BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                       AB 356


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          ASSEMBLY THIRD READING


          AB  
          356 (Williams)


          As Amended  June 1, 2015


          Majority vote


           ------------------------------------------------------------------- 
          |Committee       |Votes |Ayes                |Noes                  |
          |                |      |                    |                      |
          |                |      |                    |                      |
          |----------------+------+--------------------+----------------------|
          |Natural         |6-2   |Williams, Cristina  |Dahle, Harper         |
          |Resources       |      |Garcia, McCarty,    |                      |
          |                |      |Rendon,             |                      |
          |                |      |                    |                      |
          |                |      |                    |                      |
          |                |      |Mark Stone, Wood    |                      |
          |                |      |                    |                      |
          |----------------+------+--------------------+----------------------|
          |Appropriations  |11-6  |Gomez, Bonta,       |Bigelow, Chang, Daly, |
          |                |      |Calderon, Eggman,   |Gallagher, Jones,     |
          |                |      |Eduardo Garcia,     |Wagner                |
          |                |      |Gordon, Holden,     |                      |
          |                |      |Quirk, Rendon,      |                      |
          |                |      |Weber, Wood         |                      |
          |                |      |                    |                      |
          |                |      |                    |                      |
           ------------------------------------------------------------------- 


          SUMMARY:  Requires, prior to submitting a proposal to exempt an  
          aquifer to the United States Environmental Protection Agency (U.S.  








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          EPA), that the Division of Oil, Gas and Geothermal Resources  
          (DOGGR) hold a public hearing and gain concurrence from the State  
          Water Resources Control Board (SWRCB) on the proposal.  Requires  
          groundwater monitoring plans for underground injection projects  
          (projects) as part of an application for approval of the project  
          or for the annual review of the project. 


          EXISTING LAW:  


          1)Pursuant to the Federal Safe Drinking Water Act (SDWA):
             a)   Prohibits certain well activities that affect underground  
               sources of drinking water unless those sources are located in  
               an exempt aquifer.
             b)   Declares that the Underground Injection Control (UIC)  
               program for class II wells in the State of California, except  
               those on Indian lands, is administered by the DOGGR approved  
               by U.S. EPA pursuant to SDWA Section 1425.


             c)   Allows DOGGR to propose and the regional administrator of  
               U.S. EPA to approve an exemption of an aquifer or its portion  
               that meets the criteria in the definition of "underground  
               source of drinking water" after considering its current and  
               potential future use as drinking water.


          2)Requires the state's Oil and Gas Supervisor (Supervisor) 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.
          3)Authorizes the Supervisor to implement a monitoring program,  
            designed to detect releases to the soil and water for  
            aboveground oil production tanks and facilities.


          4)Requires groundwater monitoring in the vicinity of a well  








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            subject to a well stimulation treatment.


          This Bill:


          1)Requires, prior to submitting a proposal to exempt an aquifer to  
            U.S. EPA, that DOGGR hold a public hearing and gain concurrence  
            from the SWRCB on the proposal.
          2)Authorizes SWRCB to concur with the proposal if the following  
            conditions are met:


             a)   The proposed aquifer cannot now, or will not in the  
               future, serve as a source of drinking water or for other  
               beneficial uses.
             b)   Injection into the proposed aquifer will stay in the  
               proposed area and will not impact the ability of nearby  
               nonexempt aquifers to be a source of drinking water or for  
               other beneficial uses. 


          3)Requires, by July 1, 2018, and annually thereafter, DOGGR to  
            review all projects for compliance with applicable law.
          4)Requires, by July 1, 2018, operators for all projects to submit  
            to SWRCB or appropriate regional water quality control board  
            (RWQCB) for review and concurrence a groundwater monitoring plan  
            that provides various information including data from monitoring  
            wells that demonstrate that the injection fluid is confined to  
            the intended injection zone or zones of injection.


          5)Clarifies that each project is only required to have one  
            monitoring plan for the life of the project.


          6)Authorizes SRWCB or appropriate RWQCB to revise monitoring plans  
            to avoid duplication and assist with regional monitoring plans  
            associated with oil and gas activities.








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          7)Authorizes SRWCB or appropriate RWQCB to authorize a well  
            operator to rely on a regional monitoring plan instead of their  
            own monitoring sites.


          8)Authorizes, subject to appropriation by the Legislature, DOGGR's  
            fee authority to be used to fund a public entity's costs  
            associated with implementing this article.


          FISCAL EFFECT:  According to the Assembly Appropriations  
          Committee:


          1)Increased administrative costs for Department of  
            Conservation/DOGGR in the $10 million range (special fund/fee  
            authority).


          2)Increased costs for SWRCB in the $2 million to $2.5 million  
            range (special fund/fee authority).


          3)Potential revenue delay or loss associated from the state's  
            share of oil extraction on lands regulated by the State Lands  
            Commission.  The state's share is several million dollars per  
            year, depending on the price of oil.


