BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 550|
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UNFINISHED BUSINESS
Bill No: SB 550
Author: Florez (D), et al
Amended: 8/20/10
Vote: 21
PRIOR SENATE VOTES NOT RELEVANT
ASSEMBLY FLOOR : Not available
SUBJECT : Natural resources: oil and gas: drilling
SOURCE : Author
DIGEST : This bill, beginning January 1, 2012, requires
an operator to provide the surface rights owner with
written notification and legal documentation of any
underlying oil, mineral, or gas extraction operation
agreement to the owner of the subsurface or mineral rights
within 10 days of execution of the agreement. If the owner
of surface property cannot be located or determined, the
operator shall provide notice of that agreement by
publication.
Assembly Amendments delete the version of the bill that
passed the Senate relating to food product recall
technology. This bill now addresses oil and gas drilling.
ANALYSIS :
Existing law:
CONTINUED
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1. Requires the Supervisor of the Division of Oil, Gas and
Geothermal Resources (DOGGR) in the Department of
Conservation (DOC) to supervise the drilling, operation,
maintenance and abandonment of oil and gas wells,
production facilities, and pipelines to prevent damage
to life, health, property, underground and surface
waters, and natural resources, among other things.
2. Requires DOGGR to, by regulation, prescribe minimum
facility maintenance standards for all production
facilities in the state, which may include leak
detection, corrosion prevention, tank inspection, valve
maintenance, secondary containment, and other standards
the Supervisor deems important for proper operation of
facilities and to prevent damage to life, health,
property, natural resources, groundwater and surface
waters.
3. Requires a facility operator to file a spill contingency
plan at the time of initial production or within three
months of acquiring a production facility.
4. Authorizes the Supervisor to require an operator with a
history of violating relevant oil and gas laws or that
has outstanding liabilities to the state to require a
life-of-well or life-of-production facility bond to
ensure the proper plugging and abandonment, safe
decommission, financing of spill response and clean-up.
5. Establishes the Surface Mining and Reclamation Act of
1975 which was enacted to ensure the continued economic
well-being of the state and to the needs of the society,
and that the reclamation of mined lands is necessary to
prevent or minimize adverse effects on the environment
and to protect public health and safety.
This bill, commencing January 1, 2012, requires the
operator of an oil and gas well to provide to the surface
owner a 10-day written notice of the intent to enter the
surface owner's property for the purpose of the extraction
of underlying oil, gas, or minerals. The operator will
also be required to provide to the surface owner a copy of
the applicable recorded short form or memorandum of oil,
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gas, or minerals lease within 10 days prior to entering the
property.
Background
There is currently no requirement that an oil and gas
exploration company have liability insurance in order to
get a permit from DOGGR to drill. A small bond is required
by DOGGR to cover shut-in costs, but the bonds are not
"lifetime of facility" bonds and, in any case, the amounts
are insufficient to cover the clean-up of a large accident.
This is very important to the surface rights owner in a
situation where the surface and subsurface/mineral rights
are owned by different parties and the mineral rights owner
engages in hydro-carbon exploration (directly or through a
lease). If an accident occurs (spill, explosion, or
groundwater contamination) and the exploration company is
insolvent or under-capitalized, the surface owner could not
only suffer impairment of their investment in the surface,
but also be liable for the clean-up costs.
According to the Office of Spill Prevention and Response
(OSPR), there are over twice as many inland oil spills as
there are marine spills, but the state responds to less
than one third of all inland spills reported (it is unclear
how many spills were from oil and gas operations supervised
by DOGGR).
Recently, spills have occurred on the central coast and in
Suisun Marsh, impacting water supplies and sensitive marsh
ecosystems. In Santa Barbara County, Greka Oil and Gas
reportedly has spilled more than 500,000 gallons of oil and
contaminated material since 2002 due to a failure to
adequately maintain its facilities. In 2008 and 2009, OSPR
reported 159 and 105 onshore spills (of 42 gallons or
more), respectively, from oil exploration and production
activities most likely in DOGGR's jurisdiction.
Collectively, nearly 590,000 and 270,000 gallons of oil,
drill waste, or oily/water mixtures were spilled,
respectively. OSPR data do not indicate whether there was
a clean-up response, if any, or the damage a spill may have
caused.
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FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
According to the Assembly Appropriations Committee, minor
absorbable costs, if any, to DOC.
CTW:mw 8/25/10 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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