BILL ANALYSIS Ó AB 288 Page 1 Date of Hearing: May 15, 2013 ASSEMBLY COMMITTEE ON APPROPRIATIONS Mike Gatto, Chair AB 288 (Levine) - As Amended: April 8, 2013 Policy Committee: Natural Resources Vote: 6-3 Urgency: No State Mandated Local Program: Yes Reimbursable: No SUMMARY This bill revises statue authorizing oil and gas well drilling or well stimulation, notification and approval. This bill also requires the Department of Conservation (DOC) to impose a reasonable and appropriate fee for each notice of intention to commence well stimulation operations to be paid by the owner or operator for the costs incurred by the Division of Oil, Gas and Geothermal Resources (DOGGR) in implementing the provisions of this bill. Specifically, this bill 1)Requires DOGGR to provide written approval before an operator of an oil and gas well commences drilling or well stimulation. 2)Requires DOGGR to supervise the stimulation, well completion techniques, and rework that occurs within an oil and gas field. 3)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. FISCAL EFFECT Increased costs to DOGGR to institute, supervise, and enforce a new permitting program in the $10 million range (special fund.) Cost may be recoverable by the authorized fee. COMMENTS 1)Purpose. The author intends this bill to modernize DOGGR's guiding statute, and eliminate the language established in AB 288 Page 2 1961declaring it is the state's policy to encourage oil drilling. This bill is also intended to provide a revised permitting system for fracking and well stimulation techniques with uncertain public health and environmental impacts. 1)Background. 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. 2)Federal Exemption Followed by Fracking Increase. In 2005, Congress exempted 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. Since 2007, shale oil production has increased from about 39 barrels to 217 million barrels and shale gas production increased from 1.6 trillion cubic feet to 7.2 trillion cubic feet. 3)Potential Environmental Risks. The United States Government Accountability Office (GAO) categorizes the potential environmental risks of fracking into the following categories: a) air quality; b) water quality and quantity; c) land and wildlife. Air quality risks are generally a result of engine exhaust from increased traffic and equipment emissions with a risk of AB 288 Page 3 unintentional emissions of pollutants from faulty equipment. Water Quality risks result from spills or releases of fracking fluids from tank ruptures, or operational errors or underground migration. Fracturing chemicals may contaminate surface or groundwater under these conditions. Water is the primary component of fracking fluids. The cumulative effects of using surface water or groundwater should be regulated to prevent significant local effects. With regard to land and wildlife, the GAO raises concerns about vegetation clearing, road construction, pipelines and storage tanks, unintentional oil or toxic chemical spills and the resulting impact on wildlife and habitat 4)DOGGRs Fracking Regulations. DOGGR has the statutory responsibility to regulate fracking, but to date has not done so. In December 2012, DOGGR released a pre-rulemaking discussion draft of fracking regulations to help inform the next regulatory draft. Once released, the proposed regulations will be vetted through a year-long formal rulemaking process. In the meantime, DOGGR is conducting workshops throughout the state. Numerous groups are concerned that fracking activity is continuing absent formally adopted safeguards and regulations. Others are concerned that DOGGR may not be conducting adequate environmental review through the CEQA process to fully determine significant environmental effects. 5)Related Legislation. The following bills will be heard today in the Appropriations Committee: a) AB 7 (Wieckowski) regarding fracking disclosure; b) AB 649 (Nazarian) provides a specific fracking moratorium; c) AB 669 (Stone) regarding wastewater disposal operations; d) AB 982 (Williams) deals with groundwater monitoring; e) AB 1301 (Bloom) provides a specific fracking moratorium/ f) AB 1323 (Mitchell) provides a specific fracking moratorium. AB 288 Page 4 Analysis Prepared by : Jennifer Galehouse / APPR. / (916) 319-2081