BILL ANALYSIS Ó
SB 248
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Date of Hearing: July 13, 2015
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Das Williams, Chair
SB
248 (Pavley) - As Amended July 1, 2015
SENATE VOTE: 22-18
SUBJECT: Oil and gas.
SUMMARY: Requires the Division of Oil, Gas, and Geothermal
Resources (DOGGR) in the Department of Conservation (DOC) to
update its regulations, develop a data management system, and
enhance required reporting.
EXISTING LAW:
1)Establishes DOGGR as the state's oil and gas regulator.
2)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.
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3)Allows DOGGR to apply to the U.S. Environmental Protection
Agency (U.S. EPA) to receive "primacy" to operate the Class II
Underground Injection Control (UIC) program for oil and gas
injection wells at the state level. The U.S. EPA granted
primacy and delegated authority to DOGGR to operate the UIC
program in 1983.
4)Requires the Supervisor to produce a public annual report
containing information about the state's oil and gas
production and other related material, as specified.
5)Requires an owner or operator of a well to keep, and at
specified times file with DOGGR, a careful and accurate log,
core record, and history of the drilling of the well
containing specified information.
6)Requires monthly reporting by an owner or operator of a well
to DOGGR of certain oil and gas production and water source,
production, use, and disposition information.
THIS BILL:
1)Requires DOGGR to review and update its regulations, data
management practices, and enhance required reporting:
a) Requires that information regarding the DOGGR's
inspection program, such as frequency, be publicly
available, and that inspection results, as specified, be
included in the Supervisor's annual report;
b) Requires DOGGR to update its injection well regulations,
on or before January 1, 2018, including the development of
"best management practices" for injection wells through a
public process with independent expert and stakeholder
input;
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c) Requires injection well regulations be specific to each
kind of injection well and ensure formation, wellbore and
well integrity, including "full and complete
characterization and reporting of all operations, with
appropriate monitoring;"
d) Requires the Oil and Gas Data Management System,
developed pursuant to the Budget Act of 2015 (Chapter 10 of
the Statutes of 2015), improve data handling and sets
specific timelines when data must be posted after DOGGR has
received it; and,
e) Requires enhanced quarterly reporting of waste disposal
well information, as specified.
2)Provides that injection wells existing as of December 31, 2017
to be brought into compliance with the new regulations by
January 1, 2020.
3)Requires that injection wells subject to DOGGR's April 2015
emergency regulations, based on the U.S. EPA compliance plan,
which are currently injecting into aquifers that do not have
appropriate classification under the federal Clean Water Act,
meet the compliance schedule in the emergency regulations or
immediately cease injection operations.
4)Requires complete reporting of all activities conducted on an
oil and gas well, including injected fluid chemical
composition, as specified.
5)Requires the monthly reporting of the chemical composition of
produced water.
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6)Adds an ongoing requirement that DOGGR review its regulations
and other requirements at least every 10 years and update any,
if needed, and as specified, among other provisions.
FISCAL EFFECT: According to the Senate Appropriation Committee,
this bill's costs are:
1)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.
2)Ongoing costs no more than the low hundreds of thousands of
dollars annually to 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.
3)Unknown potential losses of fee revenues to the Oil, Gas, and
Geothermal Fund (special) for the shutting-in of noncompliant
wells.
COMMENTS:
1)Author's Statement.
According to the author:
In the last few years, the division and its operations
have come under increasing scrutiny. About five years
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ago, the division starting asking the Legislature for
- 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.
2)UIC Program. In 1974, the Safe Drinking Water Act gave the
U.S. EPA the authority and responsibility to control
underground injection to protect underground drinking water
sources. In 1982, a primacy agreement was signed that allowed
DOGGR to implement the U.S. EPA's UIC program for oil and gas
wells in California. It has recently been discovered that
there were two versions of this agreement, one allowing
exemptions for 11 aquifers with high water quality and another
denying those exemptions and requiring all existing injection
wells into those aquifers be phased out over 18 months. The
aquifers were non-hydrocarbon-producing and all had a total
dissolved solids (TDS) concentration below 3,000 mg/l. The
SDWA is supposed to protect underground sources of water with
TDS concentrations below 10,000 mg/l. DOGGR's UIC permitting
decisions have been based on the assumption that these
exemptions were granted for the 11 aquifers in question.
