BILL ANALYSIS Ó
SENATE COMMITTEE ON NATURAL RESOURCES AND WATER
Senator Fran Pavley, Chair
2015 - 2016 Regular
Bill No: AB 2756 Hearing Date: June 14,
2016
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|Author: |Thurmond | | |
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|Version: |June 1, 2016 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Katharine Moore |
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Subject: Oil and gas operations: enforcement actions
BACKGROUND AND EXISTING LAW
1)Existing law establishes the Division of Oil, Gas and
Geothermal Resources (Division), the state's oil and gas
regulator, within the Department of Conservation (Department).
The department is led by its Director (director), and the
state oil and gas supervisor (supervisor) leads the division.
Each of the division's six statutory districts is led by a
district deputy.
2)Existing law requires the division to regulate the drilling,
operation, maintenance, and abandonment of oil and gas wells
in the state.
3)Existing law provides that a person who violated certain
requirements related to the regulation of oil and gas is
subject to a civil penalty not to exceed $25,000 per
violation, although violations of well stimulation treatment
statute are subject to civil penalties of $10,000 - $25,000
per violation per day.
4)Existing law requires the supervisor to consider specified
circumstances when establishing the amount of the civil
penalty.
5)Existing law establishes procedures for an operator of a well
or production facility to appeal an order by the supervisor or
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a district deputy to the director. A notice of the appeal
must be filed with the supervisor or the district deputy who
issued the order.
6)Existing law establishes the Acute Orphan Well program and the
Acute Orphan Well Account. An "acute orphan well" is a well
that the supervisor determines could pose an immediate danger
to life, health, or natural resources and there is no operator
responsible or able to respond. The account is used, upon
appropriation, to plug, abandon, and further secure an acute
orphan well, as specified. The dedicated fee to support this
account is expired and the Acute Orphan Well program is
largely defunct. Existing law also allows the division to
spend up to $1 million annually to address certain hazardous
and idle-deserted wells, as defined, including orphan wells.
7)Existing law sets forth numerous provisions governing
discovery in the context of an informal hearing before the
director. 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, is authorized 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.
8)Existing law provides that 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.
PROPOSED LAW
This bill would substantially revise the division's civil
penalty structure and procedures for appeal of an order issued
to an oil and gas operator by the supervisor or district deputy.
Specifically this bill would:
Require the supervisor to consider certain additional
factors including, for example, any economic benefit to the
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violator from the violation, among others, relevant to
determining whether a civil penalty shall be assessed and
its amount.
Establish both "major" and "minor" violations, as
specified, separate from the existing well stimulation
treatment penalty structure which is retained. At the
supervisor's discretion, each day a violation continues may
be treated as a separate violation.
o A major violation must meet one or more
specified criteria, such as, for example, harming
persons or property, being willful, providing
significant competitive advantage to the operator or
being by a recalcitrant operator, among other things.
A major violation shall be assessed at $2,500 to
$25,000 per violation.
o A minor violation does not meet the criteria
for a major violation and is assessed at not more than
$2,500 per violation.
Establish an Oil and Gas Remediation Account to receive
civil penalties that are not used for supplemental
environmental projects. This account sunsets on January 1,
2021 and thereafter funds shall be deposited in the
existing Oil and Gas Administrative Fund.
o The supervisor may allow an operator to
perform a supplemental environmental project to offset
up to 50% of a civil penalty. A supplemental
environmental project is an "environmentally
beneficial project" that a person subject to an order
of the supervisor imposing a civil penalty voluntarily
agrees to undertake, as specified.
o The Oil and Gas Remediation Account shall
fund, upon appropriation by the Legislature, actions
by the division to plug and abandon oil and gas wells,
decommission attendant facilities or otherwise
remediate sites that the supervisor determines could
pose a danger, as specified, if there is no operator
available to do the work.
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o The Oil and Gas Remediation Account replaces
the Acute Orphan Well Program which is repealed.
Make numerous changes to the appeal process and
procedures. Among other things, these include:
o The notice of appeal is filed with the
director.
o Exceptions for when the notice of appeal
operates as a stay of the order are revised.
o Refundable costs are revised, as specified, in
the event an emergency order is set aside or
overturned on appeal.
o The circumstances are revised, as specified,
in which appeals are heard in a formal hearing process
before an administrative law judge instead of before
the director in an informal hearing process.
Authorize the supervisor to apply, for penalties due to
uncontested or affirmed orders, as specified, to the
appropriate superior court for a clerk's judgement in order
to provide an additional enforcement mechanism, as
specified.
