BILL ANALYSIS Ó
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| SENATE COMMITTEE ON NATURAL RESOURCES AND WATER |
| Senator Fran Pavley, Chair |
| 2013-2014 Regular Session |
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BILL NO: SB 4 HEARING DATE: April 9, 2013
AUTHOR: Pavley URGENCY: No
VERSION: March 11, 2013 CONSULTANT: Katharine Moore
DUAL REFERRAL: Environmental QualityFISCAL: Yes
SUBJECT: Oil and gas: hydraulic fracturing.
BACKGROUND AND EXISTING LAW
The Division of Oil, Gas, and Geothermal Resources (DOGGR)
exists within California's Department of Conservation
(department). DOGGR's Supervisor (supervisor) has extensive and
broad authority to regulate activities associated with the
production and removal of hydrocarbons (e.g. oil and gas) from
the ground (Public Resources Code (PRC) §3106). The supervisor's
authority is granted in order to prevent damage to life, health,
property, natural resources, and to underground and surface
water suitable for irrigation or domestic purposes.
California is the 4th largest oil and gas producing state and
natural resources extraction is an important contributor to the
state's economy. According to 2009 data provided by the Western
States Petroleum Association (WSPA), approximately 100,000
people were directly employed in oil and gas production in
California and the state received a combined $5.8 billion in
fuel excise, corporate and personal income taxes. One of the
largest "unconventional" shale reservoirs in the United States
is California's Monterey Shale formation, estimated to contain
15.4 billion barrels of recoverable oil. Hydraulic fracturing
or "fracking" of shale to enhance oil and gas recovery is an
increasingly popular well stimulation treatment and may be
needed to produce the oil in the Monterey Shale. Fracking,
already widely practiced in California, is likely to increase in
the future.
Fracking stimulates oil and gas production by pumping water and
chemicals into the well under high pressure to create or enlarge
cracks in the rock surrounding the well. Fracking can use large
amounts of water - hundreds of thousands to millions of gallons.
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Some fracking treatments, according to industry sources,
require clean water to work effectively. Chemicals are mixed in
with the water and serve particular purposes (e.g. corrosion
inhibitor) in the fracking treatment. The percentage of
chemicals in the fluid is relatively small - typically a few
percent by volume. However, these chemicals can be thousands of
pounds in absolute terms, given the volume of water used, and
some are potentially hazardous. According to a recent
congressional report, from 2005 - 2009 oil and gas companies
throughout the US used fracking 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. Sand ("proppant") is also injected to help keep
the cracks open after the fracturing process is completed.
Fracking is often used in conjunction with horizontal drilling,
in which a well bore runs horizontally through the production
zone to increase the zone of contact between the well bore and
the hydrocarbon-producing formation. The innovation of
horizontal drilling combined with hydraulic fracturing has made
shale fossil fuel development economically feasible in recent
decades.
After the fracking treatment is completed, most of hydraulic
fracturing fluids return to the surface. California does not
track the final disposal method for hydraulic fracturing
wastewater, but injection into disposal wells is likely to be
the primary disposal method.
Various forms of fracking have been used in California since the
1950s. There has been no systematic data collection related to
fracking and estimates of how many wells in California have been
fracked vary. Informal reports from industry sources suggest
that a majority of wells in the state are fracked. At the urging
of DOGGR, industry has started to voluntarily report frack
treatment data on the website Fracfocus.org (operated by a
consortium of the oil and gas industry and regulators). WSPA
announced in 2012 that its members fracked 628 new and existing
oil and gas wells in California in 2011, a small fraction of the
more than 50,000 existing wells. (The data reported to
Fracfocus are discussed further in the Comments.) Counties
where wells have been fracked include Kern, Ventura, Santa
Barbara, Colusa, Sutter, Glenn, Los Angeles and Monterey.
Because of potential adverse impacts to the environment and
public health, hydraulic fracturing is a controversial practice,
with critics calling for careful examination and regulation of
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its environmental impacts. Significant environmental
contamination is attributed to fracking in Wyoming, Texas,
Colorado, West Virginia and Pennsylvania. Many states have
instituted temporary or permanent bans on fracking, such as
Vermont, although the states that have taken these actions tend
to be either smaller oil and gas producers or have other
extenuating circumstances (i.e. the perceived threat to New York
City's drinking water supply). Although their authority to do
so is being contested, local governments in New York,
Pennsylvania and Colorado have passed ordinances to ban fracking
within their jurisdiction. Other states, including Texas,
Colorado, West Virginia, Wyoming, Louisiana, Arkansas and Ohio
have revised their laws and regulations to provide for
additional safety and protective measures for fracking
operations. While the specific measures vary by state, they
include advance public notice, additional ground water
monitoring, disclosure of chemicals used, and limitations on
hydraulic fracturing in some areas. At the federal level,
fracking is largely exempt from the provisions of the Safe
Drinking Water Act and the Underground Injection Control (UIC)
well program courtesy of the "Halliburton Loophole," and the
Bureau of Land Management is in the process of developing
fracking regulations.
