California Legislature—2015–16 Regular Session

Assembly Bill No. 2756

Introduced by Assembly Members Thurmond and Williams

February 19, 2016

An act to amend Sections 3236.5, 3350, 3351, 3352, 3356, and 3357 of the Public Resources Code, relating to oil and gas.

LEGISLATIVE COUNSEL’S DIGEST

AB 2756, as introduced, Thurmond. Oil and gas operations: enforcement actions.

(1) Under existing law, the Division of Oil, Gas, and Geothermal Resources in the Department of Conservation regulates the drilling, operation, maintenance, and abandonment of oil and gas wells in the state. Existing law provides that a person who violates certain requirements related to the regulation of oil and gas is subject to a civil penalty not to exceed $25,000 for each violation. Existing law requires the Oil and Gas Supervisor to consider specified circumstances when establishing the amount of the civil penalty.

This bill instead would authorize the supervisor to consider specified circumstances when establishing the amount of the civil penalty. The bill would authorize the supervisor, in his or her discretion, to treat each day a violation continues or is not cured as a separate violation. The bill would authorize the supervisor to allow a supplemental environmental project, as defined, in lieu of a portion of the civil penalty amount, not to exceed 50% of the civil penalty amount, as specified.

(2) Existing law establishes procedures for an operator of a well or production facility to appeal to the Director of Conservation from an order of the supervisor or a district deputy. Existing law requires a notice of appeal to be filed with supervisor or with the district deputy who issued the order.

This bill would make numerous changes to the appeal process and procedures. The bill would, among other things, require the notice of appeal to be filed with the director, revise exceptions for when the notice of appeal operates as a stay of the order, revise what costs will be refunded if an emergency order is set aside or modified on appeal, and revise the circumstances in which appeals are to be heard in a formal hearing process before an administrative law judge, instead of in an informal hearing before the director.

This bill would make numerous changes to the process and procedures for an informal hearing before the director. The bill would, among other things, authorize the director to extend the date of the hearing for good cause upon his or her own motion, remove the authorization for the hearing to be electronically recorded by either party, revise the timeline in which the director is required to grant or deny a petition to order the testimony of a witness at the hearing, and provide that obtaining subpoenas may be considered good cause to extend the date of the hearing.

(3) Existing law sets forth numerous provisions governing discovery in the context of an informal hearing before the director. Existing law authorizes the supervisor or the director, upon application to a judge of the superior court of the county within which the proceeding or investigation is pending, to obtain a subpoena compelling the attendance of witnesses and the production of records, surveys, documents, books, or accounts at such places as the judge may designate within the limits prescribed in these provisions.

This bill would make numerous changes to these discovery provisions. The bill would, among other things, require a judge of the superior court, upon application by the supervisor or director, to assign a case number for the proceeding or investigation, to issue an order prescribing the nature and scope of the proceeding or investigation, and to retain jurisdiction for the limited purpose of enforcing subpoenas issued in the proceeding or investigation; authorize the attorney of record for the supervisor or director, upon the assigning of a case number, to issue subpoenas compelling the attendance of witnesses and the production of records, surveys, documents, books, or accounts for certain pending proceeding or investigation in the manner specified; authorize the supervisor or director, or his or her inspector, to inspect the well site or production facilities of any owner or operator to ascertain whether the owner or operator is complying with the certain requirements; authorize the supervisor or director to require any owner or operator to furnish, under penalty of perjury, technical or monitoring reports that the supervisor or director require; and prohibit the division and the department from making available to the public for inspection portions of a report that might disclose trade secrets, well data granted confidential status, or other confidential or privileged information, when requested by the owner or operator furnishing the report. Because the bill would expand the crime of perjury, it would impose a state-mandated local program.

(4) Existing law provides if the operator does not appeal an order, seek judicial review of a decision affirming or modifying an order within the time provided in law, or if the court has affirmed the decision, then any charge, including penalty and interest, that the decision permits the supervisor to impose constitutes a state tax lien against the real and personal property of the operator.

This bill additionally would include any civil penalties imposed by the supervisor for violations of certain requirements related to the regulation of oil and gas in these provisions. The bill would authorize the supervisor to apply to the appropriate superior court for a clerk’s judgment, in addition to the state tax lien, and would provide provisions related to obtaining the clerk’s judgment.