Revise existing procedures and processes to the existing
discovery process. Among other provisions, these include:
o A judge of the superior court, upon
application by the supervisor or director, is required
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.
o The attorney of record for the supervisor or
director is authorized to issue subpoenas compelling
the attendance of witnesses and the production of
certain records, as specified.
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o The supervisor, director, or certain inspector
is authorized to inspect the well site or production
facility to ascertain whether certain requirements are
being met, as specified.
o The supervisor or director is authorized to
require the owner or operator to provide certain
technical reports, as specified.
o The division and the department are required
to keep certain confidential material, as specified,
from public release.
ARGUMENTS IN SUPPORT
According to the author, "[the division] is responsible for
regulating the State's oil and gas operations and investigating
potential violations of statute and regulations. This bill would
enhance the department's authority to regulate the oil and gas
industry and protect public health and the environment.
Specifically, this bill:
Enhances the division's penalty authority to ensure that
penalties assessed reflect the severity of the violation and
serve as an adequate deterrent to violations.
Allows up to half of penalty revenue to be spent on
environmentally beneficial projects in communities impacted by
oil and gas development.
Creates a new account for civil penalties that will be used to
remediate environmental contamination associated with oil and
gas production where a responsible party cannot be identified
or is insolvent.
Authorizes the division to immediately shut-in injection
projects that pose a risk to groundwater.
Strengthens the division's investigative authorities to
collect information about proposed and ongoing oil and gas
projects, and secure witness testimony during investigative
hearings."
ARGUMENTS IN OPPOSITION
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None received
COMMENTS
This bill is double-referred to the Senate Judiciary Committee .
Elements of the bill subject to that Committee's jurisdiction
will be discussed there and are included here for completeness
and context only.
Well stimulation treatment violations . SB 4 (Pavley, c. 313,
Statutes of 2013) requires daily assessment of violations of
well stimulation treatment statute and regulation. This bill
would allow both major and minor violations of other oil and gas
statutes and regulations to be assessed on a daily basis, at the
supervisor's discretion. The author may wish to consider
whether it is appropriate for minor violations of well
stimulation treatment statutes and regulations to be subject to
a different penalty structure than currently required.
The division has existing and ongoing programs that address
orphan wells . While the bill repeals the largely defunct Acute
Orphan Well program language, supplemental environmental
projects and the Oil and Gas Remediation Account can address
orphan wells. In addition, the pending budget includes an
additional $1 million for the orphan well remediation (proposed
by the Administration in a spring budget change proposal).
Locations of supplemental environmental projects may vary from
the site of the violation . Supplemental environmental projects
are not required to be co-located with the well or facility
subject to the civil penalty.
All oil and gas well remediation will not be completed by
January 1, 2021. However, a sunset date for the new Oil and Gas
Remediation Account will allow for the new Account to be
evaluated.
Recent related legislation
AB 1882 (Williams, 2016) would require the Water Boards to
review and concur with any Underground Injection Control project
subject to review or approval, among other provisions. (This
bill was held on suspense in Assembly Appropriations Committee.)
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AB 2729 (Williams, 2016) would create disincentives for oil and
gas well operators to maintain large idle well inventories,
ensure that funds are available to plug and abandon idle wells
in the event that they are deserted, and help improve public
perception of oil and gas operations. (This bill will be heard
by this Committee at its next hearing.)
SB 248 (Pavley, 2015) would require the division to review and
update its regulations, data management practices, and enhance
required reporting, prohibit the use of oil sumps after July 1,
2017, and allow the use of chemicals in oil and gas operations
only if complete information about specified properties is
known, among other provisions. (This bill is in the Assembly
Appropriations Committee.)
SB 4 (Pavley, c. 313, Statutes of 2013) established a
comprehensive regulatory program for oil and gas well
stimulation treatments.
AB 2453 (Tran, c. 264, Statutes of 2010) modified the appeals
process at the division 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 the division to
reimburse the operator for required work if an order is
invalidated on appeal.
AB 1960 (Nava, c. 562, Statutes of 2008) substantially
strengthened and clarified the division'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 the division to impose life-of-well
and life-of-facility bonding on operators under specified
circumstances. This bill also increased maximum penalties that
the division may impose from $5,000 to $25,000 per violation.
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SUPPORT
Department of Conservation (sponsor)
Alliance of Nurses for Healthy Environment
California Interfaith Power and Light
California League of Conservation Voters
Center for Environmental Health
City of Los Angeles
Clean Water Action
Environmental Defense Fund
Environmental Working Group
Mainstreet Moms
Sierra Club California
OPPOSITION
None Received
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