BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 1281
                                                                  Page 1

          Date of Hearing:  June 23, 2014

                       ASSEMBLY COMMITTEE ON NATURAL RESOURCES
                                Wesley Chesbro, Chair
                     SB 1281 (Pavley) - As Amended:  June 9, 2014

           SENATE VOTE  :  27-3
           
          SUBJECT  :  Oil and gas production:  water use:  reporting

           SUMMARY  :  Requires the Division of Oil, Gas, and Geothermal  
          Resources (DOGGR) to collect information regarding unlined oil  
          and gas field sumps.  In the event, and for the duration, of a  
          declared state of emergency because of a drought, requires  new  
          oil and gas field exploration, development, and production to  
          use recycled water.

           EXISTING LAW  :

          1)Regulates, under DOGGR in the Department of Conservation, the  
            drilling, operation, maintenance, stimulation, and abandonment  
            of oil and gas wells in the state.

          2)Requires the owner of an oil and gas well to file with DOGGR a  
            monthly statement that provides certain information related to  
            the well, including what disposition was made of the water  
            produced from each field.

          3)Provides that a person who fails to comply with specific laws  
            relating to the regulation of oil or gas operations, including  
            failing to furnish a report or record, is guilty of a  
            misdemeanor.

           THIS BILL  .

          1)Makes the following findings and declarations:

             a)   Existing state policy promotes the use of recycled water  
               in industry where feasible.

             b)   Water of previously unsuitable quality may now be used  
               or treated and used in some oil and gas industry processes  
               due to technological advancement.

             c)   Information facilitating an analysis of the water used  








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               or produced by each well would improve understanding of  
               water use in the state's oil and gas fields.

             d)   In the event of extreme water scarcity, untreated  
               high-quality water should not be used for new oil and gas  
               exploration, development, or production.  According to the  
               Department of Water Resources, groundwater resources  
               throughout the state are at historically low levels.

          2)Requires DOGGR to annually provide to the State Water  
            Resources Control Board and the California regional water  
            quality control boards an inventory of all unlined oil and gas  
            field sumps.

          3)Declares that it is the policy of the state that oil and gas  
            field exploration, development, and production use, or treat  
            and use, water produced through oil field activities and other  
            recycled water to the extent feasible.  Encourages the use and  
            reuse of water initially unsuitable for drinking or irrigation  
            purposes.

          4)In the event, and for the duration, of a declared state of  
            emergency because of a drought, requires  new oil and gas  
            field exploration, development, and production to use recycled  
            water.

          5)Prohibits new oil and gas field exploration, development, and  
            production from using water obtained from a groundwater basin  
            that is not managed in accordance with the State Water Plan.

          6)For the monthly statement an owner of a well is required to  
            file with DOGGR, requires additional information on water used  
            during oil and gas field activities.

           FISCAL EFFECT  :  According to the Senate Appropriations  
          Committee:

          1)One-time costs of up to $1.3 and $2.9 million from the Oil,  
            Gas, and Geothermal Administrative Fund (Fund) over a period  
            of one to two years for the expansion of the oil and gas well  
            information reporting system for additional required  
            information.

          2)Ongoing costs of $125,000 from the Fund for the management of  
            the expanded data.








                                                                  SB 1281
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           COMMENTS  :

           1)Author's Statement  .  
           
                California is suffering from one of the worst droughts  
               in the state's recorded history.  There is continuing  
               and significant public concern about the amount of  
               water used in oil and gas field exploration,  
               development and production.  Much of California's oil  
               and gas production is located in arid parts of the  
               Central Valley and where existing  
               groundwater-particularly groundwater suitable for  
               drinking or irrigation purposes-may be depleted or  
               under threat of depletion.
                
                The oil and gas industry has a ready supply of water  
               generated by oil and gas production.  On average  
               state-wide, roughly eight barrels of "produced water"  
               of varying quality are produced for every barrel of  
               crude oil.  Produced water may be used in lieu of  
               fresh water for at least some oil and gas field  
               processes.  These include, for example, enhanced oil  
               recovery operations such as waterflooding.  If needed,  
               existing technology is capable of treating produced  
               water to make it suitable for use in oil and gas field  
               operations.

