BILL ANALYSIS Ó
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| SENATE COMMITTEE ON NATURAL RESOURCES AND WATER |
| Senator Fran Pavley, Chair |
| 2011-2012 Regular Session |
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BILL NO: SB 1054 HEARING DATE: April 10, 2012
AUTHOR: Pavley URGENCY: No
VERSION: March 29, 2012 CONSULTANT: Katharine Moore
DUAL REFERRAL: Environmental QualityFISCAL: Yes
SUBJECT: Oil and gas: well operation: notice.
BACKGROUND AND EXISTING LAW
California is the 4th largest oil and gas producing state and
natural resources extraction is thus an important contributor to
the state's economy. 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 (Public Resources Code (PRC) § 3106). This includes
the subsurface injection of water and other fluids. 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. DOGGR issues
permits for drilling new wells or re-working old ones (PRC §
3203) and has 10 working days to respond to each application.
Once a permit is approved, 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 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. Due to technological innovations,
fracking, by itself and in combination with advanced drilling
techniques (e.g. directional drilling) 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
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the well at pressures high enough to cause or enlarge cracks in
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. A considerable amount of
water - hundreds of thousands to millions of gallons - may be
needed to frack an individual well. The fluid volume needed,
its chemical composition and physical characteristics will vary
depending upon the particular conditions of each well.
For many years fracking maintained a low profile in California.
According to industry reports and academic papers, wells have
been fracked for several decades. Estimates vary, but suggest
that a majority of wells in the state may be fracked. Counties
where wells have been fracked include Kern, Ventura, Santa
Barbara, Los Angeles and Monterey. Recovery of the hydrocarbon
reserves in the Monterey shale formation may be an important
"play" in the future. Fracking treatments are likely to be
necessary to achieve the reserves' full potential. However,
fracking has become a highly controversial technique subject to
considerable scrutiny. Significant environmental contamination
is attributed to it in cases in Wyoming, Texas, Colorado, West
Virginia and Pennsylvania. New York state, for example,
established a fracking moratorium until new regulations are
developed, due, in part, to the potential risks to the New York
City and other watersheds. Other states, including Texas,
Colorado, Arkansas and Ohio have revised their laws and
regulations to provide for additional safety and protective
measures. The US Environmental Protection Agency is moving
forward with a national study, due in 2014, although, at the
federal level, fracking is largely exempt from the provisions of
the Safe Drinking Water Act and the Underground Injection
Control (UIC) well program courtesy of the "Halliburton
Loophole."
In California, despite nationwide concern and legislative
direction, DOGGR has not exercised its acknowledged authority to
either regulate or systematically collect data on hydraulic
fracturing treatments under PRC § 3106. While some argue that
DOGGR regulates fracking through regulating well integrity, well
casing failures are known to occur (comprehensive data are not
available from DOGGR). Arguably, it is difficult to specify or
regulate design criteria for a well casing when all the
conditions it is exposed to (e.g. fracking) are not known.
Despite the absence of action at the state level, some local
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governments, utilizing their jurisdiction over local land use
and planning, have taken steps to include fracking within their
regulatory authority, and, by doing so, have provided some
public notice of this activity.
In the County of Los Angeles, the Department of Regional
Planning approves conditional-use permits. The neighborhood of
Baldwin Hills - with one of the largest oil fields in California
- has established a Baldwin Hills Community Standards District
whose regulations supplement those at the county level. An
Annual Drilling Plan is required and the District's Community
Advisory Panel (CAP) reviews it concurrently with the county's
Director of Planning. The plan includes information on both
planned drilling and fracking operations. The CAP conducts a
public review process in order to provide feedback to the
director, and neighbors who live within 500 feet of a well are
required to be notified. The County of Santa Barbara has
existing local land use requirements which require, for example,
permitting for the well pad where the well is located. A
conditional use permit may also be required in addition to an
approved Oil Drilling and Production Plan. In Santa Barbara,
there is at least one public hearing conducted after 10 days
advance notice. The neighbors within a 300 foot radius of the
property boundary are specifically informed of the hearing. In
December 2011, the County of Santa Barbara passed two ordinances
to explicitly include fracking within its existing land use
planning process for wells.
