BILL ANALYSIS
AB 2453
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 2453 (Tran)
As Amended August 17, 2010
Majority vote
-----------------------------------------------------------------
|ASSEMBLY: |76-0 |(June 2, 2010) |SENATE: |35-0 |(August 19, |
| | | | | |2010) |
-----------------------------------------------------------------
Original Committee Reference: NAT. RES.
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).
The Senate amendments :
1)Revise procedures for refunding costs incurred by an operator
when an enforcement order is set aside or modified on appeal.
2)Require administrative hearings to be reported by a stenographic
reporter and permit hearings to be electronically recorded by
either party.
3)Authorize the Director of the Department of Conservation (DOC)
to order testimony of a witness at the hearing, upon petition of
the operator.
4)Authorize the Director to convert an informal hearing to a
formal hearing under specified circumstances.
EXISTING LAW :
1)Requires the Supervisor of the Division of Oil, Gas, and
Geothermal Resources (DOGGR) in DOC 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.
2)Requires the Supervisor to order tests or remedial work
AB 2453
Page 2
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.
3)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.
4)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.
AS PASSED BY THE ASSEMBLY , this bill:
1)Required 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)Eliminated a hearing on appeal of an order before the Supervisor
and subjected an order imposing a civil penalty to judicial
review.
3)Revised and bifurcated appeals of an order for both oil and gas
and geothermal operations. Authorized 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 life-of-well or life-of-production
facility bond.
4)Authorized an appeal of an order to be heard by the Director
AB 2453
Page 3
under any other circumstance. Established due process
requirements, including notice, timelines for decisions, and
standard of review.
5)Provided 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. Provided 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)Provided 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 Director's decision.
7)Clarified 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)Provided for an expedited hearing before the Director for
appeals of emergency orders and required DOGGR to reimburse the
operator for required work if an emergency order is invalidated
on appeal.
FISCAL EFFECT : According to the Senate Appropriations Committee,
additional legal costs of $145,000 a year from the Oil, Gas, and
Geothermal Administrative Fund.
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 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
AB 2453
Page 4
"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."
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 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 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.
AB 2453
Page 5
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 : Lawrence Lingbloom / NAT. RES. / (916)
319-2092
FN: 0006279