(5) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

SECTION 1.  

Section 3236.5 of the Public Resources Code is
amended to read:

3236.5.  

(a) A person who violates this chapter or a regulation
implementing this chapter is subject to a civil penalty not to exceed
twenty-five thousand dollars ($25,000) for each violation. begin delete A person
who commits end delete begin insert At the supervisor’s discretion, each day a violation
continues or is not cured may be treated as a separate violation.
For each day end insert a violation of Article 3 (commencing with Section
3150) begin delete is subject to a end delete begin insert continues or is not cured, the end insert civil penalty begin delete of end delete
begin insert amount shall end insert not begin insert be end insert less than ten thousand dollars begin delete ($10,000) and
not to exceed twenty-five thousand dollars ($25,000) per day per
violation. end delete begin insert ($10,000). end insert An act of God and an act of vandalism beyond
the reasonable control of the operator shall not be considered a
violation. The civil penalty shall be imposed by an order of the
supervisor pursuant to Section 3225 upon a determination that a
violation has been committed by the person charged. The
imposition of a civil penalty under this section shall be in addition
to any other penalty provided by law for the violation. When
establishing the amount of the civil penalty pursuant to this section,
the supervisor begin delete shall end delete begin insert may end insert consider, in addition to other relevant
circumstances, all of the following:

(1) The extent of harm begin insert or potential harm end insert caused by the violation.

(2) The persistence of the violation.

(3) The pervasiveness of the violation.

(4) The number of prior violations by the same violator.

begin insert

(5) The degree of culpability of the violator.

end insert begin insert

(6) Any economic benefit to the violator resulting from the
violation.

end insert begin insert

(7) The violator’s assets, liabilities, and net worth.

end insert begin insert

(8) The supervisor’s prosecution costs.

end insert

(b) An order of the supervisor imposing a civil penalty shall be
reviewable pursuant to Article 6 (commencing with Section 3350).
When the order of the supervisor has become final and the penalty
has not been paid, the supervisor may apply to the appropriate
superior court for an order directing payment of the civil penalty.
The supervisor may also seek from the court an order directing
that production from the well or use of the production facility that
is the subject of the civil penalty order be discontinued until the
violation has been remedied to the satisfaction of the supervisor
and the civil penalty has been paid.

(c)  begin insert The supervisor may allow a supplemental environmental
project in lieu of a portion of the civil penalty amount. The
supplemental environmental project may not be more than 50
percent of the total civil penalty amount. end insert Any amount collected
under this section begin insert that is not allocated for a supplemental
environmental project end insert shall be deposited in the Oil, Gas, and
Geothermal Administrative Fund.

begin insert

(d) “Supplemental environmental project” means an
environmentally beneficial project that a person, subject to an
order of the supervisor imposing a civil penalty, voluntarily agrees
to undertake in settlement of the action and to offset a portion of
a civil penalty.

end insert

SEC. 2.  

Section 3350 of the Public Resources Code is amended
to read:

3350.  

(a) The operator of a well or a production facility to
whom the supervisor or district deputy has issued an order pursuant
to this chapter may file a notice of appeal begin delete to the director end delete from that
order. The notice of appeal shall be in writing and shall be filed
with the begin delete supervisor or with the district deputy who issued the order. end delete
begin insert director. end insert The operator shall file the appeal within 10 days of the
service of the order, or within 10 days of the posting of a copy of
an order made pursuant to Section 3308. Failure of the operator
to file an appeal from the order within the 10-day period shall be
a waiver by the operator of its rights to challenge the order. If the
order, other than an order made pursuant to Section 3308, is served
by mail, the time for responding shall be determined as provided
in Section 1013 of the Code of Civil Procedure.

(b) (1) The filing of a written notice of appeal shall operate as
a stay of the order, except when an order for begin insert testing or end insert remedial
work or an order to cease and desist begin insert production facility end insert operations
is issued as an emergency order pursuant to Section begin delete 3226. end delete begin insert 3226,
or when the order is to cease injection operations. If the order is
an order to cease injection operations, then the operator shall
cease injection as soon as it is safe to do so. end insert If the order is an
emergency order, the operator shall immediately cease and desist
the specified begin insert production facility end insert operations and shall perform
whatever work is required by the order to alleviate the emergency
or shall permit the agents appointed by the supervisor to perform
that work.

