Amended in Senate April 6, 2015

Senate Bill No. 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 amended, 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 begin delete utilize end delete begin insert drill, operate, maintain, and abandon wells utilizing end insert 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. begin insert The bill would require the applications and approvals by the supervisor or the district deputy to be posted on the division’s Internet Web site within 10 working days. end insert

(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 begin insert within 10 working days end insert 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 begin delete the end delete 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:

SECTION 1.  

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

3008.  

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

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

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

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

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

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

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

SEC. 2.  

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

3106.  

(a) The supervisor shall authorize the exploration and
production of hydrocarbons, including drilling, stimulation, the
use of enhanced oil recovery methods and well completion
techniques, operation, reworking, maintenance, and abandonment
of wells and the operation, maintenance, and removal or
abandonment of tanks and facilities attendant to oil and gas
production, including pipelines not subject to regulation pursuant
to Chapter 5.5 (commencing with Section 51010) of Part 1 of
Division 1 of Title 5 of the Government Code that are within an
oil and gas field. These activities shall be authorized in a manner
so as to prevent, as far as possible, damage to life, health, property,
and natural resources; damage to underground oil and gas deposits
from infiltrating water and other causes; loss of oil, gas, or reservoir
energy; and damage to underground and surface begin delete waters. end delete begin insert waters
suitable for irrigation or domestic purposes or otherwise
uncontaminated waters that could be treated to be suitable for
irrigation or domestic purposes. end insert

(b) The supervisor may allow an owner or operator of a well to
begin delete utilize end delete begin insert drill, operate, maintain, and abandon wells utilizing end insert all
methods and practices known to the oil industry to increase the
ultimate recovery of underground hydrocarbons if the supervisor
finds that those methods and practices are consistent with this
division. To further the elimination of waste by increasing the
recovery of underground hydrocarbons, it is hereby declared as a
policy of this state that the grant in an oil and gas lease or contract
to a lessee or operator of the right or power, in substance, to explore
for and remove all hydrocarbons from any lands in the state, in
the absence of an express provision to the contrary contained in
the lease or contract, is deemed to allow the lessee or contractor,
or the lessee’s or contractor’s successors or assigns, to do what a
prudent operator using reasonable diligence would do, having in
mind the best interests of the lessor, lessee, and the state in
producing and removing hydrocarbons, including, but not limited
to, the injection of air, gas, water, or other fluids into the productive
strata, the application of pressure, heat, or other means for the
reduction of viscosity of the hydrocarbons, the supplying of
additional motive force, or the creation of enlarged or new channels
for the underground movement of hydrocarbons into production
wells, when these methods or processes employed have been
approved by the supervisor, except that nothing contained in this
section imposes a legal duty upon the lessee or contractor, or the
lessee’s or contractor’s successors or assigns, to conduct these
operations.

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

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

SEC. 3.  

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

3203.  

(a) The operator of any well, before commencing the
work of drilling the well, shall file with the supervisor or the district
deputy a written application for approval to commence drilling.
The application shall detail all the methods and practices expected
to be used for the well, including, but not limited to, well
stimulation treatments and enhanced oil recovery methods. The
application shall also demonstrate that the drilling and any method
utilized will pose begin delete no threat to the end delete begin insert de minimis risk to end insert public health
and safety. Drilling shall not commence until written approval is
given by the supervisor or the district deputy, finding that the
project is consistent with Section begin delete 3106 and that the public health
and safety and the environment will not be harmed. end delete begin insert 3106. end insert If
operations have not commenced within one year of approval of
the application, the approval shall be deemed canceled, unless the
applicant makes a written request for an extension with a reason
for the extension. The supervisor may grant a one-year extension
of the approval in writing. The application shall contain the
pertinent data the supervisor requires on printed forms supplied
by the division or on other forms acceptable to the supervisor. The
supervisor may require other pertinent information to supplement
the application.

(b) After the completion of any well, this section also applies,
as far as may be, to the deepening or redrilling of the well, any
operation involving the plugging of the well, or any operations
permanently altering in any manner the casing of the well. The
number or designation of any well, and the number or designation
specified for any well in an application filed as required by this
section, shall not be changed without first obtaining a written
approval of the supervisor.

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

begin insert

(d) The applications and written approvals by the supervisor
or the district deputy shall be posted on the division’s Internet
Web site.

end insert

SEC. 4.  

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

3215.5.  

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

SEC. 5.  

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

3234.  

(a) (1) Except as otherwise provided in this section, all
of the well records, including production reports, of any owner or
operator that are filed pursuant to this chapter are public records
for purposes of the California Public Records Act (Chapter 3.5
(commencing with Section 6250) of Division 7 of Title 1 of the
Government Code).

(2) Those records are public records when filed with the division
unless the owner or operator requests, in writing, that the division
maintain the well records of onshore exploratory wells or offshore
exploratory wells as confidential information. The owner or
operator shall give a detailed explanation and rationale for keeping
the records of the exploratory well confidential and the supervisor
shall respond in writing as to whether the confidential well status
has been granted. Both the request for, and the granting of,
confidential well status are public records, and shall be made
accessible on the division’s Internet Web site. For onshore wells,
the confidential period shall not exceed two years from the
cessation of drilling operations as defined in subdivision (e). For
offshore wells, the confidential period shall not exceed three years
from the cessation of drilling operations as specified in subdivision
(e).

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

(4) On receipt by the supervisor of a written request
documenting extenuating circumstances relating to a particular
well, including a well on an expired or terminated lease, the
supervisor may extend the period of confidentiality, as set forth
in paragraph (2), for no more than six months.

(5) Once the confidential well period has ended, all well records
shall be begin delete immediately end delete posted on the division’s Internet Web begin delete site. end delete
begin insert site within ten working days. end insert

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

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

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

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

SEC. 6.  

Section 3450 of the Public Resources Code is repealed.

SEC. 7.  

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

3450.  

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

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

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

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

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

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

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

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

SEC. 8.  

Section 3451 of the Public Resources Code is repealed.

SEC. 9.  

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