BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 591 (Wieckowski) - Oil and gas production hydraulic
fracturing.
Amended: May 9, 2012 Policy Vote: NR&W 5-3, EQ 5-1
Urgency: No Mandate: No
Hearing Date: July 2, 2012 Consultant: Marie Liu/Brendan
McCarthy
This bill meets the criteria for referral to the Suspense File.
(See Staff Comments)
Bill Summary: AB 591 requires operators of oil and natural gas
wells to provide information on hydraulic fracturing to the
Division of Oil, Gas, and Geothermal Resources, for publication
on the Division's website.
Fiscal Impact:
Likely one-time costs of $160,000 for two-years from the
Oil, Gas, and Geothermal Administrative Fund (special fund)
beginning in 2012-13 to adopt regulations
Likely on-going costs of $720,000 annually from the Oil,
Gas, and Geothermal Administrative Fund (special fund)
beginning in 2013-14 to collect and manage information
received from operators.
Background: Under current law, operators of oil and gas wells
are regulated by the Division of Oil, Gas, and Geothermal
Resources (the Division), within the Department of Conservation.
Well operators are required to report specified information
periodically to the Division. Under federal law, the federal
Environmental Protection Agency sets standards for the injection
on liquid below ground, except for injections used by well
operators to hydraulically fracture rock strata. Under the
process of hydraulic fracturing, well operators pump water and a
variety of chemicals into wells at very high pressure. This
causes cracks to form or grow in the rock strata, allowing more
oil or gas to flow into the well and then to the surface.
Current law also provides protection to trade secret
information. In general, when a state agency possesses trade
secret information, it is responsible to ensure that it does not
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release such information to the public.
Proposed Law: AB 591 requires any person carrying out hydraulic
fracturing on behalf of a well operator to provide information
to the operator on the chemicals used in the fracturing process,
the amounts of water used in the fracturing, and the ultimate
disposition of that water.
The bill requires well operators to include information on the
water and chemicals used in any hydraulic fracturing that has
taken place with existing information they are required to
report to the Division.
The bill requires the Division to post information received from
operators regarding hydraulic fracturing on the Division's
website and ensure that information on the chemicals used at
individual wells is available to the public. The bill also
requires annual reporting to the Legislature by the Division.
Staff Comments: The current version of this bill is identical to
the July 7, 2011 version of this bill. This committee previously
considered the July 7th version of the bill on August 25, 2011
and placed the bill on the suspense file.
Staff estimates that the Division will incur one-time costs of
about $325,000 over two years to adopt regulations relating to
the reporting requirement and modify existing computer systems
to allow information to be made available to the public. In
addition, staff estimates that the Division will incur costs of
about $720,000 per year to collect information from operators,
to make information on individual wells available to the public,
and to ensure that the Division does not inadvertently release
any trade secret information to the public.
Staff notes that the Division's responsibility to provide
information to the public while also protecting trade secret
information may lead to litigation. The cost of such litigation
is unknown.
Staff notes that the Oil, Gas and Geothermal Administration Fund
has a structural deficit and the fund balance at the end of the
budget year is projected to be less than $2 million. However,
the Department has the legal authority to raise the fee, in
order to raise sufficient revenues to support expenditures
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approved in the budget act.