BILL ANALYSIS �
SB 1132
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator Jerry Hill, Chair
2013-2014 Regular Session
BILL NO: SB 1132
AUTHOR: Mitchell and Leno
AMENDED: April 21, 2014
FISCAL: Yes HEARING DATE: April 30, 2014
URGENCY: No CONSULTANT: Karen Morrison
SUBJECT : OIL AND GAS: WELL STIMULATION TREATMENTS
SUMMARY :
Existing law :
1) Under SB 4 (Pavley/Leno), Chapter 313, Statutes of 2013:
a) Requires the Natural Resources Agency to facilitate an
independent scientific study on well stimulation treatments
and their hazards and risks to natural resources and
public, occupational, and environmental health and safety
by January 1, 2015.
b) Requires the Division of Oil, Gas, and Geothermal
Resources (DOGGR) to adopt rules and regulations for well
stimulation treatments by January 1, 2015, in consultation
with the Department of Toxic Substances Control (DTSC), the
California Air Resources Board (CARB), the State Water
Resources Control Board (SWRCB), CalRecycle, and any local
air and regional water quality control boards.
c) Requires DOGGR to complete a statewide environmental
impact report (EIR) by July 1, 2015.
d) Allows operators to continue well stimulation practices
while DOGGR completes its regulations, providing that the
well owner complies with interim requirements.
e) Establishes a well stimulation permit system and
disclosure requirement.
f) Requires notification of property owners within 1,500
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feet of a wellhead or 500 feet from the stimulation area
that well stimulation will occur.
g) Requires an annual report to the Legislature that
includes information on any well stimulation activities,
response to spills, and disposition of produced water.
2) Under the California Global Warming Solutions Act of 2006 (AB
32, Health and Safety Code �38500 et seq.):
a) Requires CARB to determine the 1990 statewide greenhouse
gas (GHG) emissions level and approve a statewide GHG
emissions limit that is equivalent to that level, to be
achieved by 2020.
b) Requires CARB to adopt GHG emissions reductions measures
by regulation.
3) Under the California Environmental Quality Act (CEQA, Public
Resources Code �21000 et seq.), requires lead agencies with
the principal responsibility for carrying out or approving a
proposed discretionary project to prepare a negative
declaration, mitigated negative declaration, or EIR for this
action, unless the project is exempt from CEQA.
This bill :
1) Expands the scope of the independent scientific study to
evaluate the risks and impacts of well stimulation techniques
and related activities. This includes an evaluation of
offshore well stimulation sites, human health risks, economic
costs, disadvantaged communities, pipeline infrastructure, and
emergency response.
2) Prohibits further well stimulation treatments until the
independent scientific study is complete and has been reviewed
by a committee composed of a representative from the Natural
Resources Agency, California Environmental Protection Agency,
CARB, SWRCB, and Department of Public Health.
3) Requires the committee to determine if additional studies are
needed on the environmental and public health impacts of well
stimulation, or to certify that the report is final if certain
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criteria are met.
4) Requires the Governor to determine if well stimulation
treatments "contribute to the deterioration of environmental
conditions in a way that threatens public health and welfare
or the environmental and economic sustainability of the
state."
5) Authorizes the Governor to allow well stimulation to occur if
specific measures are in place to ensure that well stimulation
treatments do not "contribute to the deterioration of
environmental conditions in a way that threatens public health
and welfare or the environmental and economic sustainability
of the state."
6) Provides for an end to the moratorium based on the Governor's
findings or the end of a judicial review affirming the
Governor's findings.
7) Provides that existing property rights and interests are not
impaired or infringed.
8) Prohibits DOGGR from approving any authorizations for well
stimulation treatments on or after January 1, 2015.
9) Allows local governments to regulate or prohibit oil and gas
operations, including well stimulation treatments.
COMMENTS :
1) Purpose of Bill . According to the authors, "Today's fracking
techniques are new and may pose new dangers. Technological
changes have facilitated an explosion of drilling in areas
where, even a decade ago, companies couldn't recover oil and
gas profitably. It's important that the implications for
health and environmental safety are fully understood before
fracking is allowed to continue in [California]. SB 1132
imposes a moratorium on all well stimulation including
fracking and acidizing, on-shore and off-shore, until a
comprehensive report is completed and submitted to the
Governor and the Legislature and a recommendation is made as
to if, how and where fracking activity can resume. Further,
it lays out how the report is to be conducted in a way that
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ensures fairness and reliability in the data collected."