(2) If begin delete the end delete begin insert an end insert emergency order begin insert for testing or remedial work end insert is
set aside or modified on appeal, the supervisor shall refund the
reasonable costs incurred by the operator for whatever work is not
required by the set-aside or modified order or shall not impose
costs for work performed by the supervisor or the supervisor’s
agents if the work is excluded from the modified order or the order
is set aside. begin insert Only the costs of remedial work performed shall be
refunded, and there shall be no reimbursement for lost profits or
increased production costs. end insert

(3) (A) The costs to be refunded pursuant to paragraph (2) by
the supervisor shall be determined in a hearing before the director
after the exhaustion of appeals. The operator shall have the burden
of proving the amount of costs to be refunded.

(B) A determination by the director as to the amount of costs
to be refunded pursuant to paragraph (2) may be appealed by the
operator pursuant to subdivision (a) of Section 3354.

(4) If the operator believes that it will be irretrievably injured
by the performance of the work required to alleviate the emergency
pending the outcome of the appeal, the operator may seek an order
from the appropriate superior court restraining the enforcement of
the order pending the outcome of the appeal.

SEC. 3.  

Section 3351 of the Public Resources Code is amended
to read:

3351.  

(a) A hearing shall be provided in accordance with
Chapter 5 (commencing with Section 11500) of Part 1 of Division
3 of Title 2 of the Government Code only in an appeal from an
order in the following circumstances:

(1) Issued pursuant to a Section 3237 finding that the operator’s
wells are deserted and should be plugged and abandoned.

(2) Imposing civil penalties totaling more than begin delete ten end delete begin insert twenty end insert begin insert -five end insert
thousand dollars begin delete ($10,000). end delete begin insert ($25,000). end insert

(3) Rescinding an begin insert entire end insert injection project approval for a project
that has already commenced.

(4) Imposing a life-of-well bond or a life-of-production facility
bond.

(b) An order issued pursuant to Section 3225 shall satisfy the
begin delete requirement of end delete begin insert substantive requirements of an accusation pursuant
to end insert Section 11503 of the Government Code begin delete that an accusation be
filed. end delete begin insert and may be filed when scheduling a formal hearing in
accordance with this chapter and Chapter 5 (commencing with
Section 11500) of Part 1 of Division 3 of Title 2 of the Government
Code. All applicable formal hearing deadlines do not commence
until a formal hearing is scheduled. When scheduling a formal
hearing after an appeal from an order under this chapter, the
supervisor is not required to send a Notice of Defense statement
and the operator is not required to request a hearing. end insert

(c) For an appeal of an order that is not described in subdivision
(a), a hearing shall be conducted by the director in accordance with
Sections 3352 and 3353.

(d) For an appeal of an order that is described in subdivision
(a) and is also an emergency order for begin insert testing or end insert remedial work or
to cease and desist begin insert production facility end insert operations, a hearing shall
be conducted by the director in accordance with Sections 3352
and 3353 for the limited purpose of considering the begin delete emergency
order for remedial work or to cease and desist operations. end delete
begin insert reasonableness of the supervisor’s determination that an
emergency exists. end insert All other penalties and requirements imposed
by the order shall be considered at a hearing provided in accordance
with Chapter 5 (commencing with Section 11500) of Part 1 of
Division 3 of Title 2 of the Government Code.

SEC. 4.  

Section 3352 of the Public Resources Code is amended
to read:

3352.  

(a) A hearing conducted by the director shall adhere to
the following:

(1) When an order is not issued as an emergency order, within
30 days from the date of the service of the notice of appeal, the
director shall provide to the operator notice of the time and place
of the hearing. The hearing shall take place within 30 days after
the date of the director’s notice. The notice shall inform the
operator that the director may extend the date of the hearing for
up to 60 days for good cause upon begin insert his or her own motion, or an end insert
application of the operator or the supervisor.

