Senate BillNo. 545


Introduced by Senator Jackson

February 26, 2015


An act to amend Sections 3008, 3106, 3203, and 3234 of, to add Section 3215.5 to, to repeal Section 3451 of, and to repeal and add Section 3450 of, the Public Resources Code, relating to oil and gas.

LEGISLATIVE COUNSEL’S DIGEST

SB 545, as introduced, Jackson. Oil and gas operations.

(1) Under existing law, the Division of Oil, Gas, and Geothermal Resources in the Department of Conservation regulates the drilling, operation, maintenance, and abandonment of oil and gas wells in the state. Existing law requires the State Oil and Gas Supervisor to supervise the drilling, operation, maintenance, and abandonment of wells and the operation, maintenance, and removal or abandonment of tanks and facilities related to oil and gas production within an oil and gas field, so as to prevent damage to life, health, property, and natural resources, as provided; to permit owners and operators of wells to utilize all known methods and practices to increase the ultimate recovery of hydrocarbons; and to perform the supervisor’s duties in a manner that encourages the wise development of oil and gas resources to best meet oil and gas needs in this state.

This bill would no longer require the supervisor to perform his or her duties in that manner. The bill would instead require the supervisor to authorize the exploration and production of hydrocarbons, including, among other things, the drilling, operation, maintenance, and abandonment of wells, and the use of enhanced oil recovery methods, as defined, and authorize the supervisor to allow an owner or operator of a well to utilize all known methods and practices to increase the ultimate recovery of hydrocarbons if the supervisor finds that those methods and practices are consistent with existing law.

(2) Existing law requires the operator of a well to file a written notice of intention to commence drilling with, and prohibits any drilling until approval is given by, the supervisor or district deputy. Under existing law, the notice is deemed approved if the supervisor or district deputy fails to respond to the notice in writing within 10 working days from receipt and is deemed canceled if operations have not commenced within one year of receipt.

This bill would require an owner or operator of a well to file an application for approval to commence drilling, containing specified information, and would prohibit any drilling until written approval is given by the supervisor or the district deputy containing specified findings. The bill would authorize the supervisor, upon request, to grant a one-year extension if operations have not commenced within one year of the approval.

(3) The Permit Streamlining Act requires any public agency that is the lead agency for a development project to approve or disapprove of a project, as specified. Under that act, if the lead agency or responsible agency is required to provide public notice of the development project or to hold a public hearing on the development project, or both, and the agency has not provided the public notice or held the hearing, or both, at least 60 days prior to the expirations of specified time periods, the applicant may file an action to compel the agency to provide the public notice or hold the hearing, or both, as specified.

This bill would require the supervisor to perform his or her duties in conformance with that act.

(4) Existing law generally provides that well records filed by owners or operators with the supervisor are public records. However, existing law authorizes the supervisor, upon written request of an owner or operator, to maintain well records of exploratory wells, or other wells if the supervisor determines that there are extenuating circumstances, as confidential information. Under existing law, the confidential period for an onshore or offshore well is up to 2 or 5 years, respectively, from the cessation of drilling operations, as defined. Existing law authorizes the supervisor to extend the period of confidentiality of a well for 6 months upon written request documenting extenuating circumstances and requires that the total period of confidentiality, including all extensions, for onshore and offshore wells not exceed 4 or 7 years, respectively, from the cessation of drilling operations.

This bill would limit the authorization to maintain the confidentiality of well records to exploratory wells and only if the owner or operator includes specified information in the written request. The bill would deem both the request for, and the granting of, confidential well status to be public records and would require that information to be accessible on the division’s Internet Web site. The bill would require all well records of a confidential well, as defined, to be posted on the division’s Internet Web site once the confidential well period has ended. The bill would require that the confidential period for an offshore well not exceed 3 years from the cessation of drilling operations and would authorize the supervisor to extend the period of confidentiality for confidential wells for only 6 months, upon receiving a written request documenting extenuating circumstances.

(5) Existing law requires an owner or operator of a well to keep a log, core record, and history of the drilling of wells to be provided to the district deputy within 60 days after the date of cessation of drilling, rework, or abandonment operations or the date of suspension of operation. Under existing law, a person who fails to comply with this and other requirements relating to the regulation of oil or gas operations is guilty of a misdemeanor.

