BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 288
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          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  








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            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  








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            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.









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           Analysis Prepared by  :    Jennifer Galehouse / APPR. / (916)  
          319-2081