BILL ANALYSIS Ó SENATE COMMITTEE ON NATURAL RESOURCES AND WATER Senator Fran Pavley, Chair 2015 - 2016 Regular Bill No: SB 248 Hearing Date: April 14, 2015 ----------------------------------------------------------------- |Author: |Pavley | | | ----------------------------------------------------------------- ----------------------------------------------------------------- |Version: |April 6, 2015 | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant:|Katharine Moore | | | | ----------------------------------------------------------------- Subject: Oil and gas BACKGROUND AND EXISTING LAW 1.There are approximately 90,000 active oil and gas wells in the state. These wells are primarily oil and gas production wells, injection wells used to enhance oil recovery by a variety of methods, oil field wastewater disposal injection wells and gas storage wells, among others. About half of the state's active oil and gas wells are injection wells of which about 1,500 are waste disposal wells. As of 2013, California was the third ranked oil producing state by volume and also a significant producer of natural gas. 2.Primary oil and gas production is when the oil and gas reservoir has sufficient internal pressure that the oil/gas can be produced using only pumping or other artificial lift method. Secondary and tertiary oil and gas production methods, collectively known as Enhanced Oil Recovery (EOR) methods, typically involve the addition of pressure and/or heat via injection well to the hydrocarbon reservoir in order to promote hydrocarbon production. Primary and EOR-assisted production are used both on and offshore. 3.Many of California's principal oil and gas fields have been in production for several decades. As these fields age and become depleted, EOR often must be used to continue production. In many fields the crude oil is very heavy and also must be produced using EOR. Approximately 60% of the SB 248 (Pavley) Page 2 of ? state's oil production depends upon EOR. In contrast, hydraulic fracturing and other well stimulation treatments were responsible for about 25% of the state's oil production according to a recent report. 4.The Division of Oil, Gas, and Geothermal Resources (division) in the Department of Conservation is the state's oil and gas regulator. Existing law requires the state's oil and gas supervisor to produce a public annual report containing information about the state's oil and gas production and other related material, as specified. 5.The division sought and received "primacy" to operate the class II underground injection control (UIC) program from the US Environmental Protection Agency (US EPA) in the early 1980s. The class II UIC program is for oil and gas injection wells. These include wells used for EOR and waste disposal. Recent revelations (see comments) have revealed long-standing mismanagement of the UIC program by the division. 6.In 2011, an audit of the division's UIC program was completed by a US EPA contractor. One of the numerous issues raised by the audit was the need to improve the number and type of inspections by the division. This is not a problem unique to California - a recent report from the US General Accounting Office on the UIC program of several states, including California, also highlighted the need to systematically improve inspection practices. 7.Existing law requires an owner or operator of a well to keep and at specified times file with the division, a careful and accurate log, core record, and history of the drilling of the well. Existing law and regulation specify what information must be provided. 8.Existing law also requires monthly reporting to the division of certain oil and gas production, and water source, production, use and disposition information. 9.It has long been known that disposal of large amounts of waste in deep injection wells is, in some instances, associated with an increase in seismic activity. In recent years, the boom in hydraulic fracturing of oil and gas wells has led to significant increases in oil and gas wastewater in need of SB 248 (Pavley) Page 3 of ? disposal. Scientists have reported significant overall increases in seismic activity, particularly in areas with little previous activity, and attributed it to increased use of injection wells for waste disposal. While most of these earthquakes have been relatively minor, a 2011 magnitude 5.6 earthquake in Oklahoma was attributed to waste disposal well injections. PROPOSED LAW This bill would require the division to review and update its regulations, data management practices and enhance required reporting. Specifically, this bill would: Require complete reporting of all activities conducted on an oil and gas well, Require injection well regulations to be updated, including the development of "best management practices" for injection wells through a public process with independent expert and stakeholder input, Require injection well regulations be specific to each kind of injection well, as specified, including "full and complete characterization and reporting, including monitoring" of the well, Require existing injection wells to be brought into compliance with the new regulations, Require the reporting of the chemical composition of produced water and any fluids injected into an injection well, Require public participation in the injection well review process, Require the development of an inspection protocol and schedule with reporting on the inspection results, Enhance waste disposal injection well reporting, Require the development and implementation of a new data management system to improve data handling and ensure ready public access to the division's data and actions, as specified, and Add an ongoing requirement that the division review and update its regulations and other requirements at least once every 10 years, as specified, among other provisions. ARGUMENTS IN SUPPORT According to the author, "in the last few years, the division and its operations have come under increasing scrutiny. About five years ago, the division starting asking the