To date, DOGGR has not exercised its acknowledged authority to
either regulate or systematically collect data on hydraulic
fracturing treatments under PRC §3106. In December 2012, a
"discussion draft" of proposed regulations was released. DOGGR
is in the process of holding public workshops on the draft and
expect to begin the formal regulatory rulemaking process later
this year. (The discussion draft is presented in the Comments.)
PROPOSED LAW
This bill would provide a statutory framework for the
comprehensive regulation of fracking in California.
Specifically, this bill would:
State legislative intent to provide public transparency
and regulatory accountability regarding fracking in
California
Require the Natural Resources Agency to arrange for an
independent scientific study on fracking to be conducted,
as specified, to address environmental, occupational and
public health and safety. Hazard assessments and risk
analyses associated with fracking are required, as is an
examination of the potential for induced seismicity
associated with fracking and fracking-related activities.
Require that fracking regulations be promulgated by
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January 1, 2015.
Establish a fracking permit system with specified
pre-fracking disclosure of the estimated amount of water
used and the list of chemicals likely to be used. Fracking
permits would be valid for one year after approval. Within
5 days or approving the permit, DOGGR would have to tell
the local regional water quality control board, the local
planning entity and post the permit on-line. After a
fracking permit is issued, the well owner would have to
provide 30 days advance notice to the neighbors, as
specified, of fracking operations.
Allow neighbors to have the regional water quality
control boards conduct pre- and post-fracking water quality
monitoring.
Require that DOGGR receive 72 hours notice of the actual
frack job being conducted in order to witness the event.
Require, as of January 1, 2015, that no fracking permits
can be issued until the scientific study is completed.
Require that within 60 days of completing the fracking
job that frack fluid chemical data must be posted on-line.
The Fracfocus website can be used until January 1, 2016.
Extend trade secret protection to fracking fluid
chemicals eligible, but require that DOGGR receive all
trade secret information.
Provide a framework for DOGGR to protect trade secret
information and share it with other regulators, emergency
responders and health professionals, as necessary.
Require DOGGR to perform spot checks to ensure that
pre-fracking disclosure is consistent with post-fracking
disclosure.
Require that DOGGR enter into formal agreements with
certain other regulators to ensure clear regulatory
accountability and transparency for fracking from the
arrival of the fresh fluids at the well-head to the
permanent disposal of waste fluids at an injection well.
Provide for comprehensive annual reporting to the
Legislature on fracking including, for example, well
failure data, and the number of spills and inspections.
Raise the potential civil penalties for fracking
violations to no less than $10,000 and no more than $25,000
per violation per day.
Modify the oil and gas production fee calculation to
include the costs associated with fracking-related
activities
ARGUMENTS IN SUPPORT
According to the author, this "legislation is motivated by the
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public's right to know about fracking. DOGGR's draft fracking
regulations represent a step in the right direction, but don't
go far enough. My bill requires companies to obtain a
state-issued permit to frack and to notify neighboring property
owners 30 days ahead of time. It also says they must disclose
to the state all of the chemicals they use to frack in a
particular location. The bill allows industry to claim trade
secret protection for chemicals under specific circumstances
while providing full disclosure to DOGGR and retaining
provisions allowing for health professionals and other
regulators to obtain trade secret information, if necessary."
"There is an emerging national consensus on the basic
assurances the public needs around fracking operations. From
chemical disclosure, to notification, to water quality
monitoring and an independent health study, this legislation
brings the transparency and accountability needed in order to
protect our air and water supply. The rules within SB 4 are
merely the kind of common-sense protections needed for any
potentially hazardous industrial activity, let alone one that is
rapidly expanding in our state. While the industry correctly
notes that fracking has been going on in California for 60
years, many of the techniques and chemicals are new, as is the
immense scale of many of these operations. SB 4's reporting
requirements ensure the state gathers sufficient information in
order to enable informed decision-making about fracking and to
understand the scope and extent of fracking in California,
including the amount of water used and waste disposal methods."