               Current required water use reporting to the Division  
               of Oil, Gas and Geothermal Resources (DOGGR) does not  
               provide sufficient information to understand the  
               sources and uses of water in the oil and gas fields.   
               It is existing state policy that recycled water, as  
               defined, be used where feasible.

               SB 1281 seeks to clarify the use of water in the  
               state's oil and gas fields. 

           2)Recycled Water  .  There are significant amounts of water  
            co-located with the state's oil and gas fields.  The quality  
            of this water can vary considerably from potentially suitable  
            for irrigation to extremely salty.  Oil/water separators are  
            used in the oil production process.  At least some of the  
            water used in certain enhanced oil recovery operations is  
            likely to return to the surface as produced water.








                                                                  SB 1281
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            In the event of extreme water scarcity, it may be appropriate  
            that new oil and gas exploration, development, and production  
            use recycled water, given the widespread availability of  
            produced water to the oil and gas industry.  There is also  
            indication that new advancements are being made throughout the  
            country to recapture, treat, recycle, and reuse water involved  
            in oil and gas production.  

            A report from the California Environmental Resources  
            Evaluation System (CERES) highlighted groundwater depletion in  
            some of the principal areas of oil and gas production in  
            California.  Specifically, the report looked at Kern County,  
            which pumped about three-quarters of California's oil from  
            over 40,000 conventional oil wells in 2010.  Kern County also  
            has an active agricultural sector with over 800,000 acres of  
            irrigated farmland.  Although the county meets demand through  
            surface and groundwater sources, its strong reliance on  
            groundwater pumping over the last several decades has resulted  
            in substantial groundwater declines.  In fact, the credit  
            rating firm Moody's recently identified the Kern County Water  
            Agency as being at risk of a credit rating downgrade,  
            reflecting this region's vulnerability to growing water supply  
            challenges.  Although the oil and agricultural industries have  
            coexisted for many years in Kern County, elevated water use  
            for hydraulic fracturing in the context of massive drought  
            could alter this course.  The CERES states that there are  
            growing concerns that the agriculture section will find it  
            more lucrative to sell their water for oil exploration than  
            growing crops.

            Limited information is available, but it appears that the oil  
            and gas industry already provides treated produced water of  
            suitable quality for irrigation to at least one water  
            district.  Additionally, the oil and gas industry apparently  
            uses produced water as a feedstock for enhanced oil recovery  
            operations.

           3)Unlined Sumps  .  According to the Central Valley Regional Water  
            Board (CVRWB), produced water, which accounts for about 95% of  
            the fluids produced during oil well production (the other 5%  
            is oil), was historically disposed of by discharge to dry  
            stream channels or unlined surface impoundments (sumps).  A  
            sump is a surface impoundment or excavated depression used to  
            separate crude oil, water, and solids in oil fields.  CVRWB is  








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            in the process of reviewing unlined sumps in its jurisdiction.  
             It has asked DOGGR for an inventory, which has been at least  
            partially complied with.  Many of the sumps are covered by  
            out-of-date waste discharge requirement (WDR) permits, and  
            CVRWB is working to bring these up-to-date, where needed.   
            This bill will require DOGGR to collect information on unlined  
            sumps, which would help CVRWB revise these old WDR permits.

           



          REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          California League of Conservation Voters
          Clean Water Action
          Citizens for Responsible Oil & Gas
          Earthworks
          Environmental Working Group
          League of Women Voters of California
          Los Padres ForestWatch
          Mainstreet Moms
          Mount Shasta Bioregional Ecology Center
          Natural Resources Defense Council
          South Monterey County Rural Coalition
          The Wildlands Conservancy
           
            Opposition 
           
          California Independent Petroleum Association
          Western States Petroleum Association


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