BILL ANALYSIS �
AB 1323
Page 1
Date of Hearing: April 29, 2013
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
AB 1323 (Mitchell) - As Amended: March 21, 2013
SUBJECT : Oil and gas: hydraulic fracturing
SUMMARY : Prohibits hydraulic fracturing 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.
3)Declares as a policy of the state that to further the
elimination of waste by increasing the recovery of underground
AB 1323
Page 2
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)Prohibits hydraulic fracturing until a report prepared by an
advisory committee (as described below) is completed and the
Secretary of the Natural Resources Agency and the Secretary
for Environmental Protection Agency make a determination not
later than January 1, 2019, as 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 and
welfare, environment, or economy of the state.
AB 1323
Page 3
3)Advisory Committee.
a) By July 1, 2014, requires the Secretary of the Natural
Resources Agency and the Secretary for 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 two
representatives from each of the following: (1) the
California Environmental Protection Agency, (2) the Natural
Resources Agency, (3) the State Department of Public
Health, (4) environmental justice organizations, (5) the
agriculture industry, (6) the oil and gas industry, (7) two
academic researchers with experience in hydraulic
fracturing issues, and (8) water agencies.
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
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) Air quality impacts, including, but not
limited to, particulate and volatile organic compound
and methane releases;
(5) Impacts on climate change and emissions of
AB 1323
Page 4
greenhouse gases, including the goals set in the
California Global Warming Solutions Act of 2006;
(6) The potential for migration of gases and
fluids through geologic formations;
(7) The potential for generating seismic activity,
both as a result of increased hydraulic fracturing and
the disposal of produced wastewater into underground
injection wells;
(8) The use, handling, and accidental spill of
chemicals used in hydraulic fracturing; and
(9) 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) Prior to finalizing the report, requires the Secretary
of the Natural Resources Agency and the Secretary for
Environmental Protection to seek independent peer review by
persons of the scientific and academic community commonly
acknowledged to be experts on the subjects under
consideration and possessing the knowledge and expertise to
critique the scientific validity of the report.
AB 1323
Page 5
c) Requires a draft of the final report to be made
available for public comment for a period of no less than
120 days.
d) Requires the final report to be completed on or before
January 1, 2016, and a copy to be provided to the Governor
and the Legislature by the Secretary of the Natural
Resources Agency and the Secretary for Environmental
Protection 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)Purpose of the Bill. According to the author, "[t]oday's
fracking techniques are new and may pose new dangers.
Technological changes have facilitated an explosion of
drilling in areas where, even a decade ago, companies couldn't
recover oil and gas profitably. It's important that the
implications for health and environmental safety are fully
understood before fracking is allowed to continue in CA."
The author has pointed out that DOGGR does not keep track of
when or where fracking is being done in the state or what
chemicals are being used in the process. Moreover, the author
has expressed concern regarding DOGGR's recent "discussion
draft" for hydraulic fracturing regulations (which many
environmentalist argue are too weak) and DOGGR's failure to
enforce existing provisions of the California Environmental
Quality Act (CEQA).
This bill halts the practice of fracking in California and
will direct the Natural Resources Agency and the Environmental
Protection Agency to convene a multi-stakeholder advisory
committee to conduct a comprehensive study of hydraulic
fracturing. The advisory committee's report will undergo an
independent peer review by persons of the scientific and
academic community. Once this has been completed, the
Secretary for the Natural Resources Agency and the Secretary
for Environmental Protection is required to make a
determination as to whether, and under what conditions,
hydraulic fracturing is permitted within the state. This
AB 1323
Page 6
determination may only be made after measures are in place to
ensure that any activity related to hydraulic fracturing does
not pose a risk to the public health and welfare, environment
, or economy of the state.
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 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
AB 1323
Page 7
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 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
AB 1323
Page 8
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.
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
AB 1323
Page 9
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.
Ideally, the environmental risks referenced above would be
analyzed by the lead agency under CEQA. However, according to
the complaint in a recent lawsuit filed against DOGGR by a
AB 1323
Page 10
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 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 from 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
AB 1323
Page 11
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 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)Suggested Amendments. The advisory committee report required
by this bill should be a comprehensive report that looks at
current hydraulic fracturing practices as well as foreseeable
hydraulic fracturing practices in areas that have not yet been
developed (e.g. the Monterey Shale and Northern California gas
reservoirs). The committee and the author may wish to
consider amendments that specifically require the advisory
committee to consider impacts that may be caused by both
current and foreseeable hydraulic fracturing operations.
Additionally, this bill states that it "does not impair or
infringe on any vested right to conduct hydraulic fracturing
operations." It is committee staff's understanding that this
provision is in the bill to address potential constitutional
"takings" issue. It is not clear that the bill will create
this problem. This provision may also create an unintended
AB 1323
Page 12
consequence by causing a "gold rush" effect on hydraulic
fracturing. More people may try to establish a "vested right
to conduct hydraulic fracturing operations" before this bill
becomes effective on January 1, 2014 simply to be excluded
from the provisions of this bill. The committee and the
author may wish to consider amendments that delete the vested
right language-at least until it is more certain that there
are real takings issues with the bill.
7)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 1301 (Bloom), 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
City of Culver City
Opposition
American Chemistry Council
California Chamber of Commerce
California Independent Petroleum Association
California Manufacturers & Technology Association
California Small Business Alliance
California Business Properties Association
California Independent Oil Marketers Association
California Independent Petroleum Association
Coalition of Energy Users
AB 1323
Page 13
Friends for Saving California Jobs
Independent Oil Producers Agency
Kern Taxpayers Association
League of California Food Processors
Western State Petroleum Association
Analysis Prepared by : Mario DeBernardo / NAT. RES. / (916)
319-2092