The Environmental Defense Center adds "while the state of
California is widely regarded as the nation's leader on
environmental issues, our state lags far behind other major oil
and gas producing states in the development of a legal and
regulatory framework to address fracking and the significant
risks it poses to the public health, safety, and the natural
environment. [?] No one but the oil industry truly knows the
location, extent, or frequency of fracking, the source and
volume of water used, or what chemicals are being utilized."
They continue "SB 4 would remedy this unacceptable status quo."
Ventura County supports SB 4 because the county is "highly
dependent on local groundwater resources for potable water, and
groundwater is the lifeblood of the County's $1 billion-plus
agricultural industry. [?] Ventura County has historically
balanced oil and gas production and the jobs it brings with the
protection of our natural and agricultural resources. It is
important that this balancing continue to occur."
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ARGUMENTS IN OPPOSITION
In a joint letter, the Western States Petroleum Association
states that "SB 4 imposes a moratorium on the use of hydraulic
fracturing in oil and gas production starting on January 1,
2015, until [the state's] regulations are complete. This would
unnecessarily and substantially threaten our supplies of oil and
natural gas, raising business costs and harming California's
economy." They continue "this significant, untimely burden on
California's businesses and economy is unnecessary. Oil and gas
production as a whole is heavily regulated and monitored, and
hydraulic fracturing has been used for decades with no reported
incidents of harm to the environment or public health. SB 4
will not provide added public health or environmental
protections, but it will increase business costs, hamper
California's economic recovery and deprive our state of
much-needed fuel, jobs and tax revenues indefinitely."
The California Independent Petroleum Association makes similar
points and adds that "over 90% of hydraulic fracturing happens
within Kern County, 80% within the Belridge oil field alone. [?]
These fields have no potable water, no surrounding population
and no other significant business interests. [?] CIPA supports
the disclosure of chemicals used to the appropriate health and
safety regulatory agencies while protecting proprietary
information."
The Physicians for Social Responsibility - Los Angeles oppose SB
4 unless trade secret protection of the fracking fluid chemicals
is removed. Clean Water Action and the Sierra Club California,
while writing in support, call for a similar amendment.
COMMENTS
SB 4 does not automatically stop fracking on January 1, 2015 .
The bill requires that the Natural Resources Agency arrange for
an independent science study, which must be completed and
peer-reviewed by scientific experts by January 1, 2015. If the
study is not completed by that date, DOGGR is required to
suspend issuing fracking permits until it is. During the
legislative resources budget sub-committee hearings in the
spring of 2012, the department indicated that an independent
scientific study was being sought. It is unknown if the
department has - one year later - made any progress.
A California-based study of the risks associated with hydraulic
fracturing will benefit from work already underway . According to
news reports, scientific studies on fracking are underway,
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although the scope of each varies. The US EPA's fracking study
is focused on drinking water protection and is due in 2014.
However, no site in California is included in the US EPA's
study. The US EPA has also identified that additional data are
required to accurately estimate air emissions from oil field
operations and is working to address that gap.
Academic and government researchers around the country are
studying fracking. However, given differences in geology, the
characteristics of the hydrocarbon resource, existing state laws
and regulations, the surrounding environment, demographics and
public health concerns between California and other locations in
the country, results obtained elsewhere may not necessarily be
representative of what may occur in California. Therefore, an
independent science study focused specifically on California is
warranted.
There has been a scientific study conducted in California. A
2012 study of a frack job at the Inglewood Oil Field, conducted
as part of a legal settlement, has been completed. The study
found no immediate problems related to ground movement,
well-casing integrity, or air and water quality. Given the
absence of other data, it is not known how representative this
study is of all fracking activity in California. Critics have
also argued that long-term monitoring should have been included
as environmental contamination can take years to be apparent.
Is a separate permit system for fracking necessary ? DOGGR's
current well permitting system applies only to drilling a new or
re-working an existing well (PRC §3203). An existing well can
be fracked without DOGGR's review and approval. Establishing a
fracking permit system, as distinct from a notice requirement,
will provide DOGGR the opportunity to assess the safety of a
planned frack job and require modifications in order to protect
natural resources, and health and safety.
Earthquakes (induced seismicity), hydraulic fracturing and waste
disposal. A significant public concern is the risk of
earthquakes caused by hydraulic fracturing or related
activities, particularly the use of injection wells. Injection
wells are distinct from hydraulically fractured production
wells. They are a common means of disposal for hydraulic
fracturing wastewater as well as wastes from other sources. The
risk of induced seismic activity depends largely on the
proximity of wells to a fault. In 2012, the National Research
Council (NRC) released a draft study exploring the potential for
induced seismicity or "earthquakes attributable to human
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activities" associated with energy technologies. The NRC found
that hydraulic fracturing "does not pose a high risk for
inducing felt seismic events," and that wastewater disposal in
injection wells did pose some risk, although relatively few
events have been documented given the number of operating
disposal wells. Of particular concern, recent work indicates
that a magnitude 5.7 earthquake in 2011 in Oklahoma is linked to
a waste disposal well in operation for over 18 years.
