BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 2756|
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THIRD READING
Bill No: AB 2756
Author: Thurmond (D)
Amended: 6/1/16 in Assembly
Vote: 21
SENATE NATURAL RES. & WATER COMMITTEE: 7-1, 6/14/16
AYES: Pavley, Stone, Allen, Hertzberg, Hueso, Monning, Wolk
NOES: Vidak
NO VOTE RECORDED: Jackson
SENATE JUDICIARY COMMITTEE: 7-0, 6/28/16
AYES: Jackson, Moorlach, Anderson, Hertzberg, Leno, Monning,
Wieckowski
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 64-13, 6/2/16 - See last page for vote
SUBJECT: Oil and gas operations: enforcement actions
SOURCE: Author
DIGEST: This bill substantially revises the Division of Oil,
Gas and Geothermal Resources civil penalty structure for
violations and procedures for appeals of its orders among other
changes related to its enforcement actions.
ANALYSIS:
Existing law:
1)Establishes the Division of Oil, Gas and Geothermal Resources
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(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. District deputies
lead each of the Division's districts.
2)Requires the Division to regulate the drilling, operation,
maintenance, and abandonment of oil and gas wells in the
state.
3)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)Requires the supervisor to consider specified circumstances
when establishing the amount of the civil penalty.
5)Establishes procedures for an operator of a well or production
facility to appeal an order by the supervisor or 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)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.
7)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
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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)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.
9)Allows the Division to spend up to $1 million annually to
address certain hazardous and idle-deserted wells, as defined,
including orphan wells.
This bill substantially revises the Division's civil penalty
structure for violations and procedures for appeals of its
orders among other changes related to its enforcement actions.
Specifically this bill:
1)Requires the supervisor to consider certain additional factors
including, for example, any economic benefit to the violator
from the violation, among others, relevant to determining
whether a civil penalty shall be assessed and its amount.
2)Establishes both "major" and "minor" violations, as specified.
At the supervisor's discretion, each day a violation
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continues may be treated as a separate violation.
a) A major violation must meet one or more specified
criteria, such as, for example, harming persons or property
or being by a recalcitrant operator, among other things. A
major violation shall be assessed at $2,500 to $25,000 per
violation.
b) A minor violation does not meet the criteria for a major
violation and is assessed at not more than $2,500 per
violation.
3)Establishes an Oil and Gas Remediation Account to receive
civil penalties. This account shall fund specified actions by
the Division, including plugging and abandonment of oil and
gas wells among other things. This account sunsets on January
1, 2021.
a) 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.
b) The Oil and Gas Remediation Account replaces the Acute
Orphan Well Program which is repealed.
4)Makes numerous changes to the appeal process and procedures.
Among other things, these include:
a) The notice of appeal is filed with the director.
b) Exceptions for when the notice of appeal operates as a
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stay of the order are revised.
c) Refundable costs are revised, as specified, in the event
an emergency order is set aside or overturned on appeal.
d) The director may extend the date of a hearing for good
cause.
e) 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.
5)Authorizes the supervisor to apply, for penalties due to
uncontested or affirmed orders, as specified, to the
appropriate superior court for a clerk's judgment in order to
provide an additional enforcement mechanism, as specified.
6)Revises existing procedures and processes to the existing
discovery process. Among other provisions, these include:
a) 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.
b) 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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c) 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.
d) The supervisor or director is authorized to require the
owner or operator to provide certain technical reports, as
specified.
e) The Division and the Department are required to keep
certain confidential material, as specified, from public
release
Comments
The new penalty structure allows the supervisor to assess
penalties in line with the harm caused. The existing structure
is limited and inflexible.
The Division has no established general formal policy for the
handling of proprietary information. The Division is required
under its own statutes to handle trade secrets associated with
well stimulation treatment chemicals in a certain way. It is
also required to keep certain information about prospective
wells confidential for limited periods of time. The Division,
however, has no established formal procedures for the handling
of trade secrets or other confidential information. While this
bill provides protections from public disclosure to proprietary
information, it is not clear on what basis or bases that
protection is established which may result in information held
in confidence that does not warrant it.
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
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orphan wells. In addition, the budget includes an additional $1
million for the orphan well remediation at the Administration's
request.
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
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: Yes
SUPPORT: (Verified8/3/16)
Department of Conservation (source)
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: (Verified8/3/16)
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None received
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."
ASSEMBLY FLOOR: 64-13, 6/2/16
AYES: Achadjian, Alejo, Arambula, Atkins, Baker, Bloom,
Bonilla, Bonta, Brown, Burke, Calderon, Campos, Chau, Chiu,
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Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman, Frazier,
Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson,
Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Roger Hernández,
Holden, Irwin, Jones-Sawyer, Kim, Lackey, Levine, Linder,
Lopez, Low, Maienschein, Mathis, McCarty, Medina, Mullin,
Nazarian, O'Donnell, Olsen, Quirk, Ridley-Thomas, Rodriguez,
Salas, Santiago, Mark Stone, Thurmond, Ting, Weber, Wilk,
Williams, Wood, Rendon
NOES: Travis Allen, Bigelow, Brough, Chávez, Beth Gaines,
Harper, Jones, Melendez, Obernolte, Patterson, Steinorth,
Wagner, Waldron
NO VOTE RECORDED: Chang, Dahle, Mayes
Prepared by: Katharine Moore / N.R. & W. / (916) 651-4116
8/3/16 21:56:44
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