(2) When an order has been issued as an emergency order, within
10 days from the date of the service of the notice of appeal, the
director shall provide to the operator notice of the time and place
of the hearing. The hearing shall take place within 20 days after
the date of the director’s notice. The notice shall inform the
operator that the director may extend the date of the hearing for
up to 30 days for good cause upon begin insert his or her own motion, or an end insert
application of the operator or the supervisor.

(b) The director shall conduct the hearing within the district
where the majority of the wells or production facilities that are the
subject of the order are located, or the hearing may be conducted
at a location outside of that district upon application of the operator.
The hearing shall be reported by a stenographic begin delete reporter and may,
in addition, be electronically recorded by either party. end delete begin insert reporter. end insert

(c) The notice of hearing shall inform the operator of its right
to file a written answer to the charges no later than 10 days before
the date of the hearing. The notice also shall inform the operator
that it has the right to present oral and documentary evidence at
the hearing.

(d) Upon a verified and timely petition of the operator, the
director may order the testimony of a witness at the hearing. The
petition shall be served upon the director and the other party within
five days after the filing of an appeal and shall set forth the name
and address of the witness whose testimony is requested, to the
extent known; a showing of the materiality of the testimony; and
a showing that the witness cannot be compelled to testify absent
an order of the director. The supervisor may file an opposition to
the petition within five days after the petition is served. The director
shall either deny or grant the petition within 10 days after receipt
of the begin delete petition and receiving any opposition to the end delete petition. Upon
granting a petition, the director shall issue a subpoena pursuant to
Section 3357 compelling the testimony of the witness at the
hearing. begin insert Obtaining subpoenas may be considered good cause to
extend the date of the hearing under paragraph (1) or (2) of
subdivision (a). end insert

(e) The director may convert a hearing pursuant to this section
to a formal hearing conducted in accordance with Chapter 5
(commencing with Section 11500) of Part 1 of Division 3 of Title
2 of the Government Code in any of the following circumstances:

(1) The operator makes a showing satisfactory to the director
that the order being appealed is likely to result in termination of
an established oil or gas producing or injection operation.

(2) It appears to the director that the hearing will involve
complex evidentiary or procedural issues that will cause more than
minimal delay or burdens.

(3) The operator and the supervisor agree and stipulate to convert
the hearing to a formal hearing.

(f) The conversion of a hearing pursuant to this section to a
formal hearing shall be conducted in accordance with Article 15
(commencing with Section 11470.10) of Chapter 4.5 of Part 1 of
Division 3 of Title 2 of the Government Code. begin insert If a hearing for an
appeal of an emergency order is converted to a formal hearing, end insert
begin insert the supervisor shall endeavor to schedule and notice a formal
emergency hearing as soon as reasonably possible and,
notwithstanding Section 11517 of the Government Code, the
director shall only have 30 days from receipt of the administrative
law judge’s proposed emergency hearing decision to act as
prescribed in subparagraphs (A) to (E), inclusive, of paragraph
(2) of subdivision (c) of Section 11517 of the Government Code. end insert

SEC. 5.  

Section 3356 of the Public Resources Code is amended
to read:

3356.  

begin insert (a) end insert begin insert   end insert If the operator does not appeal an order, if the
operator does not timely seek judicial review of a decision
affirming or modifying an order within the time provided in Section
3354, or if the operator has timely sought and obtained judicial
review and the court has affirmed the decision, then any charge,
including penalty and interest, that the decision permits the
supervisor to impose on the operator for work performed by the
supervisor or the supervisor’s agents begin insert , and any civil penalties
imposed under Section 3236.5 end insert shall constitute a state tax lien
against the real and personal property of the operator pursuant to
Section 3423.

begin insert

(b) In addition to a state tax lien, the supervisor may apply to
the appropriate superior court for a clerk’s judgment. The
application, which shall include a certified copy of the final agency
order or decision, shall constitute a sufficient showing to warrant
the issuance of the judgment. The court clerk shall enter the
judgment immediately in conformity with the application. The
judgment so entered shall have the same force and effect as, and
shall be subject to all the provisions of law relating to, a judgment
in a civil action, and may be enforced in the same manner as any
other judgment of the court. The court shall make enforcement of
the judgment a priority.

end insert

SEC. 6.  