The U.S. Geological Survey has found an increase in earthquakes
over magnitude 3 in the proximity of injection wells in
Colorado, Texas, Arkansas, Oklahoma and Ohio. Arkansas and Ohio
have since revised their regulations governing waste injection
wells to address seismic risks. SB 4 specifically requires that
induced seismicity be included in the scientific study.
Well "neighbors. " The criteria in SB 4 used to determine who is
able to request baseline and follow-up ground and surface water
testing is consistent with the groundwater testing requirements
in the vicinity of oil and gas wells required by other states.
Colorado has recently approved regulations requiring testing
within a half-mile radius of the wellhead. West Virginia and
Pennsylvania requires testing within 1,000 feet. Alaska's
proposed regulations require baseline and follow-up testing
within one quarter mile of the well's trajectory (for fracked
wells).
The limitations of voluntary reporting . As noted previously,
WSPA reported that its members fracked 628 wells in California
in 2011 and that information for all of these frack jobs would
be reported to Fracfocus. However, as of March 7, 2013, data on
Fracfocus show only 93 wells were fracked in California in 2011,
with another 599 and 86 frack jobs reported for 2012 and 2013,
respectively. Of the 778 frack jobs listed:
at least 28 frack jobs were reported twice in error,
fourteen wells were fracked twice and one was fracked
three separate times, and
nine wells actually in Texas were reported to be in
California.
Random sampling of the data sheets specific to individual wells
on Fracfocus readily provided examples of incomplete data
reporting (e.g. omitted water volume) as well as a frack job
total water volume exceeding 1,500,000 gallons
(API#04-030-22893). This water volume is well in excess of the
several hundred thousand gallons reported as "typical" for
California. Without mandatory reporting, there is no way to
determine how much water is actually used in California for
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fracking. A recent Pacific Institute study expressed
considerable concern about the potential risks to water supply
and quality from fracking in California. However, with little
data available, it is impossible to quantify the risks and take
adequate steps to protect ground and surface waters.
Further, while it is evident that over 90% of the reported frack
jobs are in Kern County, it does not necessarily follow that the
majority of all frack jobs, including the unreported ones, are
there as well.
Fracfocus' terms of use . The terms of use of the department's
web-site primarily emphasize that any communication with the
department is subject to public disclosure. By contract, the
terms of use of the Fracfocus.org web-site are significantly
more restrictive. Fracfocus' reserves the right to:
modify or stop the site at any time,
add fee-based services
require registration in the future (and reserve the
right to disclose information about users to others), and
limit access.
The site also make no warranties about the accuracy of the data
reported (which, as noted above, could be improved) and
expressly indicates that the site should not be used as the only
storage facility for data. Further, Fracfocus' terms require
that data from the site can be downloaded for personal use only
and cannot otherwise be republished with prior permission.
(Committee staff sought and received permission to reproduce the
Fracfocus data reported here.) These restrictions are
inconsistent with how the discussion draft proposal treats data
reported to Fracfocus, as well as the usual public availability
of regulatory data.
DOGGR's discussion draft regulations . The discussion draft
regulations include the following:
the well owner or operator must ensure that all required
data are reported
the well operator would submit a form providing notice
of planned fracking operations 10 days in advance of
fracking to DOGGR and the appropriate regional board
DOGGR would publicly post the form on-line within 7 days
of receipt
DOGGR would receive 24 hours advance notice of the start
of a fracking job in order to witness it.
Additional testing and monitoring pre-, during- and
post-fracking are required
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Fracking must stop if well integrity is compromised
Spill contingency plans must be update to include
fracking fluids
DOGGR would not receive trade secret information on
fracking chemicals, just notification that it exists.
60 days after fracking, chemical information would be
disclosed to the Fracfocus web-site. DOGGR would not
obtain the chemical data unless the Fracfocus web-site was
inoperable.
Health professionals and others who need trade secret
data would have to obtain it from the operator.
Trade secret protection for the chemicals in fracking fluids is
a contentious issue . Trade secret protection is
well-established in California law. The California Public
Records Act (Government Code §6250 et seq) generally requires
that all agency documents are publicly-available, but there are
specific exceptions. These include, for example, privacy
concerns (health records) and also trade secrets (which can
range from marketing plans to chemical formulations). A trade
secret must generally meet two criteria: (1) the owner makes an
effort to keep it secret and (2) the owner gains some business
advantage from it. Numerous provisions for sharing trade secret
information between government entities acting in their official
capacities, as well as maintaining the confidentiality of that
information exist in California law and regulation.
