BILL ANALYSIS Ó
AB 2756
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ASSEMBLY THIRD READING
AB
2756 (Thurmond and Williams)
As Amended June 1, 2016
Majority vote
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+---------------------|
|Natural |7-2 |Williams, Cristina |Jones, Harper |
|Resources | |Garcia, Gomez, | |
| | |Hadley, McCarty, | |
| | | | |
| | | | |
| | |Mark Stone, Wood | |
| | | | |
|----------------+-----+----------------------+---------------------|
|Judiciary |7-2 |Mark Stone, Alejo, |Gallagher, |
| | |Chau, Chiu, Cristina |Maienschein |
| | |Garcia, Holden, Ting | |
| | | | |
|----------------+-----+----------------------+---------------------|
|Appropriations |14-6 |Gonzalez, Bloom, |Bigelow, Patterson, |
| | |Bonilla, Bonta, |Gallagher, Jones, |
| | |Calderon, Daly, |Obernolte, Wagner |
| | |Eggman, Eduardo | |
| | |Garcia, | |
| | | | |
| | | | |
AB 2756
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| | |Roger Hernández, | |
| | |Holden, Quirk, | |
| | |Santiago, Weber, Wood | |
| | | | |
| | | | |
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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. Specifically, this bill:
1)Specifies that, at the Supervisor's discretion, each day a
violation continues it may be treated as a separate violation.
Establishes different tiers of civil penalties including
minor and major violations.
2)Authorizes DOGGR to permit environmentally beneficial projects
in lieu of up to 50% of the civil penalty amount. Requires,
until January 1, 2021, civil penalties to be deposited into
the newly created Oil and Gas Environmental Remediation
Account rather than the Oil, Gas, and Geothermal Account.
3)Specifies when an emergency order for testing or remedial work
is set aside or modified on appeal, only the cost of work
performed is required to be refunded by DOGGR. Prohibits
reimbursement for lost profits or increased production costs.
4)Modifies requirements for appeals and for emergency orders
hearings.
5)Allows the Supervisor to impose a state tax lien against the
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real and personal property of the operator for civil penalties
assessed by DOGGR.
6)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.
7)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.
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.
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:
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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.
4)Allows the Supervisor to impose a state tax lien against the
real and personal property of the operator for work performed
by DOGGR.
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.
FISCAL EFFECT: According to the Assembly Appropriations
Committee, the costs of this bill are absorbable within existing
DOGGR resources, potential minor savings resulting from changes
in hearing procedures.
COMMENTS:
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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
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,
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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
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. In
addition, this bill creates a separate penalty account for
four years that, upon appropriation, may be used by DOGGR to
deal with clean up and orphan well issues.
Analysis Prepared by:
Michael Jarred / NAT. RES. / (916) 319-2092 FN:
0003381
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