This bill would in addition require an owner or operator of a well to report specified information to the applicable regional water quality control board within 5 days of any loss of well and well casing integrity. Because a violation of this requirement would be a crime, the bill would impose a state-mandated local program.

(6) Existing law recognizes the Conservation Committee of the California Oil and Gas Producers and authorizes it or any other committee of oil producers to make voluntary recommendations to the supervisor regarding, among other things, maximum efficient rates of production, as defined, if specified conditions are satisfied.

This bill would instead authorize any committee of oil producers to make recommendations to the supervisor regarding oil and gas exploration and production, as specified, and would require the division to post any recommendations received by the supervisor on the division’s Internet Web site.

(7) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

P4    1

SECTION 1.  

Section 3008 of the Public Resources Code is
2amended to read:

3

3008.  

(a) “Well” means any oil or gas well or well for the
4discovery of oil or gas; any well on lands producing or reasonably
5presumed to contain oil or gas; any well drilled for the purpose of
6injecting fluids or gas for stimulating oil or gas recovery,
7repressuring or pressure maintenance of oil or gas reservoirs, or
8disposing of waste fluids from an oil or gas field; any well used
9to inject or withdraw gas from an underground storage facility; or
10any well drilled within or adjacent to an oil or gas pool for the
11purpose of obtaining water to be used in production stimulation
12or repressuring operations.

13(b) “Prospect well” or “exploratory well” means any well drilled
14to extend a field or explore a new, potentially productive reservoir.

15(c) “Active observation well” means a well being used for the
16sole purpose of gathering reservoir data, such as pressure or
17temperature in a reservoir being currently produced or injected by
18the operator, and the data is gathered at least once every three
19years.

20(d) “Idle well” means any well that has not produced oil or
21natural gas or has not been used for injection for six consecutive
22months of continuous operation during the last five or more years.
23An idle well does not include an active observation well.

24(e) “Long-term idle well” means any well that has not produced
25oil or natural gas or has not been used for injection for six
26consecutive months of continuous operation during the last 10 or
27more years. A long-term idle well does not include an active
28observation well.

begin insert

29(f) “Enhanced oil recovery method” means the process of
30obtaining stranded oil, not recovered from an oil reservoir, by
31utilizing certain extraction processes, including, but not limited
32to, thermal recovery, gas injection, chemical injection, and water
33flooding.

end insert
begin insert

P5    1(g) “Confidential well” means an exploratory well with records
2that the division maintains as confidential information in
3accordance with Section 3234.

end insert
4

SEC. 2.  

Section 3106 of the Public Resources Code is amended
5to read:

6

3106.  

(a) The supervisor shallbegin delete so superviseend deletebegin insert authorizeend insert the
7begin insert exploration and production of hydrocarbons, includingend insert drilling,
8begin insert stimulation, the use of enhanced oil recovery methods and well
9completion techniques,end insert
operation,begin insert reend insertbegin insertworking,end insert maintenance, and
10abandonment of wells and the operation, maintenance, and removal
11or abandonment of tanks and facilities attendant to oil and gas
12production, including pipelines not subject to regulation pursuant
13to Chapter 5.5 (commencing with Section 51010) of Part 1 of
14Division 1 of Title 5 of the Government Code that are within an
15oil and gasbegin delete field, soend deletebegin insert field. These activities shall be authorized in a
16mannerend insert
begin insert soend insert as to prevent, as far as possible, damage to life, health,
17property, and natural resources; damage to underground oil and
18gas deposits from infiltrating water and other causes; loss of oil,
19gas, or reservoirbegin delete energy,end deletebegin insert energy;end insert and damage to underground and
20surfacebegin delete waters suitable for irrigation or domestic purposes by the
21infiltration of, or the addition of, detrimental substances.end delete
begin insert waters.end insert