In other states the permit process for drilling new wells
includes public notification to surface property owners meeting
certain conditions - either adjacent to or within a certain
distance of the wellhead - and many include provisions regarding
fracking. (Subsurface mineral rights are often held separately
from surface property rights.) Colorado, for example, notifies
surface property owners within 500 feet of the wellhead for new
drilling permit applications with at least 20 days advance
notice. In Ohio, public notice is required for new drilling
permit applications, and the 500 feet radius notification
requirement is also used. In West Virginia, neighbors, for the
purpose of notification, can be up to 1,500 feet away if an
aquifer is involved. In all three of these states, the local
government is also notified at the time of the permit
application and information about fracking plans must also be
disclosed. Although often required, advance notice requirements
for fracking operations may be short (for example, 48 hours in
Colorado).
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PROPOSED LAW
This bill would:
Extend to 15 working days the time for the supervisor to
respond to drilling permit applications
For drilling a well, require that the well owner or
operator provide notification 20 calendar days in advance
of drilling to surface property owners and occupants either
within 300 feet of the wellhead or who live above a clean
water aquifer that the well is likely to pierce.
For hydraulic fracturing a well, require that the well
owner or operator provide notification 30 calendar days in
advance of undertaking hydraulic fracturing operations to
surface property owners and occupants within 300 feet of
the wellhead or within 300 feet of the horizontal
projection of the subsurface portion of the well to the
surface or who live above a clean water aquifer that the
well pierces. Both advance notification of the fracking of
exploratory wells and annual reports to the Legislature on
fracking notification are required.
For both drilling and hydraulic fracturing operations,
notification is as specified and includes information about
where the well is located, a description of drilling or
fracking, as approriate, when drilling or fracking will
occur and how to find out more. Water suppliers and local
government would also be notified and the list of neighbors
notified would be provided to DOGGR. The well owner or
operator would also be required to notify the neighbors if
no well is drilled or fracked.
ARGUMENTS IN SUPPORT
According to the author, "SB 1054 requires well owners and
operators to tell their neighbors before undertaking drilling or
fracking operations. It's a simple 'no surprises' policy to
give the well's neighbors advance notice providing them with the
option to take any precautionary measures they choose. A
uniform, state-wide policy minimizes inequities based upon where
one lives and promotes transparency. Oil and gas production and
all its related processes have the potential to adversely impact
our water and natural resources, property values and quality of
life. Fracking may pose considerable environmental risks, but
we have no information to even assess the extent of the practice
here in California. SB 1054 will provide the data needed to
start answering concerns about fracking now. The practice is
expected to become even more prevalent in the future."
The Environment Working Group points out that the "drilling or
fracking of a well is a significant development project. The
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nature of the drilling and fracking process involves the use of
heavy equipment, chemicals, copious amounts of water, and often
accompanying noise, light, and dust. It is fair and reasonable
that a neighbor Ý?] be notified in advance. After all,
neighbors receive a notice for development projects such as a
variance to decrease a side yard setback in a residential zone.
It is important to point out that SB 1054 would not initiate any
new permit process or establish any new appeals or hearings."
Clean Water Action agrees and states that SB 1054 "?is a
necessary minimum first step towards ensuring that oil and gas
drilling in California is conducted safely."
ARGUMENTS IN OPPOSITION
The Western States Petroleum Association argues that SB 1054
"requires unnecessary and overly burdensome requirements" and
that it represents "a solution looking for a problem." WSPA
continues that this "legislation will slow oil and gas
development by increasing the legally acceptable permit review
time by 50%, from 10 to 15 days" and that "the bill does not
recognize the existing contracts ("surface use agreement")
between surface and mineral owners that specify how oil and gas
development can occur." Further, "SB 1054 is redundant to
existing California Civil Code 848 that requires the mineral
owner give written notice and a description of the extent,
timing and location of their extraction operation to the surface
owner and any interested public utility." The California
Chamber of Commerce's comments also stress the "excessive and
unnecessary" burden of the advance notification requirements.
