BILL ANALYSIS Ó
AB 288
Page 1
Date of Hearing: April 15, 2013
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
AB 288 (Levine) - As Amended: April 8, 2013
SUBJECT : Oil and gas: hydraulic fracturing
SUMMARY : (1) Before an operator of an oil and gas well
commences drilling or well stimulation (e.g. hydraulic
fracturing), requires the Division of Oil, Gas, and Geothermal
(DOGGR) to provide written approval; (2) within 30 days,
requires DOGGR to provide written approval of a notice to
commences drilling or well stimulation; and (3) amends DOGGR's
duties and the state's general policy related to oil and gas
drilling.
EXISTING LAW :
1)Creates DOGGR within the Department of Conservation.
2)Requires DOGGR to do all of the following:
a) Supervise the drilling, operation, maintenance, and
abandonment of wells and the operation, maintenance, and
removal or abandonment of tanks and facilities attendant to
oil and gas production, including certain pipelines that
are within an oil and gas field, so as to prevent, as far
as possible, damage to life, health, property, and natural
resources; damage to underground oil and gas deposits from
infiltrating water and other causes; loss of oil, gas, or
reservoir energy, and damage to underground and surface
waters suitable for irrigation or domestic purposes by the
infiltration of, or the addition of, detrimental
substances.
b) Supervise the drilling, operation, maintenance, and
abandonment of wells so as to permit the owners or
operators of the wells to utilize all methods and practices
known to the oil industry for the purpose of increasing the
ultimate recovery of underground hydrocarbons and which, in
the opinion of DOGGR, are suitable for this purpose in each
proposed case.
3)Declares as a policy of the state that to further the
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elimination of waste by increasing the recovery of underground
hydrocarbons, a lease or contract for the exploration and
extraction of hydrocarbons is deemed to allow, unless
otherwise stated, the lessee or contractor to do what a
prudent operator using reasonable diligence would do, having
in mind the best interests of the lessor, lessee, and the
state in producing and removing hydrocarbons, including, but
not limited to, the injection of air, gas, water, or other
fluids into the productive strata, the application of pressure
heat or other means for the reduction of viscosity of the
hydrocarbons, the supplying of additional motive force, or the
creating of enlarged or new channels for the underground
movement of hydrocarbons into production wells, when these
methods or processes employed have been approved by DOGGR.
4)To best meet oil and gas needs in this state, requires DOGGR
to administer its authority so as to encourage the wise
development of oil and gas resources.
5)Requires the operator of any well, before commencing the work
of drilling the well, to file with DOGGR a written notice of
intention to commence drilling. Drilling shall not commence
until approval is given by DOGGR. If DOGGR fails to give the
operator written response to the notice within 10 working days
from the date of receipt, that failure shall be considered as
an approval of the notice.
THIS BILL:
6)Requires DOGGR to supervise the stimulation, well completion
techniques, rework that occurs within an oil and gas field.
7)Requires DOGGR to supervise the drilling, stimulation, well
completion techniques, rework, operation, maintenance, and
abandonment of wells so as to permit the owners or operators
of a well to utilize all safe methods and practices.
8)Authorizes DOGGR to allow owners or operators of the wells to
utilize all methods and practices to increase the ultimate
recovery of underground hydrocarbons if DOGGR determines that
those methods and practices are consistent with the law and
used in a safe manner.
9)Deletes the requirement that DOGGR supervise the drilling,
operation, maintenance, and abandonment of wells so as to
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permit the owners or operators of the wells to utilize all
methods and practices known to the oil industry for the
purpose of increasing the ultimate recovery of underground
hydrocarbons and which, in the opinion of DOGGR, are suitable
for this purpose in each proposed case.
10)Repeals the declaration of state policy that to further the
elimination of waste by increasing the recovery of underground
hydrocarbons, a lease or contract for the exploration and
extraction of hydrocarbons is deemed to allow, unless
otherwise stated, the lessee or contractor to do what a
prudent operator using reasonable diligence would do, having
in mind the best interests of the lessor, lessee, and the
state in producing and removing hydrocarbons, including, but
not limited to, the injection of air, gas, water, or other
fluids into the productive strata, the application of pressure
heat or other means for the reduction of viscosity of the
hydrocarbons, the supplying of additional motive force, or the
creating of enlarged or new channels for the underground
movement of hydrocarbons into production wells, when these
methods or processes employed have been approved by DOGGR.
11)Deletes the requirement that DOGGR administer its authority
so as to encourage the wise development of oil and gas
resources to best meet oil and gas needs in this state.
12)Prohibits an operator of a well from commencing drilling
until written approval is given by DOGGR. Within 30 working
days, DOGGR shall approve or deny a notice of intention to
commence drilling.
