BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 4|
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THIRD READING
Bill No: SB 4
Author: Pavley (D), et al.
Amended: 5/24/13
Vote: 21
SENATE NATURAL RESOURCES AND WATER COMMITTEE : 6-2, 4/9/13
AYES: Pavley, Evans, Hueso, Jackson, Monning, Wolk
NOES: Cannella, Fuller
NO VOTE RECORDED: Lara
SENATE ENVIRONMENTAL QUALITY COMMITTEE : 6-2, 5/1/13
AYES: Hill, Corbett, Hancock, Jackson, Leno, Pavley
NOES: Gaines, Fuller
NO VOTE RECORDED: Calderon
SENATE APPROPRIATIONS COMMITTEE : 5-2, 5/23/13
AYES: De León, Hill, Lara, Padilla, Steinberg
NOES: Walters, Gaines
SUBJECT : Oil and gas: hydraulic fracturing
SOURCE : Author
DIGEST : This bill requires the Division of Oil, Gas, and
Geothermal Resources (DOGGR) to regulate hydraulic fracturing
and to perform numerous responsibilities associated with this
regulatory duty.
ANALYSIS : Existing federal law:
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1. Under the Clean Water Act, regulates surface discharges of
water associated with drilling and production.
2. Under the Clean Air Act, limits air emissions from engines,
gas processing equipment, and other sources associated with
drilling and production.
3. Under the Safe Drinking Water Act, establishes the United
States Environmental Protection Agency's (US EPA) Underground
Injection Control (UIC) program to regulate oil and gas
production wells that inject fluids. Hydraulic fracturing
that does not use diesel fuels is excluded from regulation by
the UIC program.
Existing state law:
1. Creates the DOGGR within the Department of Conservation and
entrusts DOGGR's Supervisor with extensive authority to
regulate activities associated with the production and
removal of hydrocarbons (e.g. oil and gas) from the ground to
prevent damage to life, health, property, natural resources,
and to underground and surface water suitable for irrigation
or domestic purposes.
2. Entrusts the State Water Resources Control Board (SWRCB) and
regional water quality control boards (regional boards) with
the protection of water quality under the Porter-Cologne
Water Quality Control Act.
3. Provides the Air Resources Board (ARB) with primary
responsibility for control of mobile sources of air
pollution, and for greenhouse gas emissions.
4. Provides that air pollution control districts and air
quality management districts have primary responsibility for
controlling air pollution from stationary sources and
non-greenhouse gases.
5. Entrusts the Department of Toxic Substances Control (DTSC)
with the safe handling and disposal of hazardous waste under
Chapter 6.5 of the Health and Safety Code (HSC).
6. Exempts waste from oil and gas production from hazardous
waste law, placing it under DOGGR's authority.
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This bill:
1. Requires that DOGGR, in consultation with the DTSC, ARB,
SWRCB, the Department of Resources Recycling and Recovery,
and any local air districts and regional water quality
control boards in areas where hydraulic fracturing treatments
may occur, promulgate hydraulic fracturing regulations by
January 1, 2015.
2. Requires that DOGGR receive 72-hour notice of the hydraulic
fracturing job in order to witness the event.
3. Establishes a hydraulic fracturing permit system. Within
five days of approving a permit, DOGGR must notify the local
regional board, the local planning entity and post the permit
online.
4. Requires DOGGR to perform spot checks to ensure that
pre-hydraulic fracturing disclosure is consistent with
post-hydraulic fracturing disclosure.
5. Provides for comprehensive annual reporting to the
Legislature on hydraulic fracturing including, for example,
well failure data, and the number of spills and inspections.
6. Raises the potential civil penalties for hydraulic
fracturing violations to no less than $10,000 and no more
than $25,000 per violation per day.