2) Background on oil production in California . According to the
U.S. Energy Information Administration, California was the
third largest producer of oil in 2013. Nationally, production
of oil and gas has increased dramatically in recent years,
largely due to improved well stimulation techniques and
increased production in the Bakken region in North Dakota.
However, California has seen a consistent decrease in field
production of crude oil from over 350 million barrels of oil
annually in the 1980s to around 200 million barrels of oil
annually since 2010. California currently imports over 60% of
the oil that is used within the state.
It is postulated that expansion of drilling to California's
Monterey Shale would substantially increase the production of
oil in the state. This expansion would likely require the use
of well stimulation techniques in order to access as much as
15.4 billion barrels of recoverable oil in that formation.
3) Background on well stimulation for gas and oil . Well
stimulation practices are used to enhance the production of
oil and gas by facilitating the movement of oil or gas trapped
in underground rock formations. Early forms of well
stimulation have been used in California for decades, but
changes in this technology have led to its increased use in
recent years.
Hydraulic fracturing, or fracking, enhances the permeability of a
formation by applying fracturing fluids at high pressures.
Typical hydraulic fracturing fluid mixtures contain mostly
water, with 5% or less of the fluid composed of added
chemicals.
Another well stimulation treatment, acidization, uses large
volumes of acid to increase formation permeability through a
chemical reaction with the formation itself. Acidization does
not require a specific pressure during application, but the
process typically uses strong acids, such as hydrochloric and
hydrofluoric acids.
In many states, millions of gallons of fresh water are used for
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each fracking treatment. In California, the Western States
Petroleum Association reports that the average amount of water
used for each voluntarily reported fracking treatment in 2012
was about 116,000 gallons, although wells using more than a
million gallons have also been reported.
4) Status of SB 4 implementation . Since SB 4 went into effect on
January 1, 2014, DOGGR has received over 300 well stimulation
applications under their interim well stimulation regulations.
Following concurrence from the SWRCB, DOGGR has approved well
stimulation applications in two regions of California that do
not contain groundwater.
On February 26, 2014, the Senate Committees on Natural Resources
& Water and Environmental Quality held a joint oversight
hearing on SB 4 (2013) Implementation and Well Stimulation
Regulations. At that hearing, representatives from Department
of Conservation (DOC), Natural Resources Agency, SWRCB, DTSC,
and CARB presented on their implementation of interim
regulations and their ongoing work on the permanent well
stimulation regulations.
On April 1, 2014, the Natural Resources Agency provided their
first progress report to the Legislature on the status of the
SB 4 independent scientific study. The Agency has recruited
Dr. Robert Powell as the Science Advisor to the Secretary; Dr.
Powell will advise the administration on well stimulation
treatment and assist in developing the scope of the
independent scientific study. The Agency has also selected
the California Council of Science & Technology to prepare the
study. The final approvals for this selection are underway as
of April 16, 2014.
DOGGR issued a Notice of Preparation in November 2013 for the
statewide EIR required under SB 4. Scoping meetings were held
in December 2013 and January 2014, and the public comment
period ended in January 2014. DOC has contracted with Aspen
Environmental Group to conduct the EIR, and the Aspen
Environmental Group is working with DOC to gather data from
DOGGR, industry representatives, and other groups. A public
draft is anticipated in Fall 2014.
5) Other attempts to regulate fracking . Over the last few years,
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there have been numerous attempts in the California
Legislature to either regulate or ban fracking, although SB 4
was the only law signed by Governor Brown.
Los Angeles, Culver City, and Santa Cruz County have all passed
resolutions to place or develop moratoria on well simulation
treatments within their jurisdictions. Several other local
governments in California are also considering steps to limit
well stimulation treatments.
Through executive order, New York State imposed a moratorium on
high-volume hydraulic fracturing. This has been in place for
over six years while a public health study is completed.
Vermont has banned fracking, although there is no oil or gas
production in that state. Other states or regional entities
(including North Carolina and the Delaware River Basin
Commission) have instituted moratoria pending the development
of regulations governing fracking. Local bans or moratoria on
fracking have also occurred in Pennsylvania, Colorado, and New
York, among others.