13)Defines "acid stimulation" as a treatment that uses various
formulations of acids to stimulate the extraction of
hydrocarbons from carbonate or sandstone formations. This
includes, but is not limited to, fracture acid stimulation and
matrix acid stimulation.
14)Defines "hydraulic fracturing" as a treatment used in
stimulating a well that involves the pressurized injection of
hydraulic fracturing fluid and proppants 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.
15)Defines "well stimulation" as any well intervention
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technique, including, but not limited to, hydraulic fracturing
and acid stimulation, to improve the permeability of the
near-wellbore formation, thereby enhancing the productivity of
a well.
16)Requires the operator of a well to file with DOGGR a written
notice of intention to commence well stimulation operations at
least 30 working days prior to any well stimulation
operations. The notice shall contain the pertinent data
required by DOGGR and shall detail all well stimulation
techniques, methods, and practices expected to be performed on
the well, and include sufficient information as to demonstrate
that the use of well stimulation will not present a threat to
public health and safety. DOGGR may require other pertinent
information to supplement the notice. Well stimulation
operations shall not commence until written approval is given
by DOGGR.
17)Deems the notice of intention to commence well stimulation
canceled if hydraulic fracturing has not commenced within one
year of receipt of the notice.
18)Gives DOGGR 30 working days to notify the operator in writing
of approval or denial of the notice. DOGGR shall approve a
notice of intention to commence well stimulation only if it
finds that the operator has provided sufficient information as
to demonstrate that use of hydraulic fracturing will not
present a threat to public health and safety.
19)Requires DOGGR to immediately notify the appropriate regional
water quality control board upon approval of a notice of
intention to commence well stimulation.
20)Requires the Department to impose a reasonable and
appropriate fee for each notice of intention to commence well
stimulation operations received to be paid by the owner or
operator for the costs incurred by DOGGR in implementing the
well stimulation provisions of this bill.
FISCAL EFFECT : Unknown
COMMENTS :
1)Purpose of the Bill. In discussions with the author's office,
it is clear that the intent of this bill is to do two things:
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(1) modernize DOGGR's statute by providing more reasonable
time frames for regulatory review and eliminating antiquated
language established in 1961 that some have argued codifies
the "drill, baby, drill" philosophy as state policy and (2)
permit hydraulic fracturing and other well stimulation
techniques that have caused major public anxiety due to the
uncertain impacts these practices have on public health and
the environment.
2)Background on Hydraulic Fracturing. According to the Western
States Petroleum Association (WSPA), hydraulic fracturing
(a.k.a. fracking) is one energy production technique used to
obtain oil and natural gas in areas where those energy
supplies are trapped in rock (i.e. shale) or sand formations.
Once an oil or natural gas well is drilled and properly lined
with steel casing, fluids are pumped down to an isolated
portion of the well at pressures high enough to cause cracks
in shale formations below the earth's surface. These cracks
or fractures allow oil and natural gas to flow more freely.
Often, a propping agent such as sand is pumped into the well
to keep fractures open.
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.
In 2005, Congress enacted what is colloquially referred to as
the "Halliburton Loophole," which exempts hydraulic fracturing
(except when involving the injection of diesel fuels) from the
federal Safe Drinking Water Act. As a result of this action,
the US Environmental Protection Agency (US EPA) lacks the
authority to regulate hydraulic fracturing activities that do
not use diesel fuel as an additive.
Around the same time that Congress exempted hydraulic
fracturing from the Safe Drinking Water Act, the country
experienced a boom in the production of shale oil and gas.
From 2007 to 2011, shale oil production increased more than
fivefold, from about 39 million barrels to about 217 million
barrels, and shale gas production increased approximately
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fourfold, from 1.6 trillion cubic feet to 7.2 trillion cubic
feet. This increase in production was driven primarily by
technological advances in horizontal drilling and hydraulic
fracturing that made more shale oil and gas development
economically viable.
But with this boom comes various issues with regard to
environmental health and safety, which has caused enormous
public anxiety. Cases of environmental contamination
attributed to hydraulic fracturing have been reported in
Wyoming, Texas, Colorado, West Virginia, and Pennsylvania.
Consequently, governments at all levels across the country are
looking to regulate the practice and address these concerns.
3)What are the environmental risks associated with hydraulic
fracturing? According to a recent report from the US
Government Accountability Office (GAO), which is a
independent, nonpartisan agency that works for Congress,
"[d]eveloping oil and gas resources?poses inherent
environmental and public health risks, but the extent of risks
associated with shale oil and gas development is unknown, in
part, because the studies we reviewed do not generally take
into account potential long-term, cumulative effects." The
GAO's report categorizes the environmental risks into the
following categories: air quality, water quantity, water
quality, and land and wildlife.
