BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 248 (Pavley) - Oil and gas
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|Version: April 6, 2015 |Policy Vote: N.R. & W. 6 - 2 |
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|Urgency: No |Mandate: Yes |
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|Hearing Date: May 11, 2015 |Consultant: Marie Liu |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: SB 248 would require the Division of Oil, Gas, and
Geothermal Resources (DOGGR) in the Department of Conservation
to update its regulations, develop a data management system, and
enhance required reporting.
Fiscal
Impact:
Ongoing cost pressures at least in the hundreds of thousands
of dollars to the Oil, Gas, and Geothermal Fund (special) to
DOGGR for additional inspection activities.
Ongoing costs in the low hundreds of thousands of dollars
annually from the Oil, Gas, and Geothermal Fund (special) for
revisions and updates to the regulations, field rules,
notices, and other requirements at least every ten years.
Unknown potential losses of fee revenues to the Oil, Gas, and
Geothermal Fund (special) for the shutting-in of noncompliant
wells.
SB 248 (Pavley) Page 1 of
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Background: 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.
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.
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 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.
DOGGR in the Department of Conservation is the state's oil and
gas regulator and is headed by the oil and gas supervisor. The
supervisor is generally charged with overseeing the drilling,
operation, maintenance, and abandonment of wells, tanks, and
other facilities used in oil and gas regulation to prevent
damage to life, health, property, and natural resources.
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.
DOGGR sought and received "primacy" to operate the class II
SB 248 (Pavley) Page 2 of
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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 have revealed long-standing mismanagement of the UIC
program by the division.
In 2011, an audit of the DOGGR 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 DOGGR.
Existing law requires an owner or operator of a well to keep and
at specified times file DOGGR, 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.
Existing law also requires monthly reporting to DOGGR of certain
oil and gas production, and water source, production, use and
disposition information.
Proposed Law:
This bill would require DOGGR to make a number of updates to
its regulations and management practices. Specifically, this
bill would:
Define "enhanced oil recovery."
Require the supervisor to establish an inspection protocol and
schedule and publically provide that information on its
website.
Require disclosure of the total number of inspections and the
inspection results as part of the supervisor's annual report.
Require DOGGR to revise and revisit its regulations, field
rules, notices, and other requirements at least every 10 years
SB 248 (Pavley) Page 3 of
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and to report to the Legislature regarding changes made.
Require DOGGR, by an unspecified date, to develop and
implement a data management plan for required well data,
including drilling notices, logs, history, and core records.
The database would be required to be publically available and
to have data in a machine readable format.
Require DOGGR, by an unspecified date, to update and revise
its regulations for all injection wells and well projects for
which it has primacy from the US EPA. These regulations must
develop the best management practices for injection wells and
well projects, review cementing requirements, review and
identify impacts of injections on the geologic formation,
ensure the integrity of the well and the formation, and allow
for the public to participate in the well project review
process, among other things.
Require that inspection wells existing by an unspecified date
be brought into compliance with regulations by an unspecified
date.
Require that any injection well subject to the division's
emergency regulations regarding aquifer exemptions be shut-in
immediately if the well is not in compliance by the deadlines
specified in the regulations.
Increase the amount of specified data to be included in the
well history to include all acid treatments of any amount and
concentration and all operations on or in the well of any
form.
Require the well history to also include the
fully-characterized chemical composition of any fluid injected
in the well. Information about the fluid composition would
also be required to be included in the monthly report from the
well owner to the supervisor that that is required under
existing law.
SB 248 (Pavley) Page 4 of
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Require the operator of a waste disposal well to report
quarterly to the supervisor regarding waste disposal performed
about the well including the volume of the material injected.
Staff
Comments: Between 2011 and 2013, DOGGR has received an
additional 53 positions and over $7 million in annual ongoing
funding. Nevertheless, numerous program functions are still not
fully implemented, including reports to the Legislature. This
bill would add some additional responsibilities for DOGGR and
would add specificity to some existing responsibilities.
In regards to the new responsibilities, this bill would require
the supervisor to establish an inspection protocol and schedule
which would be posted on its website. As a result of
highlighting DOGGRs inspection protocol, DOGGR is likely to
incur cost pressures to enhance its inspection program. These
cost pressures could be at least in the high hundreds of
thousands of dollars.
This bill would also require DOGGR to revise its regulations,
field rules, notices, and other requirements at least every 10
years. DOGGR estimates that the cost of doing a full revision
will likely cost between $600,000 and $800,000. Though it is
more likely that these costs would be spread out over several
years or broken out in a continuous process for an annual cost
in the low hundreds of thousands of dollars. The Governor's
proposed 2015-16 budget included a request for a reappropriation
of $1.5 million in unencumbered funds. This budget change
proposal is currently being held open by the Budget Subcommittee
#2. Should the BCP be approved, the costs to update regulations
regularly may become absorbable.
In regards to existing responsibilities, this bill requires
DOGGR to develop and implement a data management plan by an
unspecified date. According to DOGGR, this database is also
required by federal rules. As a result of the recent federal
audit of DOGGR's program, the US EPA has given DOGGR until
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February 2017 to bring its UIC program into compliance, which
would include the development of this database. Because of this
short-time frame, DOGGR anticipates needing to contract out much
of the work at a total cost of $20 million. Because the database
would be required by the US EPA regardless of the disposition of
this bill, the database costs should not be attributable to this
bill.
Lastly, this bill requires that any injection well be shut-in
immediately if it is not incompliance by the deadlines specified
in the regulation. While DOGGR is working towards the federally
imposed February 2017 deadline, if any of the wells are shut-in,
there could be lost revenue to the Oil, Gas, and Geothermal Fund
which receives fees based on the barrels of oil produced.
Staff notes that SB 545 and this bill create different, though
similar, definitions for "enhanced oil recovery." To avoid
confusion, these definitions should be made identical.
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