BILL ANALYSIS �
AB 649
Page 1
Date of Hearing: April 29, 2013
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
AB 649 (Nazarian) - As Amended: March 19, 2013
SUBJECT : Oil and gas: hydraulic fracturing
SUMMARY : If an oil and gas well is located an unspecified
number of miles from an aquifer, prohibits hydraulic fracturing
or the use of clean freshwater for hydraulic fracturing purposes
until (1) a report prepared by a multi-stakeholder advisory
committee is completed and (2) the Secretary of the Natural
Resources Agency and the Secretary for Environmental Protection
Agency make a determination as to whether, and under what
conditions, hydraulic fracturing is permitted within the state.
EXISTING LAW :
1)Creates the Division of Oil, Gas, and Geothermal Resources
(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.
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3)Declares as a policy of the state 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.
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 :
1)Defines "hydraulic fracturing" as the injection of fluids or
gases into an underground geologic formation with the
intention to cause or enhance fractures in the formation, in
order to cause or enhance the production of oil or gas from a
well. Alternate terms include, but are not limited to,
"fracking," "hydrofracking," and "hydrofracturing."
2)Restrictions on Hydraulic Fracturing. If an oil and gas well
is located an unspecified number of miles from an aquifer,
prohibits hydraulic fracturing or the use of clean freshwater
for hydraulic fracturing purposes until (1) a report prepared
by an advisory committee (as described below) is completed and
(2) the Secretary of the Natural Resources Agency and
Secretary of the California Environmental Protection Agency
make a determination (which is required by January 1, 2019) as
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to whether and under what conditions hydraulic fracturing is
permitted within the state. The determination shall be made
only after measures are in place to ensure that any activities
related to hydraulic fracturing do not pose a risk to the
public health, welfare, environment, or the economy of the
state.
3)Advisory Committee.
a) By July 1, 2014, requires the Secretary of the Natural
Resources Agency and the Secretary of the California
Environmental Protection Agency, to convene an advisory
committee to develop a report, based on the best scientific
information available, relating to hydraulic fracturing.
b) Requires the advisory committee to include one
representative from each of the following:
i) The California Environmental Protection Agency;
ii) The Natural Resources Agency;
iii) The State Department of Public Health;
iv) An environmental justice organization;
v) The agriculture industry;
vi) The oil and gas industry;
vii) An academic researcher with experience in hydraulic
fracturing issues; and
viii) A water agency.
4)Advisory Committee Report.
a) Requires the advisory committee to address specific
issues related to hydraulic fracturing in the report, which
shall include, but is not limited to, all of the following:
i) A description of hydraulic fracturing, and other
enhanced oil and gas recovery techniques;
ii) All potential health and environmental impacts
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related to hydraulic fracturing, including, but not
limited to, all of the following:
(1) The handling and disposition of produced water
or wastewater;
(2) Contamination of groundwater or surface water;
(3) The supply and sources of water used in
hydraulic fracturing and its impact on the state,
regional, and local water supply;
(4) The use, handling, and accidental spill of
chemicals used in hydraulic fracturing; and
(5) Impacts on endangered species and their
habitat;
iii) All potential economic impacts of increased
hydraulic fracturing operations and other enhanced oil
and gas recovery methods in the state;
iv) All potential effects on communities most likely to
be negatively affected by the impacts of hydraulic
fracturing;
v) A review of the regulations affecting hydraulic
fracturing and an analysis of whether these are adequate
to address the issues identified in this report;
vi) Recommendations for emergency planning and
mechanisms necessary to ensure adequate and fully funded
responses to emergencies related to hydraulic fracturing
operations; and
vii) Recommendations for regulatory and statutory changes
needed to address the issues covered in the report.
b) Requires a draft of the final report to be made
available for public comment for a period of no less than
120 days.
c) Requires the final report to be completed on or before
January 1, 2018, and a copy be provided to the Governor and
the Legislature by the Secretary of the Natural Resources
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Agency and the Secretary of the California Environmental
Protection Agency on or before that date.
5)Does not impair or infringe on any vested right to conduct
hydraulic fracturing operations.
FISCAL EFFECT : Unknown
COMMENTS :
1)Author Statement. According to the author:
AB 649 interjects fracking practices, until the state
conducts a full evaluation and identifies how and if
fracking should proceed and to what extent. This is
especially important as the Monterey Shale Formation
could be the next area to be fracked for oil. The
Monterey Shale is estimated to hold 15.4 billion
barrels of oil, two-thirds of the United States'
shale-oil reserves. The area is a 1,750 square mile
area that runs lengthwise through the state. The oil
in the Monterey Shale can only be removed using
advanced oil-extraction technologies, such as
horizontal drilling, which is the technic used in
fracking.
Given that we cannot predict the long-term
consequences of fracking in California, AB 649 places
a temporary halt to this practice until a full and
in-depth analysis is conducted on the procedure's
potential effects on California's water supply.
Although the idea of increasing California's economic
activity and creating new jobs is appealing,
appropriate steps need to be taken to ensure that
there is comprehensive oversight in the state and
California's water sources are protected.
2)Background on Hydraulic Fracturing. According to the Western
States Petroleum Association (WSPA), hydraulic fracturing 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
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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 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 approximately 39 million barrels to about 217
million barrels, and shale gas production increased
approximately 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
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Government Accountability Office (GAO), which is an
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
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
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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.