With regard to air quality, the risks are "generally the
result of engine exhaust from increased truck traffic,
emissions from diesel-powered pumps used to power equipment,
intentional flaring or venting of gas for operational reasons,
and unintentional emissions of pollutants from faulty
equipment." The GAO report also explains how silica sand, a
proppant commonly used in hydraulic fracturing, and storing
fracturing fluids and produced waters in impoundments can
cause air quality issues. Silica sand, if not properly
handled, can become airborne, lodge into a person's lungs, and
cause silicosis, which is an incurable lung disease.
Impoundments (i.e. ponds) containing fracturing fluids and
produced waters (i.e. the water produced when oil and gas are
extracted from the ground) pose a risk because the evaporation
of the fluids has the potential to release contaminants into
the atmosphere.
With regard to water quantity, water is used for well drilling
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operations to make drilling mud as well as to cool and
lubricate the drill bits. Water is also the primary component
of hydraulic fracturing fluids. According to the GAO, "the
amount of water used for shale gas development is small in
comparison to other water uses, such as agriculture and other
industrial purposes. However, the cumulative effects of using
surface water or ground water at multiple oil and gas
development sites can be significant at the local level,
particularly in areas experiencing drought conditions." It
should be noted that the oil and gas industry and DOGGR both
assert that the amount of water used for hydraulic fracturing
in California is a fraction of what is used in other states.
This assertion is based on information voluntarily provided by
oil and gas operators. It is not clear whether this
information is representative of all hydraulic fracturing in
the state. Additionally, with the potential for a hydraulic
fracturing boom in the Monterey Shale (which is explained in
more detail below), it would be too speculative to determine
the type and amount of hydraulic fracturing that will take
place in the future and how much water will be needed.
With regard to water quality, the GAO explains that shale oil
and gas development pose risks from contamination of surface
water and ground water as a result of spills and releases of
hydraulic fracturing chemicals, produced water, and drill
cuttings. Spills and releases of these materials can occur as
a result of tank ruptures, blowouts, equipment or impoundment
failures, overfills, vandalism, accidents, ground fires, or
operational errors.
The potential for the spill and release of chemicals involved
in hydraulic fracturing has received a great amount of public
attention. According to a recent congressional report,
between 2005 and 2009, oil and gas companies throughout the
United States used hydraulic fracturing 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. As for produced water, it can carry
a range of contaminants, including hydraulic fracturing
chemicals, salts, metals, oil, grease, dissolved organics, and
naturally occurring radioactive materials. Drill cuttings
(i.e. the broken bits of solid material removed from drilling)
may contain naturally occurring radioactive materials.
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The potential for underground migration is also a potential
risk to water quality. The GAO explains that "[u]nderground
migration can occur as a result of improper casing and
cementing of the wellbore as well as the intersection of
induced fractures with natural fractures, faults, or
improperly plugged dry or abandoned wells. Moreover, there
are concerns that induced fractures can grow over time and
intersect with drinking water aquifers." It should be noted
that the oil and gas industry has provided information
claiming that hydraulic fracturing typically occurs thousands
of feet below the earth's surface and that the well casing for
these wells extends below an impervious layer of rock "that
would prevent any migration of fluids up into the drinking
water supply." Assuming that the industry is correct, there
is still the problem with well casing failures. A 2000
Society of Petroleum Engineers article regarding an oil field
in 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."
In Pennsylvania, poor cementing around a well casing allowed
methane to contaminate the water wells of 19 families.
Morever, little data exists on (1) fracture growth in shale
formations following multistage hydraulic fracturing over an
extended time period, (2) the frequency with which
refracturing of horizontal wells may occur, (3) the effect of
refracturing on fracture growth over time, and (4) the
likelihood of adverse effects on drinking water aquifers from
a large number of hydraulically fractured wells in close
proximity to each other.
With regard to land and wildlife, the GAO explains that
"clearing land of vegetation and leveling the site to allow
access to the resource, as well as construction of roads,
pipelines, storage tanks, and other infrastructure needed to
extract and transport the resource can fragment
habitats?[which] increases disturbances?, provides pathways
for predators, and helps spread nonnative plant species."
Noise, the presence of new infrastructure, and spills of oil,
gas, or other toxic chemicals are other risks that can
negatively affect wildlife and habitat.
There is also the issue of earthquakes and hydraulic
fracturing. According to the GAO report, well injections,
especially the injection of produced water, have been
connected to seismicity.
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Ideally, the environmental risks referenced above would be
analyzed by the lead agency under the California Environmental
Quality Act (CEQA). However, according to the complaint in a
recent lawsuit filed against DOGGR by a number of
environmental groups, the agency has been "approving permits
for oil and gas wells after exempting such projects from
environmental review or? issuing boilerplate negative
declarations finding no significant impacts from these
activities."