7. Requires notification of property owners within 1,500 feet
of the wellhead, or within 500 feet from the horizontal
projection of all subsurface portions of the designated well
to the surface, that hydraulic fracturing will occur. These
property owners can choose to request that the regional
boards perform water quality sampling and testing on water
wells or surface water suitable for drinking or irrigation,
as specified.
8. The regional boards may contract with an independent third
party that adheres to SWRCB-specified standards and protocols
to perform the water sampling and testing.
9. Requires the Secretary of the Natural Resources Agency to
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commission a study on effects on water quality, air quality,
and waste disposal of hydraulic fracturing. The study will
also include a risk assessment of the impacts to public
health and safety of hydraulic fracturing with the
participation of the Office of Environmental Health Hazard
Assessment.
10.Requires, as of January 1, 2015, that no hydraulic
fracturing permits can be issued until the scientific study
is completed.
11.Requires disclosure of the chemical content of all hydraulic
fracturing fluids to DOGGR. DOGGR would share chemical data,
including trade secret information, as necessary with other
regulators, emergency responders and health professionals.
12.Modifies the oil and gas production fee calculation to
include the costs associated with hydraulic
fracturing-related activities. This includes the costs of
scientific studies required to evaluate the treatment,
inspections, and air and water quality monitoring and testing
performed by public entities.
13. Defines, for the purposes of this bill, "additive," "base
fluid," "hydraulic fracturing," "hydraulic fracturing fluid,"
"proppants," "supplier," "surface property owner," and
"cyclic steam injection."
14.Requires DOGGR, on or before January 1, 2015, enter into
formal agreements with specified state and local agencies,
which specify the appropriate public entity responsible for
air and water quality monitoring and the safe disposal of
materials in landfills, include trade secret handling
protocols, if necessary, and provide for ready public access
to information related to hydraulic fracturing treatments and
related activities.
15.Allows 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, 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.
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16.Requires DOGGR to operate a Web site that makes available to
the public all fracking fluid composition and disposition by
January 1, 2016. By January 1, 2016, DOGGR will be required
to report to the Legislature on fracking in California.
Background
California's oil and gas industry and the potential of hydraulic
fracturing . California is the fourth 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. The technological innovation of hydraulic
fracturing, by itself and in combination with advanced drilling
techniques, has allowed unconventional reserves to be developed.
One of the largest unconventional shale reservoirs in the U.S.
is California's Monterey Shale formation, estimated to contain
15.4 billion barrels of recoverable oil. This is equivalent to
the amount of petroleum the U.S. imports every five years.
Because of potential adverse impacts to the environment and
public health, hydraulic fracturing has been a controversial
practice, with critics calling for careful examination and
regulation of its environmental impacts.
A technical overview of hydraulic fracturing . Hydraulic
fracturing, commonly known as fracking, is a strategy for
stimulating oil and gas production whereby water and chemicals
are pumped into the well under high pressure to create or
enlarge cracks in the rock formations surrounding the well.
Sand is also injected to help keep the cracks open after the
fracturing process is completed. It 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 to and the hydrocarbon producing
formation. Hydraulic fracturing is used to extract oil and gas
from unconventional sources such as shale rock. Shale rock may
contain large reservoirs of oil and gas, but the hydrocarbons
are difficult to extract because they are trapped in the
relatively impermeable rock. The innovation of horizontal
drilling combined with hydraulic fracturing has made shale
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fossil fuel development economically feasible in recent decades.
History of hydraulic fracturing in California . Hydraulic
fracturing has been employed in California since the 1950s.
With no systematic public tracking of its use, 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. However, the WSPA voluntarily
reported to DOGGR in 2012 that its members fracked 628 new and
existing oil and gas wells in California in 2011, which
represents about 27% of the 2,300 new wells drilled or 1% of the
more than 50,000 existing wells. Industry can voluntarily
report fracking operations to FracFocus.org; however, as of
March 7, 2013, FracFocus.org showed only 93 hydraulically
fractured wells in California in 2011. Citizens and local
governments have reported fracking operations that do not appear
on FracFocus.org.