Legislature for SB 248 (Pavley) Page 4 of ? - and receiving - increased funding and personnel to revamp its injection well program. The then-supervisor released a draft plan to address deficiencies in that program. Many of these problems were highlighted in the 2011 EPA audit of the injection well program. It's now 4 years later, and I have a few more draft plans released by the division. It's time for legislative action to ensure there is a final plan that gets fully implemented and the division's outdated regulations are revised to reflect advances in oil and gas field technology." "The state is in the fourth year of an extreme drought. We recently found out that over 2,500 injection wells are injecting oil and gas-related wastewater and other fluids into groundwater that, in many instances, others are using for drinking and irrigation water. The division knew about this issue for years, and did little to resolve it. The division has only shut down a handful of wells while it investigates, putting much needed groundwater at risk. The division does not know all of the materials and chemicals put into those wells. How can the division fulfill its regulatory mission to protect the state's groundwater, natural resources and public health and safety, if it doesn't collect information about many oil and gas field operations and depends on regulations it acknowledges are out-of-date?" The author continues, "SB 248 seeks to spur reform at the division and specifically within its oil and gas injection well program in order to provide regulatory accountability and public transparency. The division has repeatedly promised to update these regulations for over 5 years with little apparent progress. My bill puts a statutory framework in place to require the division to regularly review its practices." ARGUMENTS IN OPPOSITION None received. COMMENTS This bill is a work-in-progress . This bill seeks to address oil and gas field practices that are, in many instances, poorly defined in statute and regulation, despite being in widespread use. According to the author's office, stakeholder discussions and additional efforts, including the review of law and regulations in other major oil and gas-producing states, continue. This includes, for example, developing an appropriate SB 248 (Pavley) Page 5 of ? definition of EOR. The completion of the independent science study required by SB 4 (Pavley, c. 313, Statutes of 2013) later this year may also inform the bill's language. The bill also does not yet specify dates that many of the required actions must be completed by. The committee may wish to direct staff to continue working with the author's office, should the bill pass the committee today. March 10, 2015 joint hearing . Last month, the Senate Committees on Natural Resources and water and Environmental Quality convened a joint hearing on the implementation of the state's UIC program. The hearing reviewed the division's acknowledgement of over 2,500 injection wells that were improperly permitted and are currently injecting fluids and oil and gas wastewater into groundwater that may be or is of sufficiently good quality to serve as a source of drinking and irrigation water. The division, the water boards and the US EPA have agreed upon a plan to assess these wells and bring them into compliance or shut them down over the next two years. (In the last week, the division has released proposed emergency regulations to codify this plan.) Hearing materials also document repeated assurances from the division, starting with the FY 2010/11 budget, that injection well regulations would be revised, and other discrepancies between the division's regulations and permitting decisions by its staff. All of the division's current injection well regulations are over 20 years old, and, in some instances, injection wells are allowed to operate at pressures exceeding that needed to fracture the surrounding formation contrary to regulation. At the hearing, the division also acknowledged the need to improve its data management and handling practices. Existing reporting loophole . When hydraulic fracturing of oil and gas wells became of wide-spread concern, legislative requests to the division for additional information revealed that only certain records, such as core logs - which focus on the geologic strata encountered while drilling - were required to be reported. While requirements for well stimulation treatment data reporting are now in place, this loophole remains for other processes. For example, a recent white paper prepared by the US Geological Survey in support of the development of model groundwater monitoring criteria required by SB 4 states that the chemicals used routinely in EOR are not reported. SB 248 (Pavley) Page 6 of ? SB 4 Independent Science Study . The first volume of the study was released in early January 2015. While focused on well stimulation treatments, this study also described some of the reporting needed to understand related oil and gas field practices. For example, this included the need to have more detailed information available on wastewater disposal injections in order to investigate whether these injections are associated with seismic activity in the state. Three later volumes are due by July 2015, and a more thorough assessment of wastewater disposal by injection wells is expected to be included. Related legislation SB 454 (Allen, 2015) This bill seeks to alter the aquifer exemption process for the UIC program (in the Senate Rules Committee) SB 545 (Jackson, 2015) This bill would revise and update division's authority and permitting practices, and reform the handling of confidential wells (before the Senate Natural Resources and Water Committee at this hearing) AB 356 (Williams, 2015) This bill would provide for reform of the UIC program with an emphasis on the role of the Water Boards and require groundwater monitoring in the vicinity of UIC wells (before the Assembly Natural Resources Committee) SUPPORT Association of California Water Agencies OPPOSITION None Received -- END --