BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 4
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           REPLACE  :  09/09/2013 Changes per consultant.

          SENATE THIRD READING
          SB 4 (Pavley and Leno)
          As Amended  September 6, 2013
          Majority vote

           SENATE VOTE  :28-11  
           
           NATURAL RESOURCES   6-3         APPROPRIATIONS      10-5        
           
           ----------------------------------------------------------------- 
          |Ayes:|Chesbro, Garcia,          |Ayes:|Gatto, Bradford, Ian      |
          |     |Muratsuchi, Skinner,      |     |Calderon, Campos, Eggman, |
          |     |Stone, Williams           |     |Gomez, Hall, Holden, Pan, |
          |     |                          |     |Quirk                     |
          |     |                          |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |Nays:|Grove, Bigelow, Patterson |Nays:|Harkey, Bigelow,          |
          |     |                          |     |Donnelly, Linder, Wagner  |
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           SUMMARY  :  Establishes a comprehensive regulatory program for oil  
          and gas well stimulation treatments (e.g., hydraulic fracturing,  
          acid well stimulation), which includes, among other things, a  
          study, the development of regulations, a permitting process, and  
          public notification and disclosure.  Specifically,  this bill  :  
           
          1)Well Stimulation Treatment.  Defines "well stimulation  
            treatment" as any treatment of a well designed to enhance oil  
            and gas production or recovery by increasing the permeability  
            of the formation.  Specifies that hydraulic fracturing and  
            acid well stimulation are well stimulation treatments.   
            Specifies that steam flooding, water flooding, cyclic  
            steaming, routine removal of formation damage due to drilling,  
            routine well cleanout work, routine well maintenance, bottom  
            hole pressure surveys, and routine activities that do not  
            affect the integrity of the well or the formation are not well  
            stimulation treatments. 

          2)Study.  On or before January 1, 2015, requires the Secretary  
            of the Natural Resources Agency to complete a comprehensive  
            independent scientific study on well stimulation treatments.   
            Requires the scientific study to evaluate the hazards and  
            risks that well stimulation treatments pose to natural  
            resources and public, occupational, and environmental health  








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            and safety.  

          3)Regulations.  On or before January 1, 2015, requires the  
            Division of Oil, Gas, and Geothermal Resources (DOGGR), 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 any local air  
            districts and regional water quality control boards in areas  
            where well stimulation treatments may occur, to adopt rules  
            and regulations specific to well stimulation treatments.   
            Requires these regulations to include the following:  1)  
            revisions to the rules and regulations governing construction  
            of wells and well casings to ensure the integrity of wells,  
            well casings, and the geologic and hydrologic isolation of the  
            oil and gas formation during and following well stimulation  
            treatments, 2) full disclosure of the composition and  
            disposition of well stimulation fluids, 3) a provision for the  
            well operator to provide for baseline and followup water  
            testing upon request by a nearby property owner; and 4)  
            threshold values for acid matrix stimulation treatments, as  
            specified. 

            While regulations are being developed, requires DOGGR to allow  
            all well stimulation treatment activities, provided that  
            various conditions are met, including the following:

             a)   The owner or operator of the well certifies compliance  
               with the disclosure and notification requirements in the  
               bill;

             b)   The owner or operator provides to DOGGR on or before  
               March 1, 2015 a complete well history incorporating the  
               disclosure information required in the bill; and

             c)   DOGGR conducts an environmental impact report (to be  
               completed by July 1, 2015) to provide the public with  
               detailed information regarding any potential environmental  
               impacts of well stimulation in the state. 

          4)Delineating Regulatory Authority.  On or before January 1,  
            2015, requires DOGGR to enter into formal agreements with  
            DTSC, ARB, SWRCB, CalRecycle, and any local air districts and  
            regional water quality control boards in areas where well  
            stimulation treatments may occur, that clearly delineate  
            respective authority, responsibility, and notification and  








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            reporting requirements associated with well stimulation  
            treatments and well stimulation treatment-related activities,  
            including air and water quality monitoring, in order to  
            promote regulatory transparency and accountability. 

          5)Well Stimulation Treatment Permit.  Requires the operator of  
            an oil and gas well who wishes to perform well stimulation  
            treatments to first apply for a permit with DOGGR to conduct  
            such treatments.  Requires the permit to include the well  
            identification number and location; the time period during  
            which the treatment is planned to occur; a water management  
            plan regarding water quantity, source, and disposal; specific  
            information related to the chemicals used in the treatment;  
            the planned location of the treatment on the well bore; the  
            estimated length, height, and direction of the induced  
            fractures; the location of existing wells, including plugged  
            and abandoned wells, that may be impacted; a ground water  
            monitoring plan; and the estimated amount of  
            treatment-generated waste material and an identified disposal  
            method for the waste materials.  Requires the permit to expire  
            one year from the date of issuance.

