BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
SB 1132 (Mitchell) - Oil and gas: well stimulation treatments.
Amended: May 6, 2014 Policy Vote: NR&W 5-2, EQ 5-2
Urgency: No Mandate: Yes (see staff comment)
Hearing Date: May 23, 2014 Consultant: Marie Liu
SUSPENSE FILE. AS AMENDED.
Bill Summary: SB 1132 would expand the scope of a scientific
study to evaluate the risks and impacts of well stimulation
techniques and prohibits further well stimulation treatments
until that study is completed and reviewed.
Fiscal Impact (as approved on May 23, 2014):
One-time costs of $1-2 million (special) to increase the
scope of the existing scientific study commissioned by the
Natural Resources Agency (agency).
Unknown revenue losses (General Fund), likely at least in
the mid-tens of millions, from decreased oil production on
state lands granted to the City of Long Beach.
Background: Under existing law, the operation of oil and gas
wells is regulated by the Division of Oil and Gas Resources
(DOGGR) within the Department of Conservation.
SB 4 (Pavley) Chapter 313, Statutes of 2013 establishes a
regulatory program for oil and gas well stimulation treatments
(e.g. hydraulic fracturing, acid well stimulation) which
includes, among other things, the development of regulations, a
permitting process, and public notification and disclosure. SB 4
requires DOGGR to develop regulations for well stimulation
treatments, which meet specified requirements, by January 1,
2015.
SB 4 also requires the Secretary of the Natural Resources Agency
(agency) to commission a study that is to be completed by
January 1, 2015, on the hazards and risks of well stimulation
treatments, including, but not limited to, hydraulic fracking
(aka "fracking") and acid well stimulation treatments (PRC
�3160(a)).The study is to evaluate the hazards and risks that
well stimulation treatments pose to natural resources and
public, occupational, and environmental health and safety.
SB 1132 (Mitchell)
Page 1
Proposed Law: This bill would extend the deadline for the
completion of regulations to June 30, 2015 and increase the
scope of the independent scientific study required and extend
the deadline of that study to June 30, 2016. Additional required
elements or expanded elements include, among other things:
Identification of offshore areas within the state where well
stimulation treatments are likely to spur or enable oil and
gas exploration and production.
An evaluation of all potential direct, indirect, and
cumulative health and environmental effects of onshore and
offshore well stimulation treatments and related activities.
Potential noise and light pollution.
Identification and evaluation of impacts on private property,
potential human health risk for each chemical used in well
stimulation treatments, impacts on communities consisting
largely of people of color, low-income individuals, or
non-English-speaking households.
The impact on, and readiness of, emergency response.
Within 6 months of the completion of the scientific study, the
agency would be required to convene a committee to review the
scientific study. The committee would consist of the agency, the
California Environmental Protection Agency, the State Air
Resources Board, the State Water Resources Control Board, and
the Department of Public Health. The committee would be required
to evaluate and create a report on the following:
Whether the study was based solely on the best information
available and met the requirements of �3160.
Whether the regulations and other measures adopted by DOGGR
would