BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 1054 (Pavley) - Oil and gas: well operation: notice.
Amended: May 8, 2012 Policy Vote: NR&W 5-3; EQ 5-2
Urgency: No Mandate: No
Hearing Date: May 24, 2012 Consultant: Marie Liu
SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
Bill Summary: SB 1054 would require a well owner or operator to
notify surface property owners of commencement of drilling
operations and hydraulic fracturing operations that are about to
occur near or below their property. This bill would also require
notification to be given to the supervisor of the Division of
Oil, Gas, and Geothermal Resources (DOGGR), the appropriate
regional water quality control board (RWQCB), water supplier,
and municipal government.
Fiscal Impact:
One-time costs of at least $220,000 from the Oil, Gas, and
Geothermal Administrative Fund (special fund) in 2013-14 for
the development of regulations and notice templates, mapping
modifications, and database and website modification.
Ongoing costs, of approximately $1 million to $1.2 million
from the Oil, Gas, and Geothermal Administrative Fund
(special fund) in 2013-14 to receive, record, and post
notices and general oversight to ensure accurate reporting.
Background: Under existing law, operators of oil and gas wells
are regulated by DOGGR within the Department of Conservation.
DOGGR's broad authority gives them the ability to regulate
hydraulic fracturing (aka "fracking") in order to protect life,
health, property, and natural resources including water supply;
however, DOGGR does not monitor fracking nor does it have
reporting or permitting requirements. Fracking is a process
where well operators pump water and a variety of chemicals into
wells at very high pressures. This causes cracks to form or grow
in the rock strata, allowing greater oil or gas production from
the well. Fracking is done in both vertical wells and in
horizontal bores that run horizontally through the target rock
strata for as much as several thousand feet. There is growing
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public concern that fracking can lead to groundwater and surface
water contamination.
Proposed Law: This bill would require a well owner or operator
to notify surface property owners of the commencement of
drilling operations or hydraulic fracturing operations that are
planned to occur near or below their property. This bill would
also require notification, either written or electronic, to be
given to the supervisor of DOGGR, the appropriate RWQCB, water
supplier, and municipal government. DOGGR would be required to
post all notifications it receives on its website.
This bill would require DOGGR to submit an annual report to the
Legislature, beginning in January 1, 2014, that would include
the number of wells with notices, the total number of notices
issued, and an evaluation of compliance for the notification
requirements.
This bill would also define hydraulic fracturing.
Staff Comments: This bill would require the development of: (1)
regulations regarding how to provide electronic notifications
and how DOGGR will track fracking projects, (2) necessary forms,
and (3) notice templates. DOGGR will also have additional
start-up costs to modify its GIS mapping to include information
such as groundwater basins, water rights holders, RWQCB
jurisdictions, and city and county boundaries in order to
determine whether notifications are being given to all the
necessary parties. DOGGR will likely use groundwater basin
information that is currently mapped by the Department of Water
Resources as a base of information. DOGGR estimates that mapping
modification will likely cost a minimum of $100,000 and that
total start-up costs will approximately be $220,000 (including
mapping). Staff believes that this estimate seems conservative,
particularly considering the scope of mapping needs for this
bill.
For the ongoing activities of receiving and recording notices,
placing notices on its website, inputting notices into DOGGR's
internal tracking database, general oversight to ensure accurate
reporting, and responding to public records act requests, DOGGR
estimates ongoing costs of approximately $1.6M, which includes
staffing costs for four Associate Governmental Program Analysts,
four Engineering Geologists, two IT staff, 1 senior legal staff,
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and one legal assistant. Staff believes that DOGGR's estimates
represents are based on a scenario representing significant
amounts of well drilling operations and fracking. However, staff
notes that DOGGR currently has no estimate on the extent of
fracking occurring in the state.
DOGGR estimates that preparing the Legislative report required
by this bill will be minor and absorbable.
This bill requires that drilling and fracking notices be sent to
the appropriate RWQCB, however, the RWQCB is not required to
take any actions other than receive the notices. Thus staff
believes the cost of this bill to the RWQCBs is likely minor and
absorbable but unconfirmed.
Proposed Author Amendments: Delete the requirement for DOGGR to
place drilling and fracking notifications on its website and
instead require the well owner to post the information on a
publically-accessible website approved by the DOGGR supervisor;
allow DOGGR to enforce notification requirements through random
sampling; clarify reporting requirements to the Legislature.