at the very least provide the total quantity of non-water fracturing fluid and a ranked list of the fluid constituents. 6) Risks to below ground aquifers . The risk to fresh water aquifers is difficult to estimate without information about the depth of local aquifers and the hydrocarbon bearing strata. In some cases the strata being fractured is several thousand feet below fresh water aquifers, in others the target strata are located closer to usable aquifers. In fields that are heavily, developed if the cap rock separating the hydrocarbons from the aquifer are heavily perforated by wells the likelihood of fracturing fluid migration to the aquifer may be increased. A more likely contamination scenario is a well failure, either in the well casing or due to inadequate cementing. DOGGR does have a regulatory program that governs well casing construction. Despite regulations, well failures still occur. A 2000 SPE article regarding an oil field in AB 591 Page 6 Kern County explained that "the well failure rate, although lower than that experienced in the 1980s, is still economically significant at 2 to 6% of active wells per year." Furthermore, a recent area of review evaluated by DOGGR in Southern California found that 20 of 228 wells needed remediation. 7) Water source . Given the large amounts of water necessary to hydraulically fracture a single well and the likelihood that it will become contaminated, it is important for the state to track the use of fresh water. AB 591 requires annual reporting of the quantity and source water used at a well. 8) Waste water disposal . Following a hydraulic fracturing treatment some, but not all of the fracturing fluid is "flowed back" to the surface. (estimates range from 15-80%). Additional fluid may be removed from the well with "produced water" once the well goes into production. In addition to chemicals contained in the fracturing fluid initially, this water may be further contaminated with naturally occurring radioactive materials, heavy metals such as mercury and arsenic, or chemicals such as benzene. The amounts of produced water are reported on monthly basis, but it is not clear that "flowed back" water is reported as the majority occurs before the well goes into production. Water may be disposed of by injection into waste disposal wells, recycled for subsequent hydraulic fracturing activities or evaporated in lined ponds. According to the RWQCBs the use of evaporation ponds has become less common with reinjection being favored. Given the large volumes of wastewater and the potential severity of its contamination the Committee should require additional reporting of the quantities and fate of water removed from wells that have been hydraulically fractured. 9) Recent budget actions . DOGGR has been relatively underfunded in recent years, given its extensive AB 591 Page 7 obligations, responsibilities and changing oil and gas recovery technology. 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. 10)Amendments needed . a) As discussed in the Senate Committee on Natural Resources and Water, amendments are needed: i) To define "Hydraulic fracturing" to mean: 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 to fracture the formation, thereby causing or enhancing, for the purposes of this division, the production of oil or gas from a well. ii) To require DOGGR to prepare an annual report on hydraulic fracturing activities beginning January 1, 2013. iii) To delete "paragraph (1) of" on Page 7, line 32. AB 591 Page 8 b) An amendment is needed to add the hydraulic fracturing of a well to the list of actions that initiate the 60 day reporting clock and to clarify that any of those activities start the reporting clock. c) An amendment is needed to require reporting of the amount of waste water removed from the well, from the initiation of drilling, and how it is disposed as discussed in comment #8. SOURCE : Environmental Working Group SUPPORT : Board of Supervisors of the County of Los Angeles, California League of Conservation Voters, Clean Energy, Clean Water Action, Environment California, Food and Water Watch, Natural Resources Defense Council, Sierra Club California, Water Replenishment District of Southern California. OPPOSITION : None on file.