BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 545 (Jackson) - Oil and gas operations
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|Version: April 16, 2015 |Policy Vote: N.R. & W. 6 - 2 |
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|Urgency: No |Mandate: Yes |
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|Hearing Date: May 11, 2015 |Consultant: Marie Liu |
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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
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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:
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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
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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.
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