4)Hydraulic Fracturing in California. According to the oil and
gas industry, hydraulic fracturing has been used in California
for decades. The industry claims that over 90% of hydraulic
fracturing occurs in Kern County, in areas with no potable
water, no surrounding population, and no other significant
business interests. However, reports from various sources
suggest that hydraulic fracturing in California will likely
increase significantly in the upcoming years, spreading to
areas throughout the state.
A recent report from the University of Southern California
(USC) explains that "California boasts perhaps the largest
deep-shale reserves in the world. Those reserves exist within
the Monterey Shale Formation, a 1,750 square mile swath of
mostly underground shale rock that runs lengthwise through the
center of the state, with the major portion in the San Joaquin
Basin." The US Energy Department estimates that the Monterey
Shale contains more than 15 billion barrels of oil, accounting
for approximately two-thirds of the shale-oil reserve in the
United States. Additionally, according to a 2008 paper
published by the Society of Petroleum Engineers, "it is
believed that hydraulic fracturing has a significant potential
in many Northern California gas reservoirs."
DOGGR, although having statutory authority to regulate
hydraulic fracturing, has not yet developed regulations to
address the activity. As explained below, the agency is
currently focused on developing regulations that require oil
and gas operators to take certain protective measure and
provide information about hydraulic fracturing operations.
Additionally, as referenced above, DOGGR may not be conducting
adequate environmental review through the CEQA process to
determine if there are significant impacts of hydraulic
fracturing.
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5)DOGGR's Draft Regulations. On December 28, 2012, DOGGR
released a pre-rulemaking discussion draft of regulations on
hydraulic fracturing. The proposed regulations attempt to
impose requirements on operators aimed to improve transparency
and safety. Specifically, the proposed regulations would
require an operator to: (1) submit information to DOGGR at
least 10 days prior to beginning hydraulic fracturing
operations and notify DOGGR at least 24 hours prior to
commencing hydraulic fracturing operations (advance disclosure
of hydraulic fracturing chemicals is not required); (2) prior
to operations, test the structural integrity of wells and
casings to prevent fluid migration; (3) store and handle
hydraulic fracturing fluids in a specified manner; (4) monitor
a specified set of parameters during hydraulic fracturing
operations and, in case a breach occurs, terminate operations
and immediately notify DOGGR about the breach; (5) after the
conclusion of operations, monitor wells for up to 30 days and
maintain data for a period of 5 years; and (6) disclose data
to a Chemical Disclosure Registry (such as FracFocus.org) that
is not a trade secret, unless a health professional submits a
written statement of need stating that the trade secret
information will be used for diagnosis or treatment of an
individual exposed to hazardous hydraulic fracturing chemicals
and the health professional also executes a confidentiality
agreement.
These proposed regulations will be vetted through a year-long
formal rulemaking process beginning the summer or fall of
2013. In the meantime, DOGGR has conducted a public workshop
in Los Angeles and Sacramento about the proposed regulations,
with more planned in California cities like Bakersfield and
Santa Maria through July 2013.
6)Well Stimulation versus Hydraulic Fracturing. A previous
version of this bill focused solely on the permitting of
hydraulic fracturing. The bill was recently amended to permit
the broader practice of well stimulation. The primary reason
for this change is to capture well stimulation techniques that
are similar to hydraulic fracturing, but that may not fit into
the exact definition of fracking. For example, DOGGR's
pre-rulemaking discussion draft of regulations includes the
use of "proppants" in the definition of hydraulic fracturing.
However, proppant is not used in acid matrix stimulation,
which articles published by the Society of Petroleum Engineers
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consider a form of hydraulic fracturing. Because of this
inconsistency, it seems reasonable to use the broader term
"well stimulation."
7)Related Legislation.
AB 7 (Wieckowski), which deals with hydraulic
fracturing disclosure.
AB 649 (Nasarian), which deals with a hydraulic
fracturing moratorium.
AB 669 (Stone), which deals with permitting
wastewater disposal from oil and gas operations.
AB 982 (Williams), which deals with groundwater
monitoring.
AB 1301 (Bloom), which deals with a hydraulic
fracturing moratorium.
AB 1323 (Mitchell), which deals with a hydraulic
fracturing moratorium.
SB 4 (Pavley), which deals with hydraulic fracturing
regulations and disclosure.
SB 395 (Jackson), which deals with wastewater
disposal wells.
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REGISTERED SUPPORT / OPPOSITION :
Support
Clean Water Action
Environment California
Environmental Working Group
Natural Resources Defense Council
San Francisco BayKeeper
Sierra Club California
Opposition
California Business Properties Association
California Chamber of Commerce
California Manufacturers and Technology Association
Western State Petroleum Association
Analysis Prepared by : Mario DeBernardo / NAT. RES. / (916)
319-2092