BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:  April 29, 2013

                       ASSEMBLY COMMITTEE ON NATURAL RESOURCES
                                Wesley Chesbro, Chair
                    AB 1301 (Bloom) - As Amended:  March 21, 2013
           
          SUBJECT  :  Oil and gas:  hydraulic fracturing

           SUMMARY  :  Prohibits hydraulic fracturing operations until the  
          Legislature enacts subsequent legislation that determines  
          whether and under what conditions hydraulic fracturing may be  
          conducted while protecting the public health and safety and the  
          natural resources of 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. 

          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  








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            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 a technique used in  
            preparing a well that typically involves the pressurized  
            injection of water and chemicals, compounds, and materials  
            into an underground geologic formation in order to expand  
            existing fractures or create new fractures in that formation,  
            thereby causing or enhancing the production of oil or gas from  
            a well. Hydraulic fracturing shall include the terms  
            "fracking," "hydrofracking," "hydrofracturing,"  
            "unconventional shale drilling," and other colloquial terms  
            referencing this drilling technique.

          2)Notwithstanding any other law, prohibits hydraulic fracturing  
            operations until the Legislature enacts subsequent legislation  
            that determines whether and under what conditions hydraulic  
            fracturing may be conducted while protecting the public health  
            and safety and the natural resources of the state.

           FISCAL EFFECT  :  Unknown








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           COMMENTS  :

           1)Purpose of the Bill.   This bill imposes a moratorium on  
            hydraulic fracturing operations until appropriate laws and  
            regulations are developed that protect the public health and  
            safety and the natural resources of the state.

            The author's rationale for this bill is based, in part, on  
            DOGGR's lack of regulations on hydraulic fracturing.  The  
            author explains that DOGGR knew about the public health and  
            environmental concerns related to hydraulic fracturing back in  
            2010, but did nothing to implement new regulations until  
            recently.  In 2012, DOGGR finally began conducting workshops  
            for the purpose of creating a discussion draft of hydraulic  
            fracturing regulations.  According to the author, the  
            discussion draft (which is explained in more detail below),  
            includes significant gaps.  Regulations are expected to be  
            proposed sometime later this year and the rulemaking process  
            will take at least another year.  Meanwhile, hydraulic  
            fracturing activities will continue without any oversight.

            In addition to DOGGR's lack of regulations, the author points  
            to DOGGR's failure to require environmental impact reports  
            (EIR) pursuant to the California Environmental Quality Act  
            (CEQA).  DOGGR has recently been sued by environmentalists who  
            argue that 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."  The plaintiffs  
            are seeking injunctive relief to prohibit the approval of new  
            oil and gas wells until DOGGR complies with its legal  
            requirements to evaluate and mitigate the significant  
            environmental and public health impacts caused by hydraulic  
            fracturing operations.

            The author further states that "[g]iven [DOGGR's] snail's pace  
            to date and the significant gaps in the discussion draft, it  
            appears that unless a moratorium is enacted, there are few  
            incentives to draw all stakeholders together to thoughtfully  
            and comprehensively develop the appropriate laws and  
            regulations needed to protect public health and safety and  
            address other factual environmental risks."

           2)Background on Hydraulic Fracturing.   According to the Western  








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            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 U.S. 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  








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            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 U.S.  
            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  








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            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.  

            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  








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            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 with 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 CEQA.  However, as  
            referenced above, a recent CEQA lawsuit filed against DOGGR  
            claims that the agency has not been conducting adequate  
            environmental review of hydraulic fracturing operations.

           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  








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            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  
            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 U.S. 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."

           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  








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            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 in California cities like Bakersfield and  
            Santa Maria through July 2013.

           6)Related Legislation.  

                     AB 7 (Wieckowski), which deals with hydraulic  
                 fracturing disclosure.
                     AB 288 (Levine), which deals with permitting well  
                 stimulation.
                     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 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.
           
          REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          350 Bay Area
          350 Sacramento
          350 Santa Barbara
          350 Silicon Valley
          350 Sonoma County
          350.org
          350.org Sonoma County
          Clean Water Action (co-sponsor)
          Center for Biological Diversity (co-sponsor)
          Food & Water Watch (co-sponsor)
          Alameda Creek Alliance
          Alliance of Nurses for Healthy Environments
          Aromas Cares for Our Environment (ACE)








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          Baldwin Hills Oil Watch
          Ballona Network
          Battle Creek Alliance
          Bay Area Healthy 880 Communities
          Bay Localize
          Breast Cancer Action
          Burbank Green Alliance
          Butte Environmental Council
          California Coastkeeper Alliance
          California Student Sustainability Coalition
          Californians for Western Wilderness
          Californians Who Drink Water
          California Nurses Association
          Center on Race, Poverty, and the Environment
          Central Valley Safe Environment Network
                 Chalice Farm and Sustainable Living Center
          Christians Caring for Creation
          City of Culver City
          Citizens Coalition for a Safe Community
          Citizens Committee to Complete the Refuge
          Claudia Y. Shafer, Attorney at Law
          Clean Water and Air Matter
          Cleveland National Forest Foundation
          Coastal Environmental Rights Foundation
          CoFED
          Comite Civico Del Valle, Inc.
          Community Food and Justice Coalition
          CREDO
          Democracy for America
          The Democratic Club of the Santa Clarita Valley
          Donna Shanske, HR Consulting
          Earthworks' Oil & Gas Accountability Project
          Ebbetts Pass Forrest Watch
          EcoEquity
          Environment California
          Environmental Action Committee of West Marin
          Environmental Defense Center
          Environmental Health Coalition
          Environmental Priorities Network
          Environmental Protection Information Center
          Evolving Products
          Family Farm Defenders
          Food & Water Watch
          Food Empowerment Project
          Frack-Free Culver City








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          Fresno Metro Ministry
          Friends Foundation International
          Friends of the Earth
          Friends of the Pogonip
          Forest Forever
          Gage & Gage Productions
          GAIA-Global Alliance for Incinerator Alternatives
          Global Community Monitor
          Golden Gate Audubon Society
          Green Party of Monterey County
          Greenaction for Health and Environmental Justice
          GreenFaith
          Greenpeace
          Humboldt Baykeeper
          inNative
          Klamath Forest Alliance
          Klamath Riverkeeper
          Klamath-Siskiyou Wildlands Center
          KyotoUSA
          Label GMOs Bakersfield
          Local Clean Energy Alliance
          Los Angeles Waterkeeper
          Los Padres ForestWatch
          Mainstreet Moms
          Medicine Lake Citizens for Quality Environment
          Movement Generation
          Natural Resources Defense Council
          Northcoast Environmental Center
          Occupy Monterey Peninsula
          Oil Change International
          The Orange County Interfaith Coalition for the Environment
          Organic Consumers Association
          Paw PAC
          People for Clean Air & Water of Kettleman City
          Project Coyote
          Protect Our Water
          Public Citizen
          Rainforest Action Network
          RefineRichmond
          Residents Organized for a Safe Environment (ROSE)
          Rising Tide Monterey Bay
          The River Project
          San Francisco Baykeeper
          San Joaquin Raptor/Wildlife Rescue Center
          San Joaquin Valley Conservancy








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          San Mateo Cool Cities
          Santa Cruz Indigenous Solidarity
          SaveWithSunlight, Inc.
          Sierra Club of California
          SLO Clean Water Action
          Stewards of the Earth
          Sungevity
          Take Back Our Democracy
          Transition Culver City
          Transition San Francisco
          Tri-Valley CAREs
          Turtle Island Restoration Network
          Union de Vecinos
          Unitarian Universalists of San Mateo
          Urban and Environmental Policy Institute
          Ventura Coastkeeper
          Whittier Hills Oil Watch
          Wild Equity Institute
          Wild Heritage Planners
          Wishtoyo Foundation
          Women's Earth and Climate Caucus
          World Stewardship Institute
          Xun Biosphere Project

           Opposition 
           
          American Chemistry Council
          California Business Properties Association
          California Chamber of Commerce
          California Independent Oil Marketers Association
          California Independent Petroleum Association
          California Manufacturers & Technology Association
          California Small Business Alliance
          Coalition for Energy Users
          Friends for Saving California Jobs
          Independent Oil Producers Agency
          Kern Taxpayers Association
          League of California Food Processors
          Western States Petroleum Association

           
          Analysis Prepared by  :  Mario DeBernardo / NAT. RES. / (916)  
          319-2092 










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