A 2011 U.S. EPA audit of DOGGR's UIC program implementation
concluded that DOGGR was misclassifying underground sources of
drinking water and doing an insufficient job monitoring the
UIC program. In June 2014, it was discovered that DOGGR was
approving injection wells in nonexempt aquifers. This included
injections into the 11 aquifers that were not properly
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exempted, but also included injections into aquifers that were
never exempt. California Environmental Protection Agency's
(CalEPA) review found that DOGGR's district offices were
approving projects without review from DOGGR and were making
errors identifying the injectable zone of exempt aquifers.
This included misidentifying the borders and depth of the
aquifer and allowing expansion of productive limits over time
beyond boundaries established in the Primacy Application.
Initially there were 2,553 injection wells operating in
non-exempt aquifers; after a review, 76 wells were removed
from that list. The wells represented both disposal wells and
enhanced oil recovery wells. To date, the state has shut down
23 injection wells, because they were injecting into aquifers
that could be suitable for drinking water. In addition, these
wells could potentially have had an impact on nearby water
supply wells. While no contamination of water supply wells has
been found yet, it is clear that aquifers that could have been
a source of underground drinking water have been contaminated
with injection fluid.
On February 6, 2015, DOGGR and SWRCB submitted a timeline to
U.S. EPA for all wells operating in non-exempt aquifers to
cease injecting unless and until there is an aquifer exemption
for the aquifer or the portion of the aquifer where the
injection is occurring. October 15, 2015 is the deadline for
ceasing injection if the injection is occurring in a
non-hydrocarbon producing zone and the groundwater has less
than 3,000 TDS. February 17, 2017 is the deadline for ceasing
injection for the other wells of concern. On April 20, 2015,
DOGGR put those timelines into emergency regulation. SB 248
codifies that an injection well subject to the emergency
regulations shall immediately cease injection if it is not in
compliance with the emergency regulations. However, SB 248
would not go into effect until January 1, 2016, several months
after the first deadline. In addition, the emergency
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regulations will only remain in effect until October 20, 2015.
DOGGR is in the process of creating permanent regulations.
Once this provision of SB 248 goes into effect, no well will
be out of compliance with those regulations and, therefore,
the provision will have no effect. The author and committee
may wish to consider amending the bill to include successor
regulations.
3)Regulations. The U.S. EPA audit of DOGGR raised concerns with
their UIC regulations. DOGGR has not had significant changes
to its UIC regulations since the original primacy application.
U.S. EPA has requested that DOGGR complete revising its UIC
regulations by September 2018. DOGGR has agreed to that
timetable. On July 3, DOGGR released a notice of upcoming
rulemaking activity to adopt regulations that address concerns
expressed by U.S. EPA. DOGGR has stated that the regulations
will achieve the following regulatory goals:
a) Clarify standards for ensuring zonal isolation of
injection projects;
b) Expressly define the quality of water to be protected
when constructing wells;
c) Codify best practices for well construction;
d) Establish permitting and regulatory requirements
specific to cyclic steam operations;
e) Establish requirements specific to cyclic steam in
diatomite, including a regulatory framework for responding
to surface expressions and clarification regarding
injection above fracture gradient; and,
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f) Clarify process and standards for establishing maximum
allowable surface pressure for injection operations.
SB 248 also requires DOGGR to update its UIC regulations by
January 1, 2018 and at least every ten years after. SB 248
includes requirements on what topics, methodologies and
desired outcomes should be used when developing the
regulations. However, in communications with DOGGR, they have
expressed confusion about some of the requirements of SB 248.
In addition, the upcoming rulemaking may create duplication
with the requirements of this bill. The author and committee
may wish to consider amending the bill to address overlap with
DOGGR's current regulatory activity and provide some clarity
about the intent of the regulations.
4)State budget action. The recently adopted 2015-16 state budget
provided DOGGR with the additional resources of 23 new
permanent positions to address deficiencies in the UIC
program. In addition, it included UIC reforms such as:
a) Requires SWRCB concurrence on any proposed aquifer
exemptions prior to submittal to U.S. EPA;
b) Include enhanced reporting requirements to the
Legislature on actions taken to correct problems at DOGGR;
and,
c) Require, by January 1, 2018, the Secretary of CalEPA and
the Secretary of the Natural Resources Agency to appoint an
independent review panel to evaluate the regulatory
performance of the DOGGR's administration of the UIC
program, which will make recommendations on how to improve
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the effectiveness of the program and consider transferring
the program to the State Water Resources Control Board.