          6)Pre-Well Stimulation Treatment Notification.  

             a)   Within five business days of issuing a permit to perform  
               a well stimulation treatment, requires DOGGR to provide a  
               copy of the permit to the appropriate regional water  
               quality control board(s) and to the local planning entity  
               where the well, including the subsurface portion, is  
               located.  

             b)   Within five business days of issuing a permit to perform  
               a well stimulation treatment, requires DOGGR to post the  
               permit on a publicly accessible portion of its Internet Web  
               site.

             c)   Requires that a copy of the approved well stimulation  
               permit and information on the available water sampling and  
               testing (described in 7) below) be provided to every tenant  
               of the surface property and every surface property owner  
               whose property line location is within a 1,500 foot radius  
               of the wellhead or within 500 feet from the horizontal  
               projection of all subsurface portions of the designated  
               well to the surface.  Allows well stimulation treatment to  
               commence 30 days after the permit copies are provided to  
               the appropriate surface property tenants and owners.








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             d)   Requires the operator of the oil and gas well to provide  
               DOGGR at least 72 hours' notice prior to the actual start  
               of the well stimulation treatment in order for DOGGR to  
               witness the treatment.

          7)Water Quality Sampling.  Allows a property owner who receives  
            a well stimulation treatment notice to request water quality  
            sampling and testing from a qualified contractor designated by  
            the regional water quality control board.  Requires the well  
            owner or operator to pay for this sampling and testing.

          8)Post-Well Stimulation Treatment Disclosure.  Within 60 days  
            after the cessation of well stimulation treatment, requires  
            the operator of the oil and gas well to post to an Internet  
            Web site designated or maintained by DOGGR and accessible to  
            the public, all of the well stimulation fluid composition and  
            disposition information required to be collected, including  
            well identification number, well location, and collected water  
            quality data.  Requires DOGGR to have its Internet Web site  
            operational on or before January 1, 2016.  Requires DOGGR's  
            Internet Web site to organize the reported information in a  
            format, such as a spreadsheet, that allows the public to  
            easily search and aggregate each type of information required.  
             Authorizes DOGGR to direct reporting to fracfocus.org in the  
            interim.  Requires DOGGR to allow the public to search and  
            sort the well stimulation and related information by at least  
            the following criteria:  1) geographic area; 2) additive; 3)  
            chemical constituent;   4) Chemical Abstract Service number;  
            5) time period; and 6) operator.

          9)Trade Secrets.  Allows a supplier of well stimulation  
            chemicals to claim trade secret protections for the chemical  
            composition of additives; however, the supplier must still  
            provide the trade secret information to DOGGR.  Requires a  
            supplier to substantiate a trade secret claim, which is  
            reviewed by DOGGR.  If the supplier legitimately claims a  
            trade secret, requires the supplier to publicly disclose where  
            trade secret information has been withheld and provide  
            substitute information as specified.

            If DOGGR receives a request for release of the trade secret  
            information to the public, requires DOGGR to notify the  
            supplier of the request and give the supplier at least 60 days  
            to commence a court action to prohibit the release of  
            information.  








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            Allows disclosure of trade secret information to a government  
            officer or employee in connection with his or her official  
            duties or to a contractor with a government entity if, in the  
            opinion of DOGGR, disclosure is necessary and required for  
            satisfactory performance of a contract or to protect health  
            and safety.

            Authorizes disclosure of trade secret information to a health  
            professional in the event of an emergency or to diagnose or  
            treat a patient.

            To protect public health, requires a supplier to provide trade  
            secret information to a health professional, toxicologist, or  
            epidemiologist who is employed in the field of public health  
            and who provides a written statement of need.  Requires the  
            written statement of need to include the public health purpose  
            and reason the disclosure of the specific chemical and its  
            concentration is required.

            Prohibits the following information from be protected as trade  
            secret: the identities of the chemical constituents of  
            additives; the concentration of the additives in the well  
            stimulation treatment fluids; any air or other pollution  
            monitoring data; health and safety data associated with well  
            stimulation treatment fluids; and the chemical composition of  
            the flowback fluid.

          10)Annual Reports. Requires annual public reports from DOGGR  
            containing data and information on well stimulation as  
            specified. 

          11)Penalties.  Authorizes a civil penalty between $10,000 to  
            $25,000 per day against a person who violates the well  
            stimulation requirements in this bill.

          12)Fee Authority.  Subject to appropriation by the Legislature,  
            authorizes DOGGR's fee authority to be used to fund a public  
            entity's costs associated with well stimulation treatments  
            including rulemaking and scientific studies required to  
            evaluate the treatment, inspections, and any air and water  
            quality sampling, monitoring, and testing performed by public  
            entities and the costs of SWRCB and the regional water quality  
            control boards for its groundwater monitoring program (see 13)  
            below).