COMMENTS
Is 300 feet sufficient ? One definition of a "critical" well is
a well within 300 feet of "any building intended for human
occupancy that is not necessary to the operation of the well"
(Title 14, California Code of Regulations, section 1720).
Additional safety features are required for critical wells to
prevent acute hazards. The definition of neighbors for wells
that are going to be fracked is expanded to incorporate the
horizontal dimensions of the well due to the capabilities of
directional drilling. Wells can now extend thousands of feet
horizontally. Many neighbors of oil and gas wells may simply be
unaware of their proximity as a result of this technology.
Is state-wide advance notice to neighbors necessary ? With
advance notice of drilling and hydraulic fracturing operations,
the neighbors of the well are provided sufficient time to
prepare, if they care to. Given the public concern about the
potential for environmental contamination from fracking,
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baseline water and soil samples, as applicable, could be taken,
stored or analyzed by the neighbors.
It is existing state policy that the owners of mineral rights
notify the surface property owner in advance of entering their
property and beginning an "extraction operation" (Civil Code
(CIV) § 848, discussed below). However, only the surface
property owner - not the neighboring owners, any occupants,
local government or local water supplier (if applicable) -
receive advance notice. While some local governments provide
advance notice to neighbors of planned drilling or fracking, a
California resident may not necessarily find out in advance
about drilling. The Committee may wish to expand existing state
policy to include the neighbors.
How long is "too long" to wait for a permit ? The increase from
10 to 15 working days for DOGGR's action on a drilling permit is
an increase of 50%, but is one work week. Fifteen days is a
reasonably quick turn-around and is comparable to practices in
other states. It is also, apparently, not uncommon for DOGGR to
notify the applicant within the 10 working day period that the
permit is still under review. The preliminary 2010 Report on
oil and gas production shows that from 2006 - 2010 there were
considerably (up to approximately 1/3) more new permits applied
for than actually used. Each permit is good for one year from
the date of issuance. This suggests that current industry
practice includes applying for many new well permits much
further in advance then 10 working days.
Existing notification requirements As noted above, there is an
existing notification requirement to surface property owners.
An owner of mineral rights (CIV § 883.110) must provide written
notice to the surface property owner and to any public utility
with interest in the property prior to entering the property to
being prospecting, mining or extraction operations (CIV § 848).
The notice must include the location and extent of the planned
operations, as well as when the mineral rights owner will be on
the property. Methods of providing the notice are specified as
is the penalty for failure to comply with the notice
requirements.
There is at least a partial, but by no means necessarily
complete, overlap between the existing notification requirements
described above and those proposed in SB 1054. In order to
avoid duplication, however, advance notification under existing
law, where it meets the criteria specified in SB 1054, is
sufficient (Amendment 1).
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Confidentiality applies to production records. Section 3243 in
the Public Resources Code provides for the production records of
exploratory wells to remain confidential for a specified period
of time. SB 1054's advance notification requirements are not
production well records (PRC §§ 3210 - 3213) and are therefore
not subject to confidentiality (Amendment 2).
The appropriate location for hydraulic fracturing notification
records? Production records include well logs (PRC § 3211),
core records (PRC § 3212) and history (PRC § 3213) and are as
defined. The well owner and operator is charged with keeping
accurate and complete records (PRC § 3210). The recording of
the time period when a well is fracked is not explicitly
consistent with the definitions cited above (Amendment 3).
What if hydraulic fracturing doesn't work ? The definition
provided for hydraulic fracturing implies that the technique is
always successful at improving hydrocarbon production from a
well. Hydraulic fracturing treatments that do not succeed
should be included, in addition to other clarifying technical
changes (Amendment 4).
Additional clarifying amendments. Hydraulic fracturing notice
timing requirements are all in calendar days (Amendment 5). The
material provided to the supervisor is clarified (Amendment 6),
and annual reporting requirements to the legislature are
standardized (Amendment 7).