22(b) The supervisorbegin delete shall also supervise the drilling, operation,
23maintenance, and abandonment of wells so as to permit the owners
24or operators of the wells to utilize all methods and practices known
25to the oil industry for the purpose of increasing the ultimate
26recovery of underground hydrocarbons and which, in the opinion
27of the supervisor, are suitable for this purpose in each proposed
28case.end delete
begin insert end insertbegin insertmay allow an owner or operator of a well to utilize all
29methods and practices known to the oil industry to increase the
30ultimate recovery of underground hydrocarbons if the supervisor
31finds that those methods and practices are consistent with this
32division. end insert
To further the elimination of waste by increasing the
33recovery of underground hydrocarbons, it is hereby declared as a
34policy of this state that the grant in an oil and gas lease or contract
35to a lessee or operator of the right or power, in substance, to explore
36for and remove all hydrocarbons from any lands in the state, in
37the absence of an express provision to the contrary contained in
38the lease or contract, is deemed to allow the lessee or contractor,
39or the lessee’s or contractor’s successors or assigns, to do what a
40prudent operator using reasonable diligence would do, having in
P6    1mind the best interests of the lessor, lessee, and the state in
2producing and removing hydrocarbons, including, but not limited
3to, the injection of air, gas, water, or other fluids into the productive
4strata, the application ofbegin delete pressure heatend deletebegin insert pressure, heat,end insert or other
5means for the reduction of viscosity of the hydrocarbons, the
6supplying of additional motive force, or thebegin delete creatingend deletebegin insert creationend insert of
7enlarged or new channels for the underground movement of
8hydrocarbons into production wells, when these methods or
9processes employed have been approved by the supervisor, except
10that nothing contained in this section imposes a legal duty upon
11the lessee or contractor, or the lessee’s or contractor’s successors
12or assigns, to conduct these operations.

13(c) The supervisor may require an operator to implement a
14monitoring program, designed to detect releases to the soil and
15water, including both groundwater and surface water, for
16aboveground oil production tanks and facilities.

begin delete

17(d) To best meet oil and gas needs in this state, the supervisor
18shall administer this division so as to encourage the wise
19development of oil and gas resources.

end delete
begin insert

20(d) The supervisor shall administer this division in conformance
21with Chapter 4.5 (commencing with Section 65920) of Division 1
22of Title 7 of the Government Code.

end insert
23

SEC. 3.  

Section 3203 of the Public Resources Code is amended
24to read:

25

3203.  

(a) The operator of any well, before commencing the
26work of drilling the well, shall file with the supervisor or the district
27deputy a writtenbegin delete notice of intentionend deletebegin insert application for approvalend insert to
28commence drilling.begin insert The application shall detail all the methods
29and practices expected to be used for the well, including, but not
30limited to, well stimulation treatments and enhanced oil recovery
31methods. The application shall also demonstrate that the drilling
32and any method utilized will pose no threat to the public health
33and safety.end insert
Drilling shall not commence untilbegin insert writtenend insert approval is
34given by the supervisor or the districtbegin delete deputy. If the supervisor or
35the district deputy fails to give the operator written response to the
36notice within 10 working days from the date of receipt, that failure
37shall be considered as an approval of the notice and the notice, for
38the purposes and intents of this chapter, shall be deemed a written
39report of the supervisor.end delete
begin insert deputy, finding that the project is
40consistent with Section 3106 and that the public health and safety
P7    1and the environment will not be harmed.end insert
If operations have not
2commenced within one year ofbegin delete receipt of the notice, the noticeend delete
3begin insert approval of the application, the approvalend insert shall be deemedbegin delete canceled.end delete
4begin insert canceled, unless the applicant makes a written request for an
5extension with a reason for the extension. The supervisor may
6grant a one-year extension of the approvalend insert
begin insert in writing.end insert Thebegin delete noticeend delete
7begin insert applicationend insert shall contain the pertinent data the supervisor requires
8on printed forms supplied by the division or on other forms
9acceptable to the supervisor. The supervisor may require other
10pertinent information to supplement thebegin delete notice.end deletebegin insert application.end insert

11(b) After the completion of any well, this section alsobegin delete appliesend delete
12begin insert applies,end insert as far as may be, to the deepening or redrilling of the well,
13any operation involving the plugging of the well, or any operations
14permanently altering in any manner the casing of the well. The
15number or designation of any well, and the number or designation
16specified for any well inbegin delete a noticeend deletebegin insert an applicationend insert filed as required
17by this section, shall not be changed without first obtaining a
18writtenbegin delete consentend deletebegin insert approvalend insert of the supervisor.

