BILL ANALYSIS
AB 2453
Page 1
Date of Hearing: April 12, 2010
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
AB 2453 (Tran) - As Introduced: February 19, 2010
SUBJECT : Oil and gas operations: enforcement actions.
SUMMARY : Clarifies the judicial standard of review for an
enforcement action of the State Oil and Gas Supervisor
(Supervisor); expands procedural safeguards for an
administrative appeal of an enforcement action, including the
use of the Office of Administrative Hearings.
EXISTING LAW :
1)Creates the Division of Oil, Gas, and Geothermal Resources
(DOGGR) in the Department of Conservation (Department).
2)Requires the Supervisor of DOGGR to supervise the drilling,
operation, maintenance, and abandonment of oil and gas and
geothermal wells, tanks and facilities, including certain
pipelines, to prevent damage to life, health, property, and
natural resources; damage to underground oil and gas or
geothermal deposits; loss of oil, gas, or reservoir energy;
and damage to underground and surface waters.
3)Requires the Supervisor to order tests or remedial work
necessary to prevent damage to life, health, property, and
natural resources; to protect oil and gas or geothermal
deposits from damage; to prevent the escape of water into
underground formations; or to prevent the infiltration of
detrimental substances into underground or surface water.
4)Requires a lessor, lessee, operator, or owner of a well, rig
or derrick, within 10 days of the date of service of an order
above, to comply with the order or appeal it to the Director
of the Department. Due process provisions, including
timelines for a hearing, written decision, and judicial review
are provided.
5)Requires any charge, including penalty and interest, imposed
by the Director to constitute a lien on real or personal
property if an operator does not seek judicial review of an
order or the Director's order is affirmed by a court.
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THIS BILL :
1)Requires that an order of the Supervisor state the factual
basis of the regulatory action being taken, the statutory
basis of the action, the associated penalties and
requirements, and the right of an operator to appeal.
2)Eliminates a hearing on appeal of an order before the
Supervisor and subjects an order imposing a civil penalty to
judicial review.
3)Revises and bifurcates appeals of an order for both oil and
gas and geothermal operations. Authorizes an appeal of an
order to be heard by an Administrative Law Judge (ALJ) and
pursuant to the procedures and timelines of the Administrative
Procedures Act (APA) under the following circumstances, as
applicable:
a) The order is issued upon a finding that a well is
deserted and should be abandoned.
b) The order imposes a civil penalty greater than $10,000.
c) The order rescinds an injection project that has already
commenced.
d) The order imposes a left-of-well or life-of-production
facility bond.
4)Authorizes an appeal of an order to be heard by the Director
under any other circumstance. Establishes due process
requirements, including notice, timelines for decisions, and
standard of review.
5)Provides that the Director's order and decision to affirm or
reject the ALJ decision are subject to judicial review with a
30-day statute of limitations. Provides that a court's
standard of review is whether the Director acted in excess of
jurisdiction, whether there was a fair hearing, and whether
there is any prejudicial abuse of discretion.
6)Provides that a penalty or charge imposed on the operator must
constitute a state tax lien against the property of the
operator if the operator does not appeal or seek judicial
AB 2453
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review of an order, or a court, on appeal, affirms the
Director's decision.
7)Clarifies that when an order of the Supervisor is issued under
emergency circumstances, the order is not stayed by the filing
of an appeal. If an order is set aside or modified on appeal,
the costs incurred by the operator must be refunded.
8)Provides for an expedited hearing before the Director for
appeals of emergency orders and requires DOGGR to reimburse
the operator for required work if an emergency order is
invalidated on appeal.
FISCAL EFFECT : Unknown
COMMENTS :
1)Purpose of bill : This bill responds to a California appellate
court decision, Termo Company v. Luther, holding that the
trial court incorrectly applied a "substantial evidence"
standard of review when it upheld an order of the Director
requiring an operator to abandon 28 oil wells in Huntington
Beach that were allegedly posing a threat to public health and
safety and the environment. The court ruled that the trial
court should have applied an "independent judgment standard,"
particularly since the applicable statute does not clearly
specify otherwise nor does it contain sufficient procedural
safeguards. In order words, in this instance, the trial court
should have determined whether the Director's order was
supported by the "weight of the evidence" not the more
deferential "substantial evidence in light of the whole
record" standard.
This bill expressly requires a court, on appeal, to apply the
"substantial evidence" standard and more generally, according
to the author's office, "Strengthen[s] procedural safeguards
and ensure[s] ample protection of due process rights for oil,
gas, and geothermal wells operators subject to [the
Supervisor's] enforcement orders." The author's office further
notes that "In these tough economic times, this due process
right of appeal is especially important for operators facing
an enforcement action."
2)Bill provides bifurcated appeals process : In addition to
clarifying the judicial standard of review, the bill creates a
AB 2453
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"formal" and "informal" process for appealing the enforcement
actions administratively prior to seeking judicial review, if
necessary. Formal appeals, before an ALJ, would be required
when an operator appeals an order imposing civil penalties
greater than $10,000 or when an order may threaten the
economic viability of an operation or operator (e.g., order to
abandon wells or to cease a project that has already
commenced). These hearings would be conducted by an ALJ at
the Office of Administrative Hearings, pursuant to the APA.
After a hearing, the ALJ would issue a written decision,
subject to the approval by the Director.
According to the Department, formal hearings include
"procedural requirements and mechanisms?to ensure that the
[appellant] has a meaningful opportunity to be heard, guard
against abuse of process?and ensure that [a] thorough and
complete administrative record is available to a reviewing
court." These mechanisms include prehearing discovery and
conferences and evidentiary rules governing admissible
evidence. All other actions would be heard, on appeal, by the
Director.
Informal hearings are conducted by a delegate (known as a
hearing officer) of the Director who is a member of the
Department's executive staff. The hearing officer is advised
by a Department attorney, both of whom are expected not to
have substantive involvement in the action being appealed.
Since there are no regulations governing the hearing process,
the hearing officer is empowered to determine such things as
timeframes and admissibility of evidence. These hearings are
considered part of the administrative record so they are
either recorded or transcribed. The appellant can choose to
be legally represented and is entitled to bring witnesses and
to question the Supervisor's witnesses. After the hearing,
the officer issues a written decision based on the testimony
and evidenced presented.
This bill imposes notice requirements, including the content
of notices, deadlines to issue a decision; establishes the
Director's standard of review (e.g., preponderance of the
evidence); and subjects a decision to judicial review.
Importantly, it extends the statute of limitations to file a
lawsuit by 20 days (a total of 30 days) which comports with
other statutory schemes. The Department notes that the
Departments of Agriculture, Toxics Substances Control, Public
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Health, and Pesticide Regulation all have similar bifurcated
appeals processes based on the severity of an enforcement
action.
3)Dual-referral : This bill will be heard in the Assembly
Judiciary Committee should it be approved by this committee.
AB 2453
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REGISTERED SUPPORT / OPPOSITION :
Support
Department of Conservation
Western States Petroleum Association
Opposition
None on file
Analysis Prepared by : Dan Chia / NAT. RES. / (916) 319-2092