The formulation of a pesticide, for example, may be in whole or in
part a trade secret. The owner provides all of the information to
the Department of Pesticide Regulation (DPR), but can claim trade
secret protection. DPR can still provide all the chemical
information to other regulators, as needed, but public disclosure
is limited to the non-trade secret part. There are provisions
providing for challenging the trade secret (Food and Agriculture
Code §14021 et seq).
In an emergency - for example, a spill at a chemical site -
existing law requires that emergency responders, health
professionals and anyone else who needs the trade secret
information in an official capacity receives it. However, trade
secret confidentiality must be maintained (see HSC §25511 et seq).
SB 4 requires DOGGR to collect all chemical data, including trade
secret information, on the fracking chemicals. (In their current
proposal, DOGGR does not collect this data. This is in sharp
contrast to numerous examples in California law and regulation
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where regulators charged with protecting health and safety receive
trade secret chemical composition data.) There are specific
provisions providing DOGGR with a framework for handling the data,
sharing it with other regulators and health professionals, when
needed, although - consistent with other statute - confidentiality
must be maintained. A procedure for challenging the trade secret
status is included. In order to provide medical care, health
professionals are specifically allowed to share trade secret
information amongst themselves and also to disclose it to the
patient. The health professional provisions stem directly from
issues that have arisen in other states, notably Colorado and
Pennsylvania. SB 4 requires that if trade secret protection is
claimed that substitute information be provided for public
disclosure - for example "quaternary amine compounds" as opposed
to a specific one.
Every single state that has passed legislation to regulate
fracking or finalized regulations related to fracking under
existing authority extends trade secret protection to fracking
chemicals. Alaska's draft proposal to regulate fracking requires
full public disclosure of the composition of fracking chemicals,
but the regulatory process has not been completed.
Related legislation (all 2013)
SB 395 (Jackson) -would move all produced water under the
purview of the Department of Toxic Substances Control (DTSC),
not DOGGR. (before the Senate Environmental Quality Committee)
SB 665 (Wolk) - would raise the bonding requirements for oil and
gas wells. (before the Senate Natural Resources and Water
Committee)
AB 7 (Wieckowski) - would provide comprehensive framework for
fracking regulation. Chemical disclosure post-fracking, trade
secret protection and notice-of-intent for fracking required
(among other provisions). (before the Assembly Natural Resources
Committee)
AB 288 (Levine) - would provide general principles to regulate
fracking to protect public health and safety. (before the
Assembly Natural Resources Committee)
AB 649 (Nazarian) - would provide for a ban on hydraulic
fracturing and sets up a distinguished panel to investigate
fracking. If the panel decides fracking is safe then fracking
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can be approved later (time frame is 4 - 5 years). The bill
would ban the use of fresh water in fracking as well as fracking
within an unspecified distance of an aquifer. (before the
Assembly Natural Resources Committee)
AB 669 (Stone) -would require more tracking, approval and
reporting related to produced water and related information.
(before the Assembly Natural Resources Committee)
AB 982 (Williams) - would require extensive groundwater
monitoring in the vicinity of fracking. (before the Assembly
Natural Resources Committee)
AB 1301 (Bloom) - would ban fracking until the legislature
specifically acts to authorize it. (before the Assembly Natural
Resources Committee)
AB 1323 (Mitchell) - would ban fracking until a study shows how
it can be done safely. It provides for an advisory council of
specified membership (appointed by 2014), a study due in 2016,
formal public review of the study, and a 2019 timeframe for
further action. (before the Assembly Natural Resources
Committee)
SUPPORT
California Association of Professional Scientists
California Coastal Protection Network
California Nurses Association
Clean Water Action (if amended)
Councilmember Brian Brennan, City of Ventura
Environmental Defense Center
Los Angeles Community College District
Los Angeles County Board of Supervisors
Natural Resources Defense Council
PawPAC
Santa Cruz County Board of Supervisors
Sierra Club California (if amended)
South Coast Air Quality Management District (w/amendments)
Ventura County Board of Supervisors
OPPOSITION
American Chemistry Council
California Business Properties Association
California Chamber of Commerce
California Independent Petroleum Association
California Manufacturers and Technology Association
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Physicians for Social Responsibility - Los Angeles (unless
amended)
Western States Petroleum Association
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