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
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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.
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 percent of
hydraulic fracturing occurs in Kern County, in areas with no
potable water, no surrounding population, and no other
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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."
While DOGGR has statutory authority to regulate hydraulic
fracturing, it has not developed regulations to address the
activity. As explained below, DOGGR is currently focused on
developing regulations that require oil and gas operators to
take certain protective measures 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.
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
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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 public workshops in
Los Angeles and Sacramento about the proposed regulations,
with more planned through July 2013.
6)Suggested Amendments. As indicated above, the setback
provision in this bill does not contain a specific distance
from aquifers. In determining how to proceed with this issue,
one possible approach is to look at the state of New York's
proposed hydraulic fracturing regulations and a Natural
Resources Defense Council (NRDC) report that provides "best
technology and practice recommendations" for New York's
proposed regulations.
New York's proposed hydraulic fracturing regulations include
setback provisions that propose a range of distances a
fracking well can be located from, among other things, homes,
schools, and various water sources. The NRDC report's
recommendations for these setbacks suggest going up to 4,000
feet to protect certain sensitive human and environment
resource receptors. The NRDC report also recommends allowing
local zoning authorities to establish minimum setbacks that
are more protective than the state's minimum standards to
address unique and site-specific local concerns and community
characteristics.
In consideration of the NRDC report, the author and the
committee may wish to consider amending Section 3 of the bill
to state the following:
SEC. 3. Section 3203.5 is added to the Public Resources Code,
to read:
3203.5. Neither hydraulic fracturing nor the use of clean
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freshwater for hydraulic fracturing purposes is permitted on
any oil or gas well if any part of the well is located within
4,000 feet of a home, public building, school, surface waters,
underground source of drinking water as defined under the Safe
Drinking Water Act regulations (40 CFR �144.3), or any other
sensitive human or environmental resource in the state, until
all of the following requirements are met:
(a) (1) By July 1, 2014, the Secretary of the Natural
Resources Agency and the Secretary of the California
Environmental Protection Agency, shall convene an
advisory committee to develop a report, based on the
best scientific information available, that provides
scientific and technical justification for appropriate
setbacks of hydraulic fracturing operations from
sensitive human and environmental resources in the
state. The advisory committee shall include of one
representative from each of the following:
(A) The California Environmental Protection Agency.
(B) The Natural Resources Agency.
(C) The State Department of Public Health.
(D) An environmental justice organization.
(E) The agriculture industry.
(F) The oil and gas industry.
(G) An academic researcher with experience in
hydraulic fracturing issues.
(H) A water agency.
(2) The advisory committee shall address specific
issues related to hydraulic fracturing in the report,
which shall include, but is not limited to, all of the
following:
(A) A description of hydraulic fracturing and other
enhanced oil and gas recovery techniques.
(B) All potential health and environmental impacts
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related to hydraulic fracturing, including, but not
limited to, all of the following:
(i) The handling and disposition of produced water or
wastewater.
(ii) Contamination of groundwater or surface water.
(iii) The supply and sources of water used in
hydraulic fracturing and its impact on the state,
regional, and local water supply.
(iv) The use, handling, and accidental spill of
chemicals used in hydraulic fracturing.
(v) Impacts on endangered species and their habitat.
(C) All potential economic impacts of increased
hydraulic fracturing operations and other enhanced oil
and gas recovery methods in the state.
(D) All potential effects on communities most likely
to be negatively affected by the impacts of hydraulic
fracturing.
E) A review of the regulations affecting hydraulic
fracturing and an analysis of whether these are
adequate to address the issues identified in this
report.
(F) Recommendations for emergency planning and
mechanisms necessary to ensure adequate and fully
funded responses to emergencies related to hydraulic
fracturing operations.
(G) Recommendations for regulatory and statutory
changes needed to address the issues covered in the
report.
(3) The advisory committee shall consider both
current and foreseeable hydraulic fracturing
operations, such as potential operations in the
Monterey Shale and Northern California gas reservoirs,
when developing the report.
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(b) A draft of the final report shall be made
available for public comment for a period of no less
than 120 days.
(c) The final report shall be completed on or before
January 1, 2018, and a copy shall be provided to the
Governor and the Legislature by the Secretary of the
Natural Resources Agency and the Secretary of the
California Environmental Protection Agency on or
before that date.
(d) Upon completion of the report, the Secretary of
the Natural Resources Agency and Secretary of the
California Environmental Protection Agency shall make
a determination not later than January 1, 2019, as to
whether and under what conditions, hydraulic
fracturing is permitted within the state, including
appropriate surface setbacks of hydraulic fracturing
operations from sensitive human and environmental
resources in the state.
(e) Nothing in this section shall be construed to
preclude a local government from establishing more
protective setbacks related to hydraulic fracturing
operations.
REGISTERED SUPPORT / OPPOSITION :
Support
Center for Biological Diversity
Opposition
American Chemistry Council
Brea Chamber of Commerce
California Chamber of Commerce
California Independent Oil Marketers Association
California Independent Petroleum Association
California Manufacturers and Technology Association
California Small Business Alliance
California Business Properties Association
Coalition of Energy Users
Friends for Saving California Jobs
Independent Oil Marketers Association
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Kern Tax Payers Association
League of California Food Processors
Western States Petroleum Association
Analysis Prepared by : Mario DeBernardo / NAT. RES. / (916)
319-2092