BILL ANALYSIS �
SB 711
Page 1
Date of Hearing: July 2, 2012
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
SB 711 (Rubio) - As Amended: May 25, 2012
SENATE VOTE : Not relevant
SUBJECT : Public resources: oil and gas: underground injection
of gas
SUMMARY : Affirms the Division of Oil, Gas and Geothermal
Resources' (DOGGR) authority to approve Class II injection wells
for the disposal of waste fluids, such as waste gas from an oil
and gas field.
EXISTING LAW:
1)United States Safe Drinking Water Act.
a) Authorizes the United States Environmental Protection
Agency (US EPA) to set national health-based standards for
drinking water to protect against both naturally-occurring
and man-made contaminants that may be found in drinking
water.
b) Establishes minimum requirements for state underground
injection control programs to prevent underground
injections that endanger drinking water sources and
prohibits any underground injection that is not authorized
by a permit issued by the state.
c) Defines "underground injection" as the subsurface
emplacement of fluids by well injection except for the
underground injection of natural gas for purposes of
storage and the underground injection of fluids or propping
agents (other than diesel fuels) pursuant to hydraulic
fracturing operations related to oil, gas, or geothermal
production activities.
d) Grants a state the primary enforcement responsibility
with respect to a type of underground injection well if,
upon the state's demonstration that its underground
injection program meets the minimum federal requirements
for that type of well, the US EPA Administrator approves
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the state program.
e) Defines, pursuant to regulations, "Class II" injection
wells as wells that inject fluids:
i) That are brought to the surface in connection with
conventional oil or natural gas production and may be
commingled with waste waters from gas plants which are an
integral part of production operations, unless those
waters are classified as a hazardous waste at the time of
injection;
ii) For enhanced recovery of oil or natural gas; and
iii) For storage of hydrocarbons which are liquid at
standard temperature and pressure.
f) Establishes, pursuant to regulations, well construction
standards, and operating, monitoring, and reporting
requirements with regard to Class II wells. These
regulations require, among other things, at least weekly
observation of injection pressure, flow rate, and
cumulative volume for produced fluid disposal operations.
g) Establishes, pursuant to regulations, that the
underground injection control program for Class II wells in
the state of California is the program administered by
DOGGR. These regulations expressly incorporate by
reference DOGGR's oil and gas conservation laws,
regulations, and the Memorandum of Agreement between EPA
Region IX and the California Division of Oil and Gas,
signed by the EPA Regional Administrator on September 29,
1982 (Primacy Agreement).
2)DOGGR's Statutes.
a) Creates DOGGR as a division within the Department of
Conservation (DOC). The head of DOGGR is referred to as
the "Supervisor," and the head of DOC is referred to as the
"Director."
b) Requires DOGGR to supervise activities related to oil
and gas wells, tanks, and facilities so as to prevent
damage to life, health, property, natural resources, and
underground and surface waters suitable for irrigation or
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domestic purposes by the infiltration of, or the addition
of, detrimental substances.
c) Defines "well" as, among other things, any well drilled
for the purpose of injecting fluids or gas for stimulating
oil or gas recovery, repressuring or pressure maintenance
of oil or gas reservoirs, or disposing of waste fluids from
an oil or gas field.
d) Requires that DOGGR's authority over oil and gas wells
be liberally construed to meet its purposes.
THIS BILL
1)Makes findings and declaration to affirm DOGGR's authority to
approve Class II injection wells for the disposal of waste
fluids, such as gas from an oil and gas field.
2)Makes clarifying, technical amendments to the definition of
"well."
3)Defines "monitoring well" as a well used for the purposes of
measuring reservoir pressures and temperatures; tracking
subsurface fluid movement; or determining the physical,
chemical, biological, or radiological properties of subsurface
fluid.
4)Defines "fluid" as material or substance that flows or moves
whether in a semisolid, liquid, sludge, gas, or other form or
state and includes both hydrocarbon and nonhydrocarbon gases.
5)Deletes references to "wastewater" in DOGGR's statutes and
replaces it with "waste fluid."
FISCAL EFFECT : Unknown
COMMENTS :
1)Background. According to the previous sponsor of this bill,
the California Independent Petroleum Association (CIPA), in
the petroleum extraction process, both crude oil and natural
gas are often produced from the same well. The natural gas is
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cleaned to pipeline quality standards and sold to the
utilities. Some natural gas that is produced cannot be sold
because its natural chemical characteristics do not meet the
utility pipeline quality standards (this gas is considered
"waste gas" for the purposes of this analysis). When waste
gas is produced, it is generally disposed of either by
re-injection back into a geological formation or burning
though a permitted flaring process.
Hydrogen sulfide and carbon dioxide are some of the commonly
produced waste gases. Hydrogen Sulfide is a flammable,
colorless gas that is toxic at extremely low concentrations in
air. High concentrations of hydrogen sulfide in drinking
water have been known to cause nausea, illness, and in extreme
cases, death. Hydrogen sulfide is also extremely corrosive.
Carbon dioxide, when re-injected into a geological formation,
may create risks such as carbon dioxide leakage, methane
leakage, seismicity, ground movement, and displacement of
brine.
Beginning in the 1980s, DOGGR regulated Class II injection
wells that were used for the disposal of waste gas. DOGGR
administered this program pursuant to the United States Safe
Drinking Water Act, state law, and the Primacy Agreement. In
the last two to three years, DOGGR has imposed a moratorium on
approving underground injection of waste gas into Class II
wells, asserting that while it clearly has authority over
waste water injections, it may never have had the authority to
regulate the injection of waste gas for disposal.
The primary purpose of this bill is to clarify that DOGGR has
authority under state law to permit the injection of waste gas
into disposal wells. Last year, CIPA explained that
"statewide, thousands of barrels of oil production are tied to
systems that require �waste gas] injection. �If DOGGR's
moratorium continues,] more than 200 existing projects and
thousands of barrels of California oil production could be
placed at risk."
2)Confusion Regarding Legal Authority. CIPA has claimed that
DOGGR has authority to permit the injection of waste gas into
Class II wells because the Primacy Agreement states that under
California law, DOGGR is required to "supervise the drilling,
operation, maintenance, and abandonment of all wells drilled
in California for the purpose of injecting fluids �for among
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other things] disposing of waste fluids from an oil or gas
field" (emphasis added).
The California law that the Primacy Agreement is referring to
is section 3106 of the Public Resources Code (PRC), which
requires DOGGR to supervise activities related to oil and gas
wells, tanks, and facilities so as to prevent "damage to life,
health, property, and natural resources?and damage to
underground and surface waters suitable for irrigation or
domestic purposes by the infiltration of, or the addition of,
detrimental substances." CIPA has explained that when this
statute is read with PRC Section 3013, which requires liberal
construction of DOGGR's authority over oil and gas wells, the
disposal of waste gas is clearly under DOGGR's jurisdiction.
Last year, DOGGR's staff argued that the only waste fluid it
has clear jurisdiction over is wastewater. The only reference
to Class II wells in existing state law is to a "Class II
commercial wastewater disposal well" and the only type of
waste fluid specifically mentioned in the oil and gas
conservation laws is wastewater.
Notwithstanding these legal arguments, DOGGR was adamant last
year that it did not have the expertise to comprehensively
regulate the disposal of waste gas into Class II injection
wells. DOGGR claimed that it is better suited to regulate,
for example, the well casings of Class II injection wells, and
that there are hazardous substance, worker safety, and air and
water quality issues associated with waste gas injections that
are more appropriate for other agencies to regulate.
This was not the first time DOGGR was concerned about its
ability to appropriately regulate waste gas injections. In
the 1990s, DOGGR and the Department of Toxic Substances
Control (DTSC) had discussions regarding their overlapping
authority over waste gas. It appeared through these
discussions that DOGGR wanted to utilize DTSC's expertise on
hazardous waste. There was some consideration of a potential
memorandum of understanding between the agencies that never
materialized. In these discussions, DTSC explained that the
federal Resource Conservation and Recovery Act and the
California Toxic Injection Well Control Act both contained
provisions exempting many of the waste gases that are injected
into Class II wells. As such, DTSC is not required to
regulate this waste. DTSC explained, however, that caveats in
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both federal and state law provide DTSC with the option to
adopt regulations regarding waste gases.
3)Suggested Committee Amendments. The author and committee may
wish to consider the following amendments:
a) Delete the finding, declaration, and intent language in
Section 1 of the bill and add PRC Section 3113, which, in
general, provides more concise findings and declarations
language affirming DOGGR's authority over the underground
injection of waste fluid for the purpose of disposal. PRC
Section 3113 also requires DOGGR, in consultation with
various regulatory agencies, including DTSC, to adopt
regulations by January 1, 2014 regarding the disposal of
waste fluid.
b) Amend PRC Section 3011 to add clarifying amendments to
the definition of "fluid."
c) Add PRC Section 3106.1, which codifies the United States
Safe Drinking Water Act's definition of "underground
sources of drinking water."
The US EPA Region 9 recently requested a review and
evaluation of DOGGR's Class II Underground Injection
Control Program for compliance with the Primacy Agreement.
The review was conducted by a third-party contractor and
resulted in the report entitled, California Class II
Underground Injection Control Program Review dated June
2011. The report indicates that DOGGR's definition of
ground water is less stringent than what the United States
Safe Drinking Water Act requires. As such, underground
sources of drinking water are "exposed to fluid movement
due to improperly plugged wells and/or lack of cement in
the casing/wellbore annulus, notwithstanding the presence
of drilling mud that may restrict fluid flow." The report
recommends that DOGGR take action to clearly require
regulation based on the federal definition of underground
sources of drinking water. The US EPA Region 9 supports
the report's recommendation and asked DOGGR in writing to
prepare an "action plan" that addresses the issue by
September 1, 2011. DOGGR has not submitted an action plan.
Since waste gas injections may impact underground sources
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of drinking water, and since DOGGR has not released an
action plan, it may be appropriate to take legislative
action by adding PRC Section 3106.1.
d) Add PRC Section 3114, which requires the supervisor to
hold quarterly public meetings to report on activities that
occurred in the previous quarter, to report on compliance
with the Primacy Agreement, and to take public comment.
DOGGR does not hold regularly scheduled public meetings.
DOGGR does, however, on its own volition, meet quarterly
with the industry and other public agencies through the
California Oil and Gas Work Group. This working group is a
longstanding collaborative partnership of federal and state
agencies and oil companies that meets quarterly to discuss
issues between agencies and industry. Since DOGGR has
quarterly meetings with industry, it seems appropriate that
it holds quarterly meetings for the public. It should also
be noted that some of the largest oil and gas producing
states in the country (e.g. Texas and Alaska) have oil and
gas permitting agencies with regular public meetings. This
issue is germane to the bill because many of the problems
related to the moratorium on waste gas injections were the
result of little or no communication between DOGGR,
industry, and the public.
e) Amend PRC Section 3224 to require well activities be
suspended when there is a well failure.
4)The bill recently received approval from the Assembly Rules
Committee for an urgency clause.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
None on file
Analysis Prepared by : Mario DeBernardo / NAT. RES. / (916)
319-2092
SB 711
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