Section 3357 of the Public Resources Code is amended
to read:

3357.  

begin insert (a) end insert begin insert   end insert In any proceeding before the director, and in any
proceeding instituted by the supervisor for the purpose of enforcing
or carrying out the provisions of this division, or for the purpose
of holding an investigation to ascertain the condition of any well
or wells complained of, or which in the opinion of the supervisor
may reasonably be presumed to be improperly located, drilled,
operated, maintained, or conducted, the supervisor and the director
shall have the power to administer oaths and may apply to a judge
of the superior court of the county in which the proceeding or
investigation is pending for begin delete a subpoena end delete begin insert subpoenas end insert for witnesses
to attend the proceeding or investigation. Upon the application of
the supervisor or the director, the judge of the superior court shall
begin insert assign a case number for the proceeding or investigation, shall
issue an order prescribing the nature and scope of the proceeding
or investigation, and shall retain jurisdiction for the limited
purpose of enforcing subpoenas issued in the proceeding or
investigation. Upon the assigning of a case number, the attorney
of record for the supervisor or director may end insert issue begin delete a subpoena end delete
begin insert subpoenas end insert directing begin delete the witness end delete begin insert witnesses end insert to attend the proceeding
or investigation, and begin delete such person end delete begin insert those persons end insert shall be required
to produce, when directed, all records, surveys, documents, books,
or accounts in the witness’ custody or under the witness’ control;
except that no person shall be required to attend upon begin delete such end delete begin insert the end insert
proceeding unless the person resides within the same county or
within 100 miles of the place of attendance. The begin insert attorney of record
for the end insert supervisor or the director may in begin delete such end delete begin insert that end insert case cause the
depositions of witnesses residing within or without the state to be
taken in the manner prescribed by law for like depositions in civil
actions in superior courts of this state under Title 4 (commencing
with Section 2016.010) of Part 4 of the Code of Civil Procedure,
and begin delete may, upon application to a judge of the superior court of the
county within which the proceeding or investigation is pending,
obtain a subpoena end delete begin insert may issue subpoenas end insert compelling the attendance
of witnesses and the production of records, surveys, documents,
books, or accounts at begin delete such end delete begin insert designated end insert places begin delete as the judge may
designate end delete within the limits prescribed in this section.

begin insert

(b) (1) In conducting a proceeding or investigation specified
in subdivision (a), the supervisor or director may require an owner
or operator to furnish, under penalty of perjury, technical or
monitoring reports that the supervisor or director requires. The
burden, including costs, of any report shall bear a reasonable
relationship to the need for the report and the benefits to be
obtained from the report. In requiring a report, the supervisor or
director shall explain in writing to the owner or operator the need
for the report, and shall identify the evidence that supports
requiring that owner or operator to provide the report.

end insert begin insert

(2) When requested by the owner or operator furnishing the
report, neither the division nor the department shall make available
to the public for inspection portions of a report that might disclose
trade secrets, well data granted confidential status pursuant to
Section 3234, or other confidential or privileged information. The
division or department shall make that confidential or privileged
information available to other public agencies as needed for
regulatory purposes and in accordance with a written agreement
with the other public agency regarding the sharing of the
information.

end insert begin insert

(c) In conducting a proceeding or investigation pursuant to
subdivision (a), the supervisor or director, or his or her inspector,
may inspect the well site or production facilities of any owner or
operator to ascertain whether the owner or operator is complying
with the requirements of or authorized by this division. The
inspection shall be made with the consent of the owner or operator
or, if consent is withheld, with a warrant duly issued pursuant to
the procedure set forth in Title 13 (commencing with Section
1822.50) of Part 3 of the Code of Civil Procedure. In the event of
an emergency affecting the public health or safety, an inspection
may be performed without consent or a warrant. This subdivision
is in addition to any other inspection authority granted or
authorized by this division.

end insert begin insert

(d) As used in this section, “evidence” means any relevant
evidence on which responsible persons are accustomed to rely in
the conduct of serious affairs, regardless of the existence of any
common law or statutory rule that might make improper the
admission of the evidence over objection in a civil action.

end insert

SEC. 7.  

No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of
the Government Code, or changes the definition of a crime within
the meaning of Section 6 of Article XIII B of the California
Constitution.