BILL ANALYSIS Ó
AB 2756
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Date of Hearing: April 4, 2016
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Das Williams, Chair
AB 2756
(Thurmond) - As Introduced February 19, 2016
SUBJECT: Oil and gas operations: enforcement actions
SUMMARY: Enhances the Division of Oil, Gas, and Geothermal
Resources' (DOGGR) penalty, shut-in order, and investigation
authority. Authorizes DOGGR to permit environmentally
beneficial projects in lieu of up to 50% of the amount of a
civil penalty.
EXISTING LAW:
1)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.
2)Provides that a person who violates state's oil and gas laws
or regulations is subject to a civil penalty not to exceed
$25,000 for each violation. Requires Supervisor to consider
specified circumstances when establishing the amount of the
civil penalty such as:
a) The extent of harm caused by the violation;
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b) The persistence of the violation;
c) The pervasiveness of the violation; and,
d) The number of prior violations by the same violator.
3)Establishes procedures for an operator of a well or production
facility to appeal to the Director of Conservation (Director)
for an order of the Supervisor or a district deputy, including
the following:
a) Requires appeal to be filed within 10 days of the
service of the order or waive its rights to challenge the
order;
b) Requires a notice of appeal to be filed with the
Supervisor or with the district deputy who issued the
order;
c) Requires a written notice of appeal to operate as a stay
of a shut-in order, except in the case of an emergency
order, which require two hearings to issue; and,
d) Requires the Supervisor to reimburse operators for their
costs to perform remedial work or tests if the emergency
order is set aside or modified.
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4)Allows the Supervisor to impose a state tax lien against the
real and personal property of the operator for work performed
by DOGRR.
5)Provides the Supervisor and the Director with the power to
administer oaths in an investigation and apply to a judge of
the superior court of the county in which the proceeding or
investigation is pending for subpoenas for witnesses to attend
the proceeding or investigation.
THIS BILL:
1)Specifies that, at the Supervisor's discretion, each day a
violation continues it may be treated as a separate violation.
2)Rather than requiring specified circumstances that the
Supervisor must consider, this bill, instead, permits the
Supervisor to consider the following conditions when
establishing the amount of the civil penalty:
a) The extent of harm or potential harm caused by the
violation;
b) The persistence of the violation;
c) The pervasiveness of the violation;
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d) The number of prior violations by the same violator;
e) The degree of culpability of the violator;
f) Any economic benefit to the violator resulting from the
violation;
g) The violator's assets, liabilities, and net worth; and,
h) The Supervisor's prosecution costs.
3)Requires the operator to cease injection operations as soon as
it is safe to do so when ordered to do so by DOGGR.
4)Authorizes DOGGR to permit environmentally beneficial projects
in lieu of up to 50% of the civil penalty amount.
5)Specifies when an emergency order for testing or remedial work
is set aside or modified on appeal, only the cost of remedial
work performed is required to be refunded by DOGGR. Prohibits
reimbursement for lost profits or increased production costs.
6)Modifies requirements for appeals and for emergency orders
hearings. Removes the option for either party to
electronically record the hearing.
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7)Allows the Supervisor to impose a state tax lien against the
real and personal property of the operator for civil penalties
assessed by DOGRR.
8)Authorizes the Supervisor or Director to require an operator
to furnish, under penalty of perjury, technical or monitoring
reports that the Supervisor or Director requires.
9)Authorizes the Department of Conservation (DOC) or DOGGR to
inspect the well site or production facilities of any operator
to ascertain whether the operator is complying with the
requirements of the state's oil and gas laws or regulations.
Specifies that inspection will be conducted with the consent
of the operator or with a warrant. Authorizes DOC or DOGGR,
in the event of an emergency affecting the public health or
safety, to inspect a well site or production facilities
without consent or a warrant.
FISCAL EFFECT: Unknown
COMMENTS:
1)Background. DOGGR was created in 1915 to supervise the
drilling, operation, maintenance, and plugging and abandonment
of onshore and offshore oil, gas, and geothermal wells.
California is in the top five oil producing states in the
country and produced over 200 million barrels of oil in 2014.
There has been concern that DOGGR has had too much focus on
protection of oil and gas resources in the state from
production practices that could harm the ultimate level of
hydrocarbon recovery. This focus has been at the cost of
protection of groundwater, occupational safety, and public
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health. In October 2015, DOGGR released its "Renewal Plan for
Oil and Gas Regulation," which outlines reforms DOGGR will
undertake with the goal of having "an effective regulatory
program that ensures the protection of public health and the
environment in the oil fields of California." One issue DOGGR
has identified as needing improvement is its enforcement of
the state's oil and gas laws and regulations.
2)Penalties. Current law allows DOGGR to assess between $10,000
and $25,000 per day for each violation for well stimulation,
but only up to $25,000 per violation for other penalties.
Unlike other agencies, such as California Environmental
Protection Agency, DOGGR is not authorized as part of a
penalty order to permit an operator to fund supplemental
environmental projects (SEPS) to benefit impacted communities
in lieu of a portion of their civil penalty amount. This has
created issues for DOGGR's enforcement capabilities. In early
2014, a gas leak was detected beneath the community of Arvin,
California. A total of eight families were evacuated from
their homes and unable to return for several months. Affected
residents smelled gas and complained of nosebleeds, headaches,
coughing, and dizziness. DOGGR was only able to fine the
operator, Petro Capital Recourses, $75,000 for three
violations. This fine does not consider the severity of the
violation such as it resulted in evacuations, illnesses, and
environmental damage. The penalty does not act as deterrence,
because it is not a significant amount of money for the
company. In addition, the operator was prevented from
conducting SEPS that could have helped reduce the impacts on
the community of Arvin.