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          13)Groundwater Monitoring Program.  Requires, on or before July  
            1, 2015, SWRCB to develop model groundwater monitoring  
            criteria to be implemented either on a well-by-well basis for  
            a well subject to well stimulation treatment, or on a regional  
            scale.  Requires, on or before January 1, 2016, SWRCB or  
            appropriate regional water quality control board to begin  
            implementation of the regional groundwater monitoring  
            programs.  Where there is no regional groundwater monitoring  
            plan approved by SWRCB or regional water quality control  
            board, requires the use of the well-by-well groundwater  
            monitoring plan.

           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.  Prohibits the commencement of  
            drilling 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, requires that failure  
            to be considered an approval of the notice.

           FISCAL EFFECT  :  According to the Assembly Appropriations  
          Committee:

          1)One-time costs of $2 million for DOGGR's initial activities  
            including rulemaking.  Ongoing costs of approximately $2  
            million for DOGGR to provide regulatory oversight.

          2)Unknown Increased initial and ongoing costs to the State Water  
            Resources Control Board (SWRCB) and regional boards to provide  
            groundwater monitoring depending on well activity. 









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          3)Unknown significant costs to the Natural Resources Agency,  
            potentially in the hundreds of thousands of dollars to conduct  
            an independent scientific study.

          4)Ongoing costs of approximately $2 million for the Air  
            Resources Board to update their regulations and provide  
            associated monitoring.

          5)Unknown one-time and ongoing costs for CalRecycle and the  
            Department of Toxic Substance Control likely in the hundreds  
            of thousands of dollars to consult with DOGGR in regulation  
            development and form multi-agency agreements.

          This bill expands DOGGR's existing fee and assessment authority  
          (special fund) to cover all costs of the bill.

           COMMENTS  :

           First of its kind  .  In a white paper developed last year by the  
          Natural Resources Defense Council (NRDC), NRDC stated that "no  
          state can boast a comprehensive disclosure rule [regarding  
          hydraulic fracturing]."  NRDC concluded that adequate hydraulic  
          fracturing rules should contain the following key elements:  1)  
          prior notice of hydraulic fracturing to landowners and  
          residents, and disclosure of the chemicals to be used, at least  
          30 days before hydraulic fracturing commences; 2) complete  
          disclosure concerning the geological and environmental context  
          of the well; 3) chemical identification of all substances used  
          in hydraulic fracturing, including the Chemical Abstract Service  
          numbers and actual concentrations; 4) disclosure of other  
          important information about the hydraulic fracturing treatment,  
          including the volume, source, and type of the base fluid, the  
          maximum pressure used, a record of all annulus pressures, and  
          the fracture length; 5) information concerning the waste  
          generated, its contents, and the methods of waste storage and  
          disposal; 6) requirement that confidential information is  
          provided to state regulators and a process for the public to  
          challenge confidentiality claims; and 7) immediate access for  
          medical professionals and first responders to confidential  
          information in order to diagnose and treat patients.

          This bill contains essentially all the key elements outlined by  
          NRDC as well as additional requirements, such as ground water  
          monitoring plans and water quality sampling.  Moreover, this  
          bill applies to all forms of well stimulation (e.g., acid well  
          stimulation treatment), not just hydraulic fracturing.  Industry  








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          statements suggest that acidization may be more important to the  
          development of the unconventional reserves in California's  
          Monterey Shale than hydraulic fracturing.  For example, in a  
          November 2010 interview with the Oil & Gas Financial Journal,  
          former Venoco Inc. Chief Executive Officer (now Executive  
          Chairman) Tim Marquez said, "[w]e think our primary completion  
          method will be big acid jobs" in the Monterey Shale.

          With all of this considered, and in the words of the California  
          League of Conservation Voter's support letter for this bill, "if  
          passed, SB 4 would be the first of its kind..."

           Background on well stimulation  .  According to the Western States  
          Petroleum Association (WSPA), hydraulic fracturing (also known  
          as fracking) is a form of well stimulation 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.

          Another form of well stimulation is called acid matrix  
          stimulation, which involves the injection of acid-such as  
          hydrochloric or hydrofluoric-into an oil and gas well to create  
          or enhance channels for the oil and gas.  Unlike hydraulic  
          fracturing, acid matrix stimulation injection pressures are not  
          high enough to fracture the formation.

          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 U.S. Environmental Protection Agency (US EPA) lacks the  








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          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 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.

