BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
SB 4 (Pavley) - Oil and gas: hydraulic fracturing.
Amended: May 7, 2013 Policy Vote: NR&W 6-2, EQ 6-2
Urgency: No Mandate: Yes
Hearing Date: May 23, 2013 Consultant: Marie Liu
SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
Bill Summary: SB 4 would require the Division of Oil and Gas
(DOGGR) to regulate fracking and to perform numerous
responsibilities associated with this regulatory duty.
Fiscal Impact:
One-time costs of $2.2 million (special fund) in FY 2013-14
for DOGGR's initial activities including the establishment of
regulations.
Ongoing costs of $1.98 million (special fund) for DOGGR to
provide regulatory oversight of fracking.
Estimated $1 million (special fund) to develop a web-based
database for public fracking information.
Ongoing costs of approximately $2 million (special fund) for
ARB to update their regulations and associated monitoring.
One-time costs of $25,000 for DTSC to collaborate with DOGGR
in regulation development.
Ongoing costs of $4.5 million from Regional Water Quality
Boards for testing and sample storage.
Unknown, but estimated millions to tens of millions of
dollars, in revenues (special fund) to reimburse DOGGR and
other state agencies for their regulatory costs.
Background: Under existing law, operators of oil and gas wells
are regulated by DOGGR within the Department of Conservation.
DOGGR's broad authority gives them the ability to regulate
hydraulic fracturing (aka "fracking") in order to protect life,
health, property, and natural resources including water supply;
however, DOGGR does not monitor fracking nor does it have
reporting or permitting requirements. Fracking is a process
where well operators pump water and a variety of chemicals into
wells at very high pressures. This causes cracks to form or grow
in the rock strata, allowing greater oil or gas production from
the well. Fracking is done in both vertical wells and in
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horizontal bores that run horizontally through the target rock
strata for as much as several thousand feet. There is growing
public concern that fracking can lead to groundwater and surface
water contamination.
Proposed Law: This bill would require DOGGR, by January 1, 2015,
to adopt rules and regulations specific to fracking that would
include full disclosure of the composition and disposition of
fracking fluids.
The regulations would be developed in consultation with the
Department of Toxic Substances Control (DTSC), the State Air
Resources Board (ARB), the State Water Resources Control Board
(SWRCB), the Department of Resources Recycling and Recovery
(CalRecycle), and local air districts and regional water quality
control boards. DOGGR would be required to enter into formal
agreements with these agencies by January 1, 2015 that
delineates respective authority and responsibilities. All
agencies must revise its regulations if necessary to reflect the
agreement.
This bill would require a well operator to apply for a permit
prior to performing a fracking treatment on a well. The permit
application would include specific information including a
complete list of chemicals planned to be used and the location
of the well. DOGGR would be restricted to only approving
complete permit applications. Approved permits would be
transmitted to the appropriate regional water quality control
board, transmitted to the local planning entity, and be posted
on DOGGR's publically available website.
The well operator would also be required to provide a copy of
the approved permit to any property owner located within a 1,500
radius of the wellhead and within 500 feet from the horizontal
projection of all subsurface portions of the well to the
surface. This bill would allow any notified property owner to
request that the regional water quality control board perform
water quality testing on any well suitable for drinking or
irrigation purposes before and after the fracking treatment.
Samples would be required to be retained for future analyses.
This bill would allow trade secret protection under the existing
Uniform Trade Secrets Act. However, the supplier of the fracking
fluid would still be required to disclose information to DOGGR,
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but not the well operator. The trade secret would not be part of
the public record and DOGGR would not be permitted to disclose
the trade secret information unless disclosure is necessary and
required to protect health and safety.
This bill require the Secretary of the Natural Resources Agency,
by January 1, 2015 to commission a study on the hazards and
risks that fracking poses to natural resources and public,
occupational, and environmental health and safety. No permits
for fracking would be allowed to be issued after January 1, 2015
unless the study is completed and peer reviewed.
DOGGR would also be required to operate a website that would
make available to the public all fracking fluid composition and
disposition by January 1, 2016. By January 1, 2016, DOGGR would
be required to report to the Legislature on fracking in
California.
This bill specifies that all costs associated with the
requirements for fracking may be paid for by charges levied,
assessed, and collected from a well owner.
Related Legislation: SB 1054 (Pavley) 2012 would have required
notification of nearby landowners of fracking activity. SB 1054
failed passage on the Senate Floor.
Staff Comments: DOGGR estimates initial costs of $2.2 million in
the first year and $1.98 million in ongoing costs to review
fracking permits, review maps and directional well information
to enforce nearby landowner notification requirements, and
notification requirements. These costs would include staffing
for two oil and gas engineers, four engineering geologists, one
senior programmer analyst, and one staff information systems
analyst, four associate governmental program analysts, two
office technicians, one senior legal analyst, and one legal
assistant.
DOGGR estimates than an additional $1 million may be needed to
develop a website to provide access to fracking permits and
associated information.
ARB indicates that this bill will necessitate increased
monitoring needs and fracking specific oversight
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responsibilities totaling 10.7 PYs at $1.7 million annually.
These cost estimates would include the workload to develop and
negotiate the interagency agreement with DOGGR and the workload
to amend six regulations.
DTSC anticipates approximately $25,000 for consultation with
DOGGR. The cost to update regulations or perform specific duties
are unknown until the interagency agreement is developed.
SWRCB estimates very significant costs, likely in the low
millions of dollars, associated with the bill's provision to
allow individuals to request that a regional quality control
board test a drinking or irrigation well before and after
fracking. Additional costs may be incurred to store the samples
for future testing as indicated by the bill.
The Natural Resources Agency estimates that a minor study would
cost approximately $100,000 but the ultimate cost would depend
on the scope of the study. Staff notes that the study indicated
by the bill is will likely be more costly than a minor study.
Proposed Author Amendments: Clarify that cyclic steam injection
is not a hydraulic fracturing treatment, limits, removes the
requirement for each agency to revise its regulations in
accordance to a formal agreement, and explicitly allow for
electronic reporting to DOGGR.