BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     SB 248  


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          Date of Hearing:  August 19, 2015


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                                 Jimmy Gomez, Chair


          SB 248  
          (Pavley) - As Amended August 17, 2015


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          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.   








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          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.









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          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  








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            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  








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            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:










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             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

















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