5)Science study. On July 9, the SB 4 (Pavley, 2013), Chapter
313, Statutes of 2013, independent scientific study volume II
and III on well stimulation in California was released. The
study contains many conclusions about well stimulation and
about oil and gas production in California more generally.
Some of the highlights include that "the California oil and
gas industry uses a large number of hazardous chemicals during
the hydraulic fracturing and acid treatments." The study
states that hazardous chemicals used in well stimulation are
the most direct impact of the practice. In addition, the study
concludes that a majority of impacts associated with well
stimulation are indirect impacts caused by the increase in oil
and gas production it enables. It states that all oil and gas
production should be studied and regulated. The study also
concluded that hazardous chemicals used in well stimulation
may have been inappropriately disposed of into protected
aquifers and open ponds. The author of this bill, who was
also the author of SB 4, has been closely following the
independent scientific study process and has been in
discussions with committee staff about amending this bill to
address some of the recommendations in the study. The author
has committed to working with the committee as the bill moves
forward on these issues.
6)Previous and related legislation.
AB 982 (Williams, 2013) required Regional Water Quality Control
Boards to approve a proposed groundwater monitoring plan prior
to noticing the intent to begin any oil or gas drilling. The
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bill would have required the notice to include the source of
water used during any hydraulic fracturing operations. The bill
was held in Assembly Appropriations Committee.
SB 4 (Pavley), Chapter 313, Statutes of 2013, established a
comprehensive regulatory program for oil and gas well
stimulation treatments, which includes among other things, a
study, the development of regulations, a permitting process, and
public notification and disclosure.
SB 454 (Allen, 2015) would have prohibited DOGGR from submitting
a proposal for an aquifer exemption to the U.S. EPA unless DOGGR
and SWRCB concur in writing that the aquifer meets specified
conditions. This bill failed passage on the Senate Floor with a
vote of 17-17.
SB 545 (Jackson, 2015) revised and updated DOGGR's authority and
permitting practices and reforms the handling of confidential
wells. This bill was held in the Senate Appropriations
Committee.
SB 356 (Williams, 2015) required, prior to submitting a proposal
to exempt an aquifer to the U.S. EPA, that DOGGR hold a public
hearing and gain concurrence from SWRCB on the proposal. This
bill would have required groundwater monitoring plans for
underground injection projects as part of an application for
approval of the project or for the annual review of the project.
This bill failed passage on the Assembly Floor with a vote of
28-33.
AB 1490 (Rendon, 2015) prohibits well stimulation, and in some
cases, wastewater disposal in areas that are seismically active
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or have recently had an earthquake. This bill was never heard in
Assembly Appropriations Committee and is a two-year bill.
AB 1501 (Rendon, 2015) requires air districts to establish
an emission standard for methane from well stimulation
treatment and other petroleum extraction facilities. This
bill requires emission standards to include a permit
requirement and consideration of the effect production
facilities have on adjacent vulnerable populations. This
bill requires the Air Resources Board or a local air
district to install monitoring stations near any approved
well stimulation site and other petroleum extraction
facilities to monitor for 12 different chemicals. This bill
was never heard in Assembly Appropriations Committee and is
a two-year bill
REGISTERED SUPPORT / OPPOSITION:
Support
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Asian Pacific Environmental Network
Association of California Water Agencies
California League of Conservation Voters
California Coastal Protection Network
Center for Environmental Health
Center on Race, Poverty & the Environment
Citizens for Responsible Oil & Gas
Clean Water Action
Coastal Environmental Rights Foundation
Earthworks
Environment, Inc.