           The risks associated with shale oil and gas development  .   
          According to a recent report from the U.S. 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 four major 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  








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          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 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 an oil boom in the Monterey Shale (which is  
          explained in more detail below), it is too speculative to  
          determine the type and amount of well stimulation 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 known or possible human carcinogens;  
          regulated under the Safe Drinking Water Act for their risk to  
          human health; or 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  








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          solid material removed from drilling) may contain naturally  
          occurring radioactive materials, as well.

          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 induced fractures  
          with natural fractures, faults, or improperly plugged dry or  
          abandoned wells.  There are also 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.   
          Moreover, little data exists on fracture growth in shale  
          formations following multistage hydraulic fracturing over an  
          extended time period; the frequency with which refracturing of  
          horizontal wells may occur; the effect of refracturing on  
          fracture growth over time; and 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  








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          analyzed by the lead agency under the California Environmental  
          Quality Act (CEQA).  However, according to a complaint in a  
          recent lawsuit filed against DOGGR by a 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."

           Well stimulation 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 U.S.  
          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 well  
          stimulation, 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.  

           DOGGR's Draft Regulations  .  On December 28, 2012, DOGGR released  
          a pre-rulemaking discussion draft of regulations on hydraulic  
          fracturing-this draft does not address other forms of well  
          stimulation, such as acid matrix stimulation.  The proposed  
          hydraulic fracturing regulations attempt to impose requirements  
          on operators aimed to improve transparency and safety.   
          Specifically, the proposed regulations would require an operator  








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          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 five 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.

          Many believe that these proposed regulations fall short of  
          providing adequate protections for the public and the  
          environment.  

           Clarification to address environmental stakeholders' concerns  .   
          This bill includes Section 3160(d)(2)(B) of the Public Resources  
          Code (PRC), which states the following:

               Where the supervisor determines that the  
               activities proposed in the well stimulation  
               treatment permit or the combined authorization  
               have met all of the requirements of Division  
               13 (commencing with Section 21000), and have  
               been fully described, analyzed, evaluated, and  
               mitigated, no additional review or mitigation  
               shall be required.  (Emphasis added.)

          Some of the environmental stakeholders are concerned that this  
          provision may preclude 1) additional review or mitigation  
          pursuant to existing laws and regulations, such as the  
          California Global Warming Solutions Act, the Clean Water Act,  
          and even DOGGR's emergency powers under PRC Section 3226; 2) the  
          ability of local governments to enforce their own approval  
          authority; and 3) the enforceability of a judicial order in the  
          pending CEQA lawsuit referenced above.  Moreover, there is  
          concern that this provision will affect the standard of review  








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          for subsequent CEQA litigation regarding well stimulation  
          treatment permits.
          However, PRC Section 3160(n) states, "[t]his article does not  
          relieve the division or any other agency from complying with any  
          other provision of existing laws, regulations, and orders."
          The legislative intent of PRC Section 3160(n) is clear:  the  
          division (i.e., DOGGR) and all other agencies (state or local)  
          are not absolved from complying with any other provision of  
          existing laws, regulations, and orders (including court orders).  
           As such, all of the following are true:

             1)   This bill does not limit the authority of the California  
               Global Warming Solutions Act, the Clean Water Act, and PRC  
               Section 3226 with regard to well stimulation treatment  
               operations;


             2)   This bill does not limit a local government's ability to  
               enforce its own approval authority;


             3)   This bill does not preclude the enforcement of any  
               judicial order; and


             4)   This bill does not affect the standard of review in  
               subsequent CEQA litigation regarding well stimulation  
               treatment permits.

          A different reading of PRC Sections 3160(d)(2)(B) and 3160(n)  
          would run afoul of the Legislature's intent, the bill's purpose,  
          and the public policy the bill seeks to advance.  

           Clarification regarding interim threshold value for acid matrix  
          stimulation  .  Pursuant to PRC Section 3160(b)(1)(C) of this  
          bill, DOGGR is required to go through a rulemaking process to  
          establish "threshold values" for acid matrix stimulation  
          treatments.  These regulations, as well as other well  
          stimulation treatment regulations are to be finalized and  
          implemented on or before January 1, 2015.   In the interim,  
          DOGGR is authorized to approve well stimulation treatment  
          permits if, among other things, the owner or operator certifies  
          compliance with PRC Section 3160(b)(1)(C).  (See PRC Section  
          3161(b)(1).)  Through PRC Section 3161(b)(6), DOGGR is  
          authorized to adopt emergency regulations for DOGGR's interim  
          approval process.  Therefore, DOGGR is authorized to adopt  








                                                                  SB 4
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          emergency regulations to adopt interim threshold values for acid  
          matrix stimulation treatments. 


           Analysis Prepared by  :    Mario DeBernardo / NAT. RES. / (916)  
          319-2092 


                                                                FN: 0002615