BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session SB 454 (Allen) - Water quality: oil and gas: exempt aquifer ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: April 21, 2015 |Policy Vote: N.R. & W. 7 - 1, | | | E.Q. 5 - 2 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: May 28, 2015 |Consultant: Marie Liu | | | | ----------------------------------------------------------------- SUSPENSE FILE. AS AMENDED. Bill Summary: AB 454 would prohibit the division of Oil, Gas, and Geothermal Resources (DOGGR) from submitting a proposal for an aquifer exemption unless DOGGR and the State Water Resources Control Board (SWRCB) both make specified findings. Fiscal Impact (as approved on May 28, 2015): Ongoing costs of $560,000 from the Oil, Gas, and Geothermal Administrative Fund (special) to the SWRCB to consider aquifer exemptions. Unknown potential revenues losses to the Oil, Gas, and Geothermal Administrative Fund (special) for decreased oil production. Background: DOGGR in the Department of Conservation is the state's oil and gas regulator and is headed by the oil and gas supervisor. The SB 454 (Allen) Page 1 of ? 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. As part of the application, DOGGR asked to exempt certain aquifers from protection under the Safe Drinking Water Act. These "exempt aquifers" were not or could not become sources of drinking water, as defined (see 40 Code of Federal Regulations (CFR) §146.4, described below). Most of these aquifers were either hydrocarbon-producing, co-located with an existing oil and gas field, or were already being used for oil and gas wastewater injection. In 1982, the US EPA signed a Memorandum of Agreement (MOA) with the Department of Conservation establishing DOGGR's primacy for the UIC program and, among other things, providing certain aquifers with exempt status. Under this MOA, (1) the US EPA must approve any additional requests for aquifer exemption status, (2) no injection is allowed into an aquifer without first obtaining exempt status (if needed), and, (3) by mutual agreement between DOGGR and the US EPA, the exempt status for an aquifer may be withdrawn at any time. In the primacy agreement, DOGGR pledged to work closely with the SWRCB. A 1988 MOA between DOGGR and the SWRCB requires the DOGGR to share information with the appropriate regional water quality control board (regional board) about proposed UIC applications and provides an opportunity for the regional board to comment. Additionally, DOGGR agrees not to issue final approvals until regional board concerns are satisfied. 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. SB 454 (Allen) Page 2 of ? In the last 10 months there have been a series of revelations showing, at best, questionable and lax management of the UIC program by the division, particularly with respect to aquifer exemptions. DOGGR staff disregarded DOGGR's own agreements, guidelines and regulations and regularly approved Class II wells that injected into aquifers that required exemption to be used or where the aquifer's water quality was unknown. Some of these "non-exempt aquifers" contain or may contain good quality water. (See the March 10, 2015 joint oversight hearing on the UIC program convened by the Senate Natural Resources and Water Committee and the Senate Environmental Quality Committee for more information.) Proposed Law: This bill would require DOGGR and the SWRCB to make specific written findings before submitting an application to the US EPA for an aquifer exemption. Specifically, if the aquifer is hydrocarbon bearing, DOGGR and the SWRCB must find that the aquifer (1) is geologically and hydrogeologically isolated from other zones containing waters that may have a beneficial use, and (2) does not contain waters with potential beneficial uses or has a beneficial use that wouldn't be impacted by fluids injected into the zone. If the aquifer is not hydrocarbon bearing, DOGGR and SWRCB must find that the aquifer (1) meets the US EPA requirements for an aquifer exemption, (2) has more than 3,000 milligrams per liter total dissolved salts, (3) is geologically and hydrogeologically isolated from other zones containing waters that may have a beneficial use, and (4) would not be contaminated for current or future beneficial use. This last finding must be made by the SWRCB and posted on its website in a public and readily accessible location. Staff Comments: The actions required of DOGGR in this bill are largely in line with the requirements that currently exist in DOGGR's regulations and DOGGR's MOA with the US EPA establishing DOGGR's primacy in implementing the UIC program with two exceptions. First, the bill requires that an aquifer being SB 454 (Allen) Page 3 of ? geologically and hydrogeophically isolated while currently an aquifer only needs to geologically or hydrogeologically isolated. This difference will require additional review by DOGGR at an annual cost of approximately $350,000. The second difference between this bill and existing regulations and agreements is that existing regulations and agreements would allow for an aquifer exemption to be applied for even if it had a total dissolved solids concentration below 3,000 milligrams per liter if that aquifer was not economically recoverable or too polluted to use. Should this bill result in injection wells being shut-in, and that shut-in decreases oil production, DOGGR could have some revenue losses since well owners pay fees to the state based on oil production. Staff notes that DOGGR currently has a budget change proposal (BCP) open for consideration by the Senate Budget Subcommittee #2 to reappropriate $1.5 million from the Oil, Gas, and Geothermal Administrative Fund for the UIC program. Approval of this BCP would give DOGGR the resources that it feels it needs to meet existing requirements. Thus, approval of the BCP would not provide funds for the activities required under this bill. The actions required of the SWRCB in this bill are also largely in line with the MOA between DOGGR and the SWRCB regarding oil field wastewater disposal. However, the SWRCB was never appropriated funds for this purpose. As such, to implement this bill, the SWRCB would necessitate $560,000 for four PYs to review existing and future aquifer exemptions. Staff notes that the SWRCB also has a budget change proposal for $2.1 million and 13 PYs from the Oil, Gas, and Geothermal Administrative Fund for UIC program oversight. According to the SWRCB, should this BCP be approved, it will need no additional funds needed to implement this bill. Committee amendments (as adopted on May 28, 2015): Amend to specify that an isolated aquifer is hydrogeologically isolated. -- END -- SB 454 (Allen) Page 4 of ?