Environmental Action Committee of West Marin
Environmental Defense Center
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Environmental Working Group
Friends Committee on Legislation of California
League of Women Voters of California
Los Angeles Waterkeeper
Los Padres Forest Watch
Mainstreet Moms
Mount Shasta Bioregional Ecology Center
Natural Resources Defense Council
San Diego350
Save the Sespe
Sierra Club California
Southern Monterey County Rural Coalition
The Wildlands Conservancy
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West Marin Environmental Action Committee
Wholly H20
Opposition
African American Farmers of California
Associated Builders & Contractors of California
Bellflower Chamber of Commerce
California Asian Pacific Chamber of Commerce
California Chamber of Commerce
California Cotton Ginners Association
California Cotton Growers Association
California Independent Petroleum Association
California Manufacturers & Technology Association
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California Small Business Alliance
California Women for Agriculture
Camarillo Chamber of Commerce
Cambodian American Chamber of Commerce
Ceres Unified School District Board Members
Cerritos Regional Chamber of Commerce
Chamber of Commerce, Santa Barbara Region
Chambers of Commerce Alliance of Ventura & Santa Barbara
Counties
City of Ceres
City of Clovis
City of Fresno, Councilmember Brand
City of Fresno, Councilmember Brandau
City of Fresno, Councilmember Olivier
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City of Fresno, Councilmember Quintero
City of Hanford, Councilmember Mendes
City of Hanford, Mayor Curry
City of Huron, Mayor Chavez
City of Mendota, Mayor, Silva
City of San Joaquin, Mayor Dhallwal
City of Santa Barbara, Councilmember Hotchkiss
City of Turlock, Councilmember Nascimento
City of West Covina, Councilmember Spence
City of Woodlake
Coachella Chamber of Commerce
Coalition of Energy Users
Coastal Energy Alliance
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El Monte/South El Monte Chambers of Commerce
Fresno Area Hispanic Foundation/Downtown Business Hub
Fresno County Farm Bureau
Fresno County Supervisor Borgeas
Fresno County Supervisor Mendes
Fresno Unified School District
Fullerton Chamber of Commerce
Greater Bakersfield Chamber of Commerce
Greater Fresno Area Chamber of Commerce
Hayward Chamber of Commerce
Humboldt Taxpayer's League
Huntington Beach Chamber of Commerce
Independent Oil Producers Agency
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Independent Petroleum Association
Indio Chamber of Commerce
Industrial Association of Contra Costa County
Inland Empire Economic Partnership
International Faith Based Coalition
Irvine Chamber of Commerce
Kern County Black Chamber of Commerce
Kern County Firefighters (AFF Local 1301)
Kern County Hispanic Chamber of Commerce
Kern County Taxpayers Association
Kern Economic Development Corporation
Kettleman City Community Services District
Kings County Farm Bureau
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Kings County Supervisor Valle
Kings County Supervisor Verboon
Kings County Supervisor Pedersen
Latino Community Roundtable of Stanislaus County
Latino Mayors and City Elected Officials Coalition for Fresno
County
La Quinta Chamber of Commerce
Madera County Supervisor, Farinelli
Montclair Chamber of Commerce
Monterey County Farm Bureau
Monterey County Hospitality Association
Murietta Chamber of Commerce
National Association of Royalty Owners
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National Association of Royalty Owners - California
National Federation of Independent Business
National Hmong American Farmers
National Tax Limitation Committee
Nickel Family LLC
Nisei Farmers League
Oxnard Chamber of Commerce
Porterville Chamber of Commerce
Rancho Cordova Chamber of Commerce
Regional Chamber Alliance
Ridgecrest Chamber of Commerce
Sacramento Asian Pacific Chamber of Commerce
Sacramento Taxpayers Association
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San Diego East County Chamber of Commerce
San Diego Tax Fighters
San Joaquin County Hispanic Chamber of Commerce
San Joaquin Farm Bureau
San Ramon Chamber of Commerce
Santa Barbara County, Supervisor Adam
Santa Barbara County Taxpayers Association
Santa Barbara Technology and Industry Association
Santa Fe Springs Chamber of Commerce
Santa Maria Valley Chamber of Commerce & VCB
Southwest California Legislative Council
Stanislaus County, Supervisor DeMartini
Stanislaus County, Supervisor Monteith
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Stanislaus County Supervisor Withrow
Taft Chamber of Commerce and Visitors Bureau
Tulare County Farm Bureau
Tulare County, Supervisor Vander Poel
Tulare County, Supervisor Worthley
Valley Industry & Commerce Association
Ventura County Economic Development Association
Ventura County, Supervisor Foy
Western Agricultural Processors Association
Western States Petroleum Association
Western United Dairymen
Yosemite Community College District, District 4
Analysis Prepared by:Michael Jarred / NAT. RES. / (916)
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319-2092