BILL ANALYSIS Ó SB 248 Page 1 Date of Hearing: August 19, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair SB 248 (Pavley) - As Amended August 17, 2015 ----------------------------------------------------------------- |Policy |Natural Resources |Vote:|6 - 2 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: YesReimbursable: No SUMMARY: This bill requires the Division of Oil, Gas, and Geothermal Resources (DOGGR) to update and revise its regulations, develop a data management system, and enhance required reporting. SB 248 Page 2 Specifically, this bill: 1)Requires the Oil and Gas Supervisor to establish an inspection program for all regulatory activities, as specified, to be available to the public and included in the Supervisor's annual report. Defines enhanced oil recovery as specified. 2)Adds data requirements and timelines for the Oil and Gas Data Management System developed pursuant to the Budget Act of 2015. 3)Requires DOGGR to update its injection well regulations, except those currently under review, by January 1, 2018, through a public process with independent expert and stakeholder input. Requires DOGGR to review its regulations and rules at least every 10 years and update as necessary. 4)Requires injection wells, in existence as of December 31, 2017, to be brought into compliance with the 2018 regulations by January 1, 2020. 5)Requires out-of-compliance injection wells subject to April 2015 emergency regulations to meet the compliance schedule or cease operations. 6)Requires DOGGR to develop additional safeguards to protect groundwater in shallow depths or wells as specified. 7)Requires the chemical composition of injection fluid and produced water to be characterized and reported in the well history and monthly statements, as specified. SB 248 Page 3 8)By January 1, 2017, prohibits the use of injection chemicals, unless DOGGR has complete information about specified properties and potential groundwater impacts. Requires the DOGGR to consult with the Office of Environmental Health Hazard Assessment (OEHHA) to develop a list of chemicals and impacts, and post the list on its internet website. 9)Modifies the definition of "oil sump" and prohibits disposal of water or wastewater associated with oil or gas exploration, development or production into oil sumps beginning July 1, 2017. FISCAL EFFECT: 1)Increased annual cost of approximately $850,000 (Oil, Gas, and Geothermal Fund) for DOGGR to increase inspection activities, update regulations, increase compliance, and provide information to the public. 2)Unknown, potential losses of fee revenue (Oil, Gas, and Geothermal Fund) resulting from ceased operations of noncompliant wells. COMMENTS: 1)Purpose. According to the author, "Numerous new stories and editorials across the state cite the need for reform at the Division of Oil, Gas and Geophysical Resources (DOGGR) and its programs, particularly the injection well program. This bill backstops the Administration's promised reforms and adds appropriate statutory requirements to protect the state's groundwater. This bill achieves this in part by directly SB 248 Page 4 responding to the recent independent science study on fracking and closing reporting loopholes that have previously resulted in significant data gaps concerning oil and gas operations. With SB 248 DOGGR will have the information it needs to assess risks to and protect groundwater." 2)Background. There are approximately 90,000 active oil and gas wells in the state. These wells are primarily: 1) oil and gas production wells, 2) injection wells used to enhance oil recovery by a variety of methods, 3) oil field wastewater disposal injection wells, and 4) gas storage wells. 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 SB 248 Page 5 were responsible for about 25% of the state's oil production according to a recent report. 3)Division of Oil, Gas, and Geothermal Resources. 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 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. 4)State budget action. The 2015-16 state budget provided DOGGR with 23 new permanent positions to address deficiencies in the Underground Injection Control (UIC) program. In addition, it included the following reforms: SB 248 Page 6 a) Requires State Water Resources Control Board (SWRCB) concurrence on any proposed aquifer exemptions prior to submittal to U.S. EPA. b) Includes enhanced reporting requirements to the Legislature on corrective actions. a c) Requires, 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 the effectiveness of the program and consider transferring the program to the SWRCB. 5)SB 4 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. SB 248 seeks to address the data gaps identified by the study that prevent a full assessment of oil and gas operations and risks to groundwater. Analysis Prepared by:Jennifer Galehouse / APPR. / (916) 319-2081 SB 248 Page 7