Hydraulic fracturing and water quality concerns . Hydraulic
fracturing has the potential to affect water quality at a number
of steps during the process, as specified.
In California, a Kern County almond farmer was awarded $8.5
million in damages in 2009, after his almond trees died when he
irrigated them with well water that had been tainted by nearby
oil and gas operations. The contamination was traced to unlined
pits where Aera Energy LLC had dumped billions of gallons of
wastewater that leached pollutants into nearby groundwater. It
is unknown if any of this wastewater came from hydraulic
fracturing.
The Central Valley Water Board is currently investigating
allegations that Vintage Production California dumped hydraulic
fracturing wastewater into unlined pits.
The US EPA has attributed two cases of groundwater contamination
to hydraulic fracturing: one in Jackson County, West Virginia
and another in Pavilion, Wyoming. Industry representatives
dispute the source of water contamination in Wyoming; the data
is presently being reviewed by an independent group of experts.
There is no comprehensive list of surface spills associated with
hydraulic fracturing, but there have been a few dozen documented
cases in academic papers and the popular press and confirmed by
local and state governments.
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Hydraulic fracturing and air quality concerns . Oil and gas
production wells, regardless of whether they are hydraulically
fractured, can emit air pollutants such as greenhouse gases,
volatile organic compounds, particulate matter, hydrogen
sulfide, and carcinogenic benzene, toluene, ethylbenzene, and
xylene compounds. California well sites are designed to control
air emissions by operating as closed systems, with vapors and
other fluids from the wells being directed through a series of
pipes, valves, and flanges into storage tanks, compressors,
processors, and other equipment. Emissions from the system are
due to leaks, also known as fugitive emissions, or emergency
releases. The air districts have authority to regulate volatile
organic compounds and toxic air emissions from well sites. The
ARB will be considering how to address methane emissions in
their pending rulemaking on upstream oil and gas operations.
Silica is a common proppant material used in hydraulic
fracturing. The National Institute for Occupational Safety and
Health has identified exposure to airborne respirable silica as
a health hazard to workers conducting some hydraulic fracturing
operations. Breathing silica can increase the risk of lung
cancer and other diseases such as silicosis, tuberculosis, and
kidney and autoimmune diseases.
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 Section 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
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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 Section14021 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 (HSC Section25511 et
seq).
California Environmental Quality Act (CEQA) review of oil and
gas wells . DOGGR regularly approves oil and gas development
proposals under the CEQA categorical exemptions for minor
alterations to land or existing facilities, or by way of
negative or mitigated negative declarations. As a result, oil
and gas permits are rarely reviewed in Environmental Impact
Reports that would evaluate the potential risks associated with
hydraulic fracturing.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
One-time costs of $2.2 million (special fund) in fiscal year
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.
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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.
SUPPORT : (Verified 5/23/13)
California Association of Professional Scientists
California Coastal Protection Network
California Nurses Association
Clean Water Action (if amended)
Councilmember Brian Brennan, City of Ventura
Earthworks (if amended)
Environmental Defense Center
Environmental Working Group
League of Women Voters of California
Los Angeles Community College District
Los Angeles County Board of Supervisors
National Nurses Organizing Committee
Natural Resources Defense Council
Nature Conservancy
PawPAC
Santa Cruz County Board of Supervisors
Ventura County Board of Supervisors
OPPOSITION : (Verified 5/23/13)
American Chemistry Council
California Business Properties Association
California Chamber of Commerce
California Independent Petroleum Association
California Manufacturers and Technology Association
Physicians for Social Responsibility - Los Angeles (unless
amended)
Western States Petroleum Association
ARGUMENTS IN SUPPORT : The Environmental Defense Center
states, "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
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fracking, the source and volume of water used, or what chemicals
are being utilized? SB 4 would remedy this unacceptable status
quo."
Ventura County states 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."
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. Opponents argue
that 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."
RM:k 5/25/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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