BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session SB 545 (Jackson) - Oil and gas operations ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: April 16, 2015 |Policy Vote: N.R. & W. 6 - 2 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: Yes | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: May 11, 2015 |Consultant: Marie Liu | | | | ----------------------------------------------------------------- This bill meets the criteria for referral to the Suspense File. Bill Summary: SB 545 would require that a well operator file a written application to the Division of Oil, Gas, and Geothermal Recovery (DOGGR) before commencing drilling a well, which would be posted on the DOGGR website. Fiscal Impact: Unknown revenue losses in the millions to tens of millions of dollars to the Oil, Gas, and Geothermal Administrative Fund as a result of 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 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 SB 545 (Jackson) Page 1 of ? produce a public annual report containing information about the state's oil and gas production and other related material, as specified. Existing law requires the operator of an oil and gas well to file a written notice of intention to commence drilling or to rework a well. It prohibits drilling until the notice is approved by the supervisor or division district deputy, although if neither responds in writing within 10 working days, the notice is deemed approved. The operator has one year to complete the work described in the notice (PRC §3203). Existing law generally provides that well records filed by the well owners and operators are public. However, existing law (PRC §3234) allows the supervisor, upon written request from a well owner or operator, to keep certain well records of exploratory or certain other wells confidential for specified periods of time after the well has been drilled. For both onshore and offshore wells, the initial confidential periods of 2 and 5 years, respectively, can be extended up to another 2 years each, with further extension possible with the supervisor's approval and subject to certain conditions. 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. Existing law recognizes the existence of the Conservation Committee of California Oil Producers and explicitly recognizes that the committee can lawfully issue recommendations on maximum efficient rates of productions. Proposed Law: SB 545 (Jackson) Page 2 of ? This bill would make various changes to DOGGR's authority and practices. Specifically, this bill would: Revise the process by which a well owner must obtain approval for well drilling, reworking, deepening, redrilling or plugging so that a permit application replaces the existing notice of intent. The application would be required to demonstrate that the drilling and any method utilized will pose de minimums risk to public health and safety. The application must be approved in writing and the approval and application must be publically available online. Require that the appropriate regional water quality control board be notified of a loss of well and well casing integrity within five days. Revise the requirements to obtain and retain confidential well status, as specified, including to require additional information, documentation, and public posting requirements. The total and initial time limits for confidential well status would be reduced. Define enhanced oil recovery and confidential wells. Revise the supervisor's broad authority to regulated oil and gas field activities. Revise the recognition of the Conservation Committee of California Oil Producers. Staff Comments: The administrative changes in this bill largely can be absorbed by DOGGR, including the revisions to the supervisor's broad authority over oil and gas field activities. This bill would replace the current requirement for a well operator to file a notice of intent to drill with an explicit requirement to file an application for approval to commence SB 545 (Jackson) Page 3 of ? drilling. These changes are largely in line with its current practices, or at least what should be their current practices under existing law, with one exception, the requirement that the application demonstrate that the drilling and working of the well will have a de minimis risk to public health and safety. According to DOGGR, this requirement will be virtually impossible to reach, as all drilling will have some impact, though that impact may be minimized and mitigated. Because this bill is establishing a standard that practically cannot be met, the bill is in effect ending all new well drilling and well reworking. Because the state receives fees based on the barrels of oils produced to fund DOGGR's activities, by decreasing the amount of oil that can be produced in the state, this bill will result in tens of millions of dollars of reduced revenues. This bill contains a definition of enhanced oil recovery that is similar but different to the definition of that same term in SB 248 (Pavley). Staff recommends that the bills be amended so that both bills contain the same definition. -- END --