          COMMENTS: 


          1)UIC Program.  In 1974, the SDWA gave the U.S. EPA the authority  
            and responsibility to control underground injection to protect  
            underground drinking water sources.  In 1982, a primacy  
            agreement was signed that allowed DOGGR to implement the U.S.  
            EPA's UIC program for oil and gas wells in California.  It has  








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            recently been discovered that there were two versions of this  
            agreement, one allowing exemptions for 11 aquifers with high  
            water quality and another denying those exemptions and requiring  
            all existing injection wells into those aquifers be phased out  
            over 18 months.  The aquifers were non-hydrocarbon-producing and  
            all had a total dissolved solids (TDS) concentration below 3,000  
            mg/l.  The SDWA is supposed to protect underground sources of  
            water with TDS concentrations below 10,000 milligram/liter.   
            DOGGR's UIC permitting decisions have been based on the  
            assumption that these exemptions were granted for the 11  
            aquifers in question. 


            A 2011 U.S. EPA audit of DOGGR's UIC program implementation  
            concluded that DOGGR was misclassifying underground sources of  
            drinking water and doing an insufficient job monitoring the UIC  
            program.  In June 2014, it was discovered that DOGGR was  
            approving injection wells in nonexempt aquifers.  This included  
            injections into the 11 aquifers that were not properly exempted,  
            but also included injections into aquifers that were never  
            exempt. California Environmental Protection Agency's (CALEPA)  
            review found that DOGGR's district offices were approving  
            projects without review from DOGGR and were making errors  
            identifying the injectable zone of exempt aquifers.  This  
            included misidentifying the borders and depth of the aquifer and  
            allowing expansion of productive limits over time beyond  
            boundaries established in the Primacy Application.  Initially  
            there were 2,553 injection wells operating in non-exempt  
            aquifers; after a review, 76 wells were removed from that list.   
            The wells represented both disposal wells and enhanced oil  
            recovery wells.  To date, the state has shut down 23 injection  
            wells, because they were injecting into aquifers that could be  
            suitable for drinking water.  In addition, these wells could  
            potentially have had an impact on nearby water supply wells.   
            While no contamination of water supply wells has been found yet,  
            it is clear that aquifers that could have been a source of  
            underground drinking water have been contaminated with injection  
            fluid. 









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          2)Aquifer exemptions.  Any aquifer less than 10,000  
            milligram/liter TDS must be exempted by U.S. EPA to be injected  
            into.  The state can decide which aquifers to propose to U.S.  
            EPA.  In response to U.S. EPA's audit and concerns over aquifers  
            that were not properly exempted, DOGGR will now require SWRCB  
            concurrence on any aquifer exemption proposal.  In addition, the  
            operator will be required to demonstrate that the aquifer cannot  
            now, and will not in the future, serve as a source of drinking  
            water or for other beneficial uses.  This bill codifies this new  
            procedure to ensure that aquifer exemptions will be thoroughly  
            vetted by DOGGR and SWRCB with public input.  As California  
            deals with the fourth year of drought conditions, protecting  
            groundwater has become more important than ever.  Past actions  
            by DOGGR harmed aquifers that could have been used for a  
            beneficial use.  Thorough vetting of aquifers will help prevent  
            that from happening again. 


          3)Groundwater monitoring.  California's 515 alluvial (loose)  
            groundwater basins and sub-basins provide close to 40% of the  
            state's water supply in an average year.  In dry or drought  
            years, groundwater accounts for as much as 60% of the state's  
            water supply.  Many disadvantaged communities rely on  
            groundwater for 100% of their water supply.  There are  
            approximately 42,000 oil and gas injection wells in California;  
            however, those wells are grouped together as injection projects.  
             According to DOGGR, there are 897 active injection projects and  
            2,146 total projects in DOGGR's database.  DOGGR estimates that  
            these projects inject into 350 aquifers, but does not  
            definitively know the number of aquifers being injected into.   
            Injection projects can also be into sand or rock that are not  
            aquifers.  When wastewater and other fluids associated with the  
            extraction of oil or gas are injected into an aquifer, they can  
            change the chemistry of and contaminate that aquifer.  In  
            addition, there is concern that injection fluids may not stay in  
            the aquifer they are injected into.  Zonal isolation is  
            important to protect other nearby aquifers.  There have been  
            examples in other states, such as Pennsylvania, where drinking  








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            water has been contaminated by nearby oil and gas activities.   
            According to USGS, chemical additives used in well stimulation  
            are also used in enhanced oil recovery and chemicals are mixed  
            into the produced wastewater stream. SB 4 (Pavley), Chapter 313,  
            Statutes of 2013, requires groundwater monitoring for wells that  
            have been stimulated.  SWRCB released its Draft Model Criteria  
            on April 29, 2015, to govern the groundwater monitoring plans  
            required by SB 4.




          Analysis Prepared by:                                               
                          Michael Jarred / NAT. RES. / (916) 319-2092  FN:  
          0000839