Recent Budget history. In the last two budgets, DOGGR has
received authorization for 35 new positions to help improve its
regulatory capabilities. These are fewer positions than it
sought, and, according to DOGGR, there has been difficulty in
filling them. According to the Legislative Analyst's Office, 13
positions remain unfilled, although recent administrative
changes offer the promise of larger pools of qualified
candidates, particularly engineers. Budget change proposal
language in Fiscal Year (FY) 2010/2011 specifically directed
DOGGR to address the regulation of fracking, although the
trailer bill language only considered the UIC program. Trailer
bill language in FY 2011/2012 also allowed DOGGR to begin
evaluating fracking regulation. To the recent frustration of
both Senate and Assembly Budget Sub-committees on resources,
DOGGR still has taken no specific action to regulate fracking
until last week when it called for voluntary reporting by the
industry to the web-site "fracfocus.org," and announced plans to
convene a scientific advisory panel on the topic, and hold
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"listening sessions" across the state. The Budget
sub-committees have held open DOGGR's current request pending
the receipt of additional data, including a workload analysis.
Admittedly, both a new director of the Department of
Conservation and a supervisor were recently appointed and focus
continues on the UIC program.
Is fracking safe ? It is impossible to answer that question for
California today given the lack of available information.
However, plausible mechanisms exist for significant subsurface
fluid and/or gas migration, including breaches of the integrity
of the well-casing or reservoir. As noted in an earlier
section, there is considerable evidence that suggests the
increasing concern about the potential public health and
environmental impacts of the practice is warranted.
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.
Additionally, the composition of fluids injected into some wells
cannot even be identified by well owners or operators. This is
considered proprietary information by the product manufacturer
and is not disclosed.
Related legislation
AB 591 (Wieckowski) - would require disclosure of hydraulic
fracturing and fracking fluid chemical composition to DOGGR
after operations have occurred, among other related provisions.
Currently in Senate Appropriations Suspense file.
AB 1966 (Ma) - would require mineral rights owners to provide
advance notice and other information to surface property owners,
as specified. Before Assembly Natural Resources
SUGGESTED AMENDMENTS
AMENDMENT 1
Page 4, between lines 18 - 19, add the following:
"(c) Notice required pursuant to Civil Code section 848
meeting all of the criteria specified in this section shall
be deemed to comply with this section, and shall be
included in the report to the supervisor or district deputy
pursuant to paragraph (4) of subdivision (b)."
Page 5, between lines 38 - 39, add the following:
"(c) Notice required pursuant to Civil Code section 848
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meeting all of the criteria specified in this section shall
be deemed to comply with this section, and shall be
included in the report to the supervisor or district deputy
pursuant to paragraph (4) of subdivision (b)."
AMENDMENT 2
Page 5, lines 39 - 40: delete both lines in their entirety
AMENDMENT 3
Page 5, line 37: replace "3210" with "3213"
Page 6, after line 8: add the following:
"SEC. 4. Section 3213 of the Public Resources Code is
amended to read:
The history shall show the location and amount of
sidetracked casings, tools, or other material, the depth
and quantity of cement in cement plugs, the shots of
dynamite or other explosives, and the results of production
and other tests during drilling operations. This includes
the time period that hydraulic fracturing treatments are
performed ."
AMENDMENT 4
Page 4, delete lines 29 - 31, inclusive, and replace with:
"stimulation treatment that typically includes the
pressurized injection of water and other materials into an
underground geologic formation in order to create or
propagate fractures in the formation, thereby or with the
intent of"
AMENDMENT 5
Page 5, line 29: insert "calendar" between "20" and "days"
AMENDMENT 6
Page 4, line 13: after "notice" insert "and a copy of the
information provided in the notice"
Page 5, line 28: after "notice" insert "and a copy of the
information provided in the notice"
AMENDMENT 7
Page 6, line 2: insert "thereafter" between "year" and the
comma following "year"
Page 6, delete lines 3 - 5, inclusive, and insert
"Legislature a written report describing compliance with
this section."
Page 6, line 8: following "the results." add "The report
shall be submitted in compliance with section 9795 of the
Government Code."
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SUPPORT
Environmental Working Group (sponsor)
Clean Water Action
Environment California
Planning and Conservation League
California Coastal Protection Network
Sierra Club California
California League of Conservation Voters
League of Women Voters
Earthworks
OPPOSITION
California Manufacturers and Technology Association
Western States Petroleum Association
California Chamber of Commerce
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