BILL ANALYSIS Ó AB 1323 Page 1 ASSEMBLY THIRD READING AB 1323 (Mitchell) As Amended May 28, 2013 Majority vote NATURAL RESOURCES 5-3 APPROPRIATIONS 12-5 ----------------------------------------------------------------- |Ayes:|Chesbro, Muratsuchi, |Ayes:|Gatto, Bocanegra, | | |Skinner, Stone, Williams | |Bradford, | | | | |Ian Calderon, Campos, | | | | |Eggman, Gomez, Hall, | | | | |Ammiano, Pan, Quirk, | | | | |Weber | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Grove, Bigelow, Patterson |Nays:|Harkey, Bigelow, | | | | |Donnelly, Linder, Wagner | | | | | | ----------------------------------------------------------------- SUMMARY : Prohibits hydraulic fracturing until the date that regulations adopted by the Division of Oil, Gas, and Geothermal Resources (DOGGR) regulating hydraulic fracturing take effect. EXISTING LAW : 1)Requires DOGGR to 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. 2)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 AB 1323 Page 2 of the notice. FISCAL EFFECT : According to the Assembly Appropriations Committee, potential delay in state revenues of up to $9 million due to the inability to use hydraulic fracturing on tidelands oil wells owned by the state while the regulations are being developed. COMMENTS : Background . Hydraulic fracturing (also known as 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. 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 United States (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. Potential Environmental Risks . The US Government Accountability Office (GAO) categorizes the potential environmental risks of fracking into the following categories: a) air quality; b) water quality and quantity; and c) land and wildlife. AB 1323 Page 3 Air quality risks are generally a result of engine exhaust from increased traffic and equipment emissions with a risk of 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 DOGGR's 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 California Environmental Quality Act (CEQA) process to fully determine significant environmental effects. Analysis Prepared by : Mario DeBernardo / NAT. RES. / (916) 319-2092 FN: 0001023