Another example is DOGGR recently issued a $75,000 civil
penalty order to the Termo Company for three violations,
because the company was illegally venting natural gas in the
Aliso Canyon field. According to the penalty order, "once the
pipeline was discovered, Operator destroyed the evidence of
its existence before the division personnel could fully
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inspect it. The brazen nature of this violation shows that
operator held little to no regard for the statutes and
regulations or, more importantly, public health and safety."
DOGGR is not able to take into account the intentionality of
the violation or how many days it occurred when issuing
penalty orders.
This bill enhances DOGGR's penalty authority and allows SEPs
for 50% of a total civil penalty. However, DOGGR is still
required to deposit its penalties into the Oil, Gas, and
Geothermal Administrative Fund, which funds the operations of
DOGGR. This fund is already supported by fees and DOGGR has
the authority to adjust fees to cover its regulatory
activities. Penalty funds should be used to help clean up oil
and gas production contamination and deal with orphan wells
issues that are not covered by fees. The author and committee
may wish to consider amending the bill to create a separate
penalty account that, upon appropriation, may be used by DOGGR
to deal with clean up and orphan well issues.
3)Shut-in Order. Oil and gas operations can cause harm to
public health and the environment. DOGGR has issued shut-in
orders when injection projects were injecting into aquifers
that contained protected water. However, DOGGR has limited
authority to shut-in wells that may be a threat to public
health and the environment. If an operator appeals a shut-in
order, the order is automatically stayed unless it is an
emergency order. Emergency orders require two hearings where
the Supervisor must prove the shut-in order is an emergency
and an appeals hearing. Therefore, DOGGR is unable to compel
an operator to shut-in their well immediately if there is a
threat to public health or the environment. This bill would
require operators to cease injection operations as soon as it
is safe to do so if ordered by DOGGR, which would enhance
DOGGR's ability to protect public health and the environment.
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4)Investigations. This bill enhances DOGGR's ability to conduct
investigation by providing DOGGR with authority that other
state agencies, such as the State Water Resources Control
Board, already have. These provisions enhance DOGGR's
subpoena power, increasing DOGGR's ability to require
information from operators, such as technical or monitoring
reports and provide DOGGR with more access to well sites and
production facilities. These changes include authorizing DOGGR
to inspect without consent or a warrant in the event of an
emergency affecting public health or safety.
5)Related/Prior Legislation.
AB 1882 (Williams, 2016) requires the State Water Resources
Control Board (SWRCB) or appropriate regional water quality
control board (RWQCB) to review and concur with any Underground
Injection Control (UIC) project subject to review or approval.
This bill allows SWRCB or appropriate RWQCB to propose
additional requirements for a project, including groundwater
monitoring. This bill is scheduled to be heard by this committee
on April 4, 2016.
AB 2729 (Williams, 2016) creates disincentives for operators to
maintain large idle well inventories, will ensure that funds are
available to plug and abandon idle wells in the event that they
are deserted, and will help improve public perception of oil and
gas operations. This bill is scheduled to be heard by this
committee on April 4, 2016.
SB 248 (Pavley, 2015) requires DOGGR to review and update its
regulations, data management practices, and enhance required
reporting. This bill prohibits the use of oil sumps after July
1, 2017. This bill also prohibits injection chemicals, unless
DOGGR has complete information about specified properties and
potential groundwater impacts. This bill is in the Assembly
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Appropriations Committee.
SB 4 (Pavley), Chapter 313, Statutes of 2013, established a
comprehensive regulatory program for oil and gas well
stimulation treatments, which includes, among other things, a
study, the development of regulations, a permitting process, and
public notification and disclosure. This bill also required
DOGGR to assess between $25,000 and $10,000 per day that a
violation related to well stimulation occurred.
AB 2453 (Tran, Chapter 264, Statutes of 2010) modified the
appeals process at DOGGR to clarify that the judicial review of
an appealed order be based on the "substantial evidence"
standard of review. This bill shifted certain appeals from an
informal hearing to a formal hearing, including appeals of plug
and abandon orders or other actions such as rescission of an
injection project approval. This bill clarified that when an
order for remedial work, or a cease-and-desist order is issued
under emergency circumstances, the order would not be stayed by
the filing of an appeal, but rather, providing for an expedited
hearing before the Director. The bill required DOGGR to
reimburse the operator for required work if an order is
invalidated on appeal.
AB 1960 (Nava, Chapter 562, Statutes of 2008) substantially
strengthened and clarified DOGGR's authority to regulate oil and
gas production facilities. This bill imposed additional
requirements on operators to minimize frequency and severity of
oil spills, and authorized DOGGR to impose life-of-well and
life-of-facility bonding on operators under specified
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circumstances. This bill also increased maximum penalties that
DOGGR may impose from $5,000 to $25,000 per violation.
6) Double Referral. This bill has been double referred to
Assembly Judiciary Committee.
REGISTERED SUPPORT / OPPOSITION:
Support
Department of Conservation (sponsor)
Alliance of Nurses for Healthy Environments
California Interfaith Power and Light
California League of Conservation Voters
Center for Environmental Health
Clean Water Action California
Environmental Defense Fund
Mainstreet Moms
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Opposition
California Independent Petroleum Association
Analysis Prepared by:Michael Jarred / NAT. RES. / (916) 319-2092