19(c) If an operator has failed to comply with an order of the
20supervisor, the supervisor may deny approval of proposed well
21operations until the operator brings its existing well operations
22into compliance with the order. If an operator has failed to pay a
23civil penalty, remedy a violation that it is required to remedy to
24the satisfaction of the supervisor pursuant to an order issued under
25Section 3236.5, or to pay any charges assessed under Article 7
26(commencing with Section 3400), the supervisor may deny
27approval to the operator’s proposed well operations until the
28operator pays the civil penalty, remedies the violation to the
29satisfaction of the supervisor, or pays the charges assessed under
30Article 7 (commencing with Section 3400).

31

SEC. 4.  

Section 3215.5 is added to the Public Resources Code,
32to read:

33

3215.5.  

For any well, regardless of the operation or activity
34taking place, if there is any loss of well and well casing integrity,
35that loss and any resultant action or remedial work shall be reported
36by the operator to the applicable regional water quality control
37board with five days of the event.

38

SEC. 5.  

Section 3234 of the Public Resources Code is amended
39to read:

P8    1

3234.  

(a) (1) Except as otherwise provided in this section, all
2begin insert ofend insert the well records, including production reports, of any owner or
3operatorbegin delete whichend deletebegin insert thatend insert are filed pursuant to this chapter are public
4records for purposes of the California Public Records Act (Chapter
53.5 (commencing with Section 6250) of Division 7 of Title 1 of
6the Government Code).

7(2) Those records are public records when filed with the division
8 unless the owner or operator requests, in writing, that the division
9maintain the well records of onshore exploratory wells or offshore
10exploratory wells as confidential information.begin delete The records of other
11wells may be maintained as confidential information if, based upon
12information in a written request of the owner or operator, the
13supervisor determines there are extenuating circumstances.end delete
begin insert The
14owner or operator shall give a detailed explanation and rationale
15for keeping the records of the exploratory well confidential and
16the supervisor shall respond in writing as to whether the
17confidential well status has been granted. Both the request for,
18and the granting of, confidential well status are public records,
19and shall be made accessible on the division’s Internet Web site.end insert

20 For onshore wells, the confidential period shall not exceed two
21years from the cessation of drilling operations as defined in
22subdivision (e). For offshore wells, the confidential period shall
23not exceedbegin delete fiveend deletebegin insert threeend insert years from the cessation of drilling operations
24as specified in subdivision (e).

25(3) Well records maintained as confidential information by the
26division shall be open to inspection by those persons who are
27authorized by the owner or operator in writing. Confidential status
28shall not apply to state officers charged with regulating well
29operations, the director, or as provided in subdivision (c).

30(4) On receipt by the supervisor of a written request
31documenting extenuating circumstances relating to a particular
32well, including a well on an expired or terminated lease, the
33supervisor may extend the period of confidentialitybegin insert, as set forth
34in paragraph (2),end insert
forbegin insert no more thanend insert six months.begin delete For onshore wells,
35the total period of confidentiality, including all extensions, shall
36not exceed four years from the cessation of drilling operations as
37specified in subdivision (e), and for offshore wells the total period
38of confidentiality, including all extensions, shall not exceed seven
39years from the cessation of drilling operations as specified in
40subdivision (e), unless the director approves a longer period after
P9    1a 30-day public notice and comment period. The director shall
2initiate and conduct a public hearing on receipt of a written
3complaint.end delete

begin insert

4(5) Once the confidential well period has ended, all well records
5shall be immediately posted on the division’s Internet Web site.

end insert

6(b) Notwithstanding the provisions of subdivision (a) regarding
7the period of confidentiality, the well records for onshore and
8offshore wells shall become public records when the supervisor
9is notified that the lease has expired or terminated.

10(c) Production reports filed pursuant to Section 3227 shall be
11open to inspection by the State Board of Equalization or its duly
12appointed representatives when making a survey pursuant to
13Section 1815 of the Revenue and Taxation Code or when valuing
14state-assessed property pursuant to Section 755 of the Revenue
15and Taxation Code, and by the assessor of the county in which a
16well referred to in Section 3227 is located.

17(d) For the purposes of this section, “well records” does not
18include either experimental logs and tests or interpretive data not
19generally available to all operators, as defined by the supervisor
20by regulation.

21(e) The cessation of drilling operations occurs on the date of
22removal of drilling machinery from the well site.

23

SEC. 6.  

Section 3450 of the Public Resources Code is repealed.

begin delete
24

3450.  

The Legislature takes notice of the existence of the
25Conservation Committee of California Oil Producers and of the
26fact that said committee for a number of years last past, in the
27interest of the conservation of oil and gas, has made
28recommendations of maximum efficient rates of production and
29for the intrapool distribution of such maximum efficient rates of
30production with respect to oil pools, capacity production from
31which pools would result in a loss of ultimate production. The
32Legislature declares that recommendations for such purpose are
33in the interest of the conservation of the oil and gas resources of
34this State and that it is lawful for said committee or any other
35committee of oil producers to issue such recommendations as to
36any such oil pool and for producers of oil to comply therewith or
37to agree to comply therewith, provided:

38(a) Copies of all such recommendations shall be currently
39delivered to the supervisor and shall be open to public inspection
40in the office of the supervisor; and

P10   1(b) Any such committee shall make available to the supervisor
2its records, files, minutes, reports and other data pertaining to such
3recommendations.

4The supervisor in his discretion may join in any such
5recommendations or may express his disapproval thereof.

6The supervisor, in the absence of such recommendations by a
7committee of oil producers with respect to any of such pools, or
8if the supervisor deems any such recommendations to be
9insufficient or incorrect, may issue recommendations with respect
10to any such pools on said subject matter, and it shall be lawful for
11producers to comply therewith or to agree to comply therewith.
12Neither a disapproval by the supervisor nor a recommendation by
13him shall constitute a basis for implying any obligation for
14producers of oil to comply with such a disapproval or
15recommendation.

16Nothing herein contained shall be deemed to permit the
17production of gas in violation of Articles 5 and 6 of Chapter 1 and
18Chapter 2 of this division.

end delete
19

SEC. 7.  

Section 3450 is added to the Public Resources Code,
20to read:

21

3450.  

(a) The Conservation Committee of the California Oil
22and Gas Producers or any other committee of oil producers may
23issue recommendations to the supervisor relating to oil and gas
24exploration and production, if both of the following are satisfied:

25(1) Copies of those recommendations are delivered to the
26supervisor.

27(2) A committee issuing the recommendations makes available
28to the supervisor its records, files, minutes, reports, and other data
29pertaining to those recommendations.

30(b) The division shall post any recommendation received by the
31supervisor pursuant to subdivision (a) on the division’s Internet
32Web site.

33(c) (1) The supervisor, in his or her discretion, may express his
34or her disapproval of any recommendation received pursuant to
35subdivision (a).

36(2) The supervisor, in the absence of a recommendation by a
37committee of oil producers or if the supervisor deems a
38recommendation to be insufficient or incorrect, may issue
39recommendations relating to oil and gas exploration and
40production.

P11   1(3) Oil producers may comply or agree to comply with the
2supervisor’s recommendation, but neither a disapproval by the
3supervisor nor a recommendation by him or her shall constitute a
4basis for implying an obligation for oil producers to comply with
5that disapproval or recommendation.

6(d) Nothing in this section shall authorize the production of oil
7or gas in violation of this division.

8

SEC. 8.  

Section 3451 of the Public Resources Code is repealed.

begin delete
9

3451.  

“Maximum Efficient Rate,” commonly referred to as
10“MER,” is defined as the highest daily rate of production which
11can be sustained economically from a particular pool, from existing
12wells and facilities, for a reasonable period without loss of
13economically recoverable ultimate production of oil from such
14pool.

end delete
15

SEC. 9.  

No reimbursement is required by this act pursuant to
16Section 6 of Article XIII B of the California Constitution because
17the only costs that may be incurred by a local agency or school
18district will be incurred because this act creates a new crime or
19infraction, eliminates a crime or infraction, or changes the penalty
20for a crime or infraction, within the meaning of Section 17556 of
21the Government Code, or changes the definition of a crime within
22the meaning of Section 6 of Article XIII B of the California
23Constitution.


CORRECTIONS:

Text--Page 5.




O

Corrected 3-11-15—See last page.     99