6) Arguments in support . Supporters of the bill emphasize the
importance of a comprehensive review of well stimulation prior
to any drilling. Supporters of the bill comment on the
potential link between well stimulation and various
environmental and human health concerns, including groundwater
and surface water contamination, air pollution, increased
GHGs, earthquakes, and intensive water use.
The City of Culver City states "this area is home to hundreds of
thousands of residents and businesses who have experienced the
impacts of decades of oil extraction in the [Inglewood oil
field]. As evidenced by the number of residents who have
expressed their ongoing concerns during recent Culver City
Council meetings, there is significant public apprehension
regarding the uncertain, additional impacts that may have
occurred, or may occur in the future, as a result of well
stimulation, including hydraulic fracturing."
7) Arguments in opposition . A joint oil and gas industry letter
states, "SB 1132 appears to establish a study, comment and
findings process designed to ensure that well stimulation
treatments are prohibited in California in perpetuity." The
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letter continues, "The Governor's finding shall be considered
final only when all pending legal challenges are resolved and
[the] Governor's findings are affirmed based on 'clear and
convincing evidence.' Should this standard be set for all
future state scientific studies, economic studies and
regulations?" The letter also states that a "comprehensive,
peer reviewed scientific study of the Inglewood Oil Field near
Culver city [?] found no adverse environmental impacts from
the hydraulic fracturing operations" (emphasis removed).
According to a joint letter signed by the California Chamber of
Commerce, among others, SB 1132 is a "job killer" and "will
place our businesses at a competitive disadvantage, impede job
growth and suppress property, income and excise tax revenues."
8) Policy issues .
a) Findings and declarations . The current findings and
declarations in the bill make strong, broad statements on
well stimulation techniques that, at times, reference oil
and gas activities in general rather than well stimulation.
Additionally, the current language states scientific
findings that the independent scientific study in the bill
is designed to elucidate. Finally, some of the language
may overstate what is currently known about well
stimulation techniques.
Suggested Amendments:
An amendment is needed to refine the intent language to be
consistent with what is currently known about well
stimulation and well stimulation treatment-related
activities and their environmental and human health
impacts.
b) Independent scientific study . The independent
scientific study dramatically expands the scope originally
required under SB 4.
In the bill, the study must now consider well stimulation
treatment-related activities in addition to well
stimulation treatment itself in all potential or existing
areas where the practice might be performed. This includes
onshore and offshore sites, and requires an evaluation of
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all potential direct, indirect, and cumulative health and
environmental effects.
The bill would require the study to evaluate any economic
costs associated with well stimulation and to determine any
impacts on disadvantaged communities. The bill also
requires an analysis of broader infrastructure impacts
(pipelines and transportation), as well as emergency
response.
Although these are all important considerations in the context
of the potential impact of well stimulation on human and
environmental health, a substantial increase in time and
effort will be needed to adequately address the topics
listed in the bill. Currently, a deadline for completion
is set for June 30, 2016.
c) Review process . The bill creates an agency committee to
review the scientific study, along with the regulations
developed by DOGGR and other related laws (including AB
32). The public has an opportunity to review a tentative
report and provide comments, and then the committee can
finalize its report if well stimulation treatments are
found to "not contribute to the deterioration of
environmental conditions in a way that harms human or
environmental health and welfare."
Once the report is finalized, it is distributed to the
Legislature and the Governor. The Governor must then make
a finding based on the report. If the Governor finds that
well stimulation techniques "do not contribute to the
deterioration of environmental conditions in a way that
harms human or environmental health and welfare," then the
moratorium will be lifted after either 90 days OR after all
judicial reviews and legal challenges are complete.
i) Permanent regulations . During the committee
review process, the independent scientific study is
used to evaluate the regulations developed by DOGGR.
The goal of this process is to ensure that the
regulations appropriately address any damages and
risks that are identified during the study.
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In its current form, the bill removes the deadline to
finalize regulations on well stimulation. In order
for the committee review process to work as designed
in the bill, it is necessary for the regulations to be
finalized on or before the completion of the
independent scientific study.
Suggested Amendment:
An amendment is needed to require the division to finalize
the regulations on or before June 30, 2016.
ii) Risk assessment . The bill requires that well
stimulation treatments "do not contribute to the
deterioration of environmental conditions in a way
that threatens public health and welfare or the
environmental and economic sustainability of the
state" in order for the moratorium on fracking to be
lifted.
This language is vague and it is unclear what the
implications of requiring well stimulation techniques
to "not contribute to the deterioration of
environmental conditions in a way that harms human or
environmental health and welfare" are. Who is
responsible for making this determination? What does
"deterioration of environmental conditions" mean? Who
determines what a threat is? All practices have some
human or environmental footprint. In effect, the
language of this bill implies that any risk is
unacceptable as it relates to well stimulation.
If the well stimulation treatments are found to contribute
to the deterioration of environmental conditions, the
committee may request an additional scientific study.
In California, in the context of environmental and public
health impacts, potential risks are identified and
mitigated. This process of mitigating environmental
health risks can be highlighted in the context of
CEQA.
CEQA provides a process for evaluating the environmental
effects of a project, and includes statutory
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exemptions, as well as categorical exemptions in the
CEQA guidelines. If a project is not exempt from
CEQA, an initial study is prepared to determine
whether a project may have a significant effect on the
environment. If the initial study shows that there
would not be a significant effect on the environment,
the lead agency must prepare a negative declaration.
If the initial study shows that the project may have a
significant effect on the environment, the lead agency
must prepare an EIR.
Generally, an EIR must accurately describe the proposed
project, identify and analyze each significant
environmental impact expected to result from the
proposed project, identify mitigation measures to
reduce those impacts to the extent feasible, and
evaluate a range of reasonable alternatives to the
proposed project. Prior to approving any project that
has received environmental review, an agency must make
certain findings. If mitigation measures are required
or incorporated into a project, the agency must adopt
a reporting or monitoring program to ensure compliance
with those measures.
If a mitigation measure would cause one or more significant
effects in addition to those that would be caused by
the proposed project, the effects of the mitigation
measure must be discussed but in less detail than the
significant effects of the proposed project.
Currently, DOC and DOGGR are working on a statewide EIR in
order to identify risks and any appropriate mitigation
measures. What are the implications of not applying
similar standards to the independent scientific study
and regulations review?
Suggested Amendment:
An amendment is needed to clarify how risks are evaluated
and how they should be addressed.
The bill should be amended to add language that requires
the committee detailed in the bill determine that any
identified risks are appropriately mitigated.
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iii) Governor's findings and judicial review process .
The bill requires the Governor to determine whether
specific measures are in place to ensure that well
stimulation treatments "do not contribute to the
deterioration of environmental conditions in a way
that harms human or environmental health and welfare."
If the Governor makes a finding that appropriate
measures are in place, and this finding is based on
"clear and convincing evidence" (as determined by the
court in the instance of a legal challenge), the
finding is considered final. Once the findings are
issued, and any pending judicial reviews are complete
and uphold the Governor's findings, then the
moratorium is lifted after 90 days.
This process raises several major policy concerns:
First, the Governor's role seems redundant. The Governor's
findings required in the bill are based on the
committee report. Given that the committee is
composed of agency representatives with expertise in
areas related to well stimulation, it would seem that
the committee is qualified to make a decision based on
"clear and convincing evidence," as required by the
bill. Instead, it may be more appropriate for the
Governor to make a determination based on the
committee's findings as to whether the moratorium
should be lifted.
Second, the Governor's findings are not finalized until
after all pending legal challenges are resolved. This
seems contrary to the normal process of review for a
declaration or law, which would allow for the process
to continue while any legal challenges are addressed
in the courts. In addition, the ramifications of a
legal challenge to a Governor's finding are unclear
and may raise constitutional questions.
Third, in a similar vein, pending judicial review of the
committee's report and Governor's findings further
limit the end of the moratorium. If the practice is
determined to be safe by the committee and the
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Governor, it would be consistent with existing legal
procedures for well stimulation treatments to resume
while the Courts resolve pending questions.
Finally, if all pending legal challenges must be solved
before a moratorium can be lifted, a legal challenge,
regardless of its merit, could keep the moratorium in
place. Does this keep the Governor from directing his
or her Administration from lifting the moratorium?
Suggested Amendments:
An amendment is needed to change the role of the Governor
to make a determination based on the committee's
findings.
An amendment is also needed to remove the judicial review
process from the timeline for lifting the moratorium
on well stimulation techniques.
d) Is this really a moratorium? In its current form, the
bill dramatically expands the independent scientific study,
it does not require DOGGR to finalize regulations by a
specified date, it creates another opportunity for public
feedback with the committee, it creates a vague level of
proof for the committee to finalize their decision, it
creates a vague level of proof for the Governor to finalize
his or her decision, and it allows for a lengthy judicial
review process before any decisions can be acted on. When
could the moratorium be lifted?
9) Additional policy issues: What are the offshore/federal land
implications? DOGGR only has the authority to regulate
fracking in California and state waters. However, the federal
government does not currently regulate well stimulation
techniques, and it is conceivable that such practices could
continue on federally owned lands within the borders of
California or in adjacent waters. Will the stringency and
environmental protection desired by this bill be achieved if
well stimulation treatments are still happening within
California or in the coastal waters?
10)Triple referral recommendation . The language on the
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Governor's findings and subsequent judicial review may raise
constitutional questions and is outside the Committee's
jurisdiction. As a result, if this measure is approved by the
Senate Environmental Quality Committee without the amendments
suggested in Comment 8(c)(iii), the do pass motion must
include the action to re-refer the bill to the Senate Rules
Committee for potential review by the Senate Judiciary
Committee.
11)Related legislation . AB 2420 (Nazarian) of 2014 would
authorize a city or county to adopt and enforce a local
prohibition of well stimulation treatments.
AB 2718 (Bloom) of 2014 would require DOGGR to develop a neighbor
notification form in English and Spanish for well stimulation
treatments that can be understood by a layperson.
Several bills were introduced in 2013 to address various aspects
of fracking, including AB 7 (Wieckowski), AB 288 (Levine), AB
649 (Nazarian), AB 669 (Stone/Williams), AB 982 (Williams), AB
1301 (Bloom), AB 1323 (Mitchell), and SB 4 (Pavley/Leno). Of
these, only SB 4 was signed into law (Chapter 313, Statutes of
2013).
SOURCE : Author
SUPPORT : 350 San Francisco
7th Generation Advisors
Alameda County Board of Supervisors
Alliance of Nurses for Healthy Environments
American Congress of Obstetricians and
Gynecologists,
District IX California
Asian Pacific Environmental Network
Black Women for Wellness
Breast Cancer Action
California Environmental Justice Alliance
California League of Conservation Voters
California Nurses Association, National Nurses
United
California State Grange
Center for Biological Diversity
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Center for Community Action and Environmental
Justice
Center of Race, Poverty & the Environment
Citizens Coalition for a Safe Community
City of Carson
Clean Water Action
Communications Workers of America, District 9
Consumer Attorneys of California
CREDO Action
Earthworks
Environment California
Environmental Protection Information Center
Environmental Water Caucus
Environmental Working Group
Food & Water Watch
Frack-Free Butte County
International Longshore & Warehouse Union
Southern California District Council
Karuk Tribe
Mainstreet Moms Organize or Bust
San Francisco Bay Area Physicians for Social
Responsibility
SanDiego350.org
Sierra Club California
State Board of Equalization Board Member Betty
Yee
Sustainable Novato
The Wildlands Conservancy
United Native Americans Inc.
United Nurses Associations of California
21,670 Individual Support letters.
OPPOSITION : American Chemistry Council
Associated Builders and
Contractors of California
California Chamber of Commerce
California Construction and
Industrial Materials Association
California Construction Trucking Association
California Independent Oil Marketers Association
California Independent Petroleum Association
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California Manufacturers and Technology
Association
California Metals Coalition
California Small Business Alliance
Camarillo Chamber of Commerce
Central Coast Energy Alliance
Chambers of Commerce Alliance of Ventura
and Santa Barbara Counties
Chemical Industry Council of
California
Coalition of Energy Users
Coalition of Labor, Agriculture and Business Santa
Barbara
Friends for Saving California Jobs
Fullerton Chamber of Commerce
Howard Jarvis taxpayers Association
Independent Oil Producers Agency
Inland Empire Business Council
Kern County Firefighters IAFF Local 331
Kern Economic Development Association
Kern Taxpayers Association
Los Angeles County Business Federation
McKittrick School District
National Federation of Independent
Business/California
North of the River Chamber of Commerce
Orange County Business Council
Oxnard Chamber of Commerce
Placer County Taxpayers
San Diego Tax Fighters Regional Hispanic Chamber
of
Commerce
Santa Barbara County Taxpayers
Santa Barbara County Industry & Technology
Association
Small Business Action Committee
Southwest California Legislative Council
Taft City School District
Valley Industry & Commerce Association
Ventura Chamber of Commerce
Western Plant Health Association
Western States Petroleum Association
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