BILL ANALYSIS
AB 2453
Page 1
ASSEMBLY THIRD READING
AB 2453 (Tran)
As Introduced February 19, 2010
Majority vote
NATURAL RESOURCES 9-0 JUDICIARY 10-0
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|Ayes:|Chesbro, Gilmore, |Ayes:|Feuer, Tran, Brownley, |
| |Brownley, | |Evans, Hagman, Jones, |
| |De Leon, Hill, Huffman, | |Knight, Swanson, Monning, |
| |Knight, Logue, Skinner | |Nava |
|-----+--------------------------+-----+--------------------------|
| | | | |
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APPROPRIATIONS 17-0
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|Ayes:|Fuentes, Conway, Ammiano, | | |
| |Bradford, Charles | | |
| |Calderon, Coto, Davis, | | |
| |Monning, Ruskin, Harkey, | | |
| |Miller, Nielsen, Norby, | | |
| |Skinner, Solorio, | | |
| |Torlakson, Torrico | | |
| | | | |
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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 (OAH).
Specifically, 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
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gas and geothermal operations. Authorizes an appeal of an
order to be heard by an Administrative Law Judge (ALJ) in the
OAH and pursuant to the Administrative Procedures Act (APA)
under one of the following circumstances:
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; or,
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
of the Department of Conservation (DOC) under any other
circumstance. Establishes due process requirements, including
notice, timelines for decisions, and standard of review.
5)Provides that DOC 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 of DOC 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
review of an order, or a court, on appeal, affirms the DOC
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 of DOC
for appeals of emergency orders and requires DOGGR to
reimburse the operator for required work if an emergency order
is invalidated on appeal.
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EXISTING LAW :
1)Creates the Division of Oil, Gas, and Geothermal Resources
(DOGGR) in DOC.
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 DOC. 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 of DOC 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.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, DOC estimates it will need one staff counsel
position, at an approximate cost of $145,000 a year, to
represent DOGGR in both informal and formal hearings.
COMMENTS : 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 of DOC 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
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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 DOC 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."
In addition to clarifying the judicial standard of review, the
bill creates a "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 DOC, 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 of DOC who is a member of the
DOCs executive staff. The hearing officer is advised by a DOC
attorney, both of whom are expected not to have substantive
involvement in the action being appealed. Since there are no
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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 DOC
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
Health, and Pesticide Regulation all have similar bifurcated
appeals processes based on the severity of an enforcement
action.
Analysis Prepared by : Dan Chia / NAT. RES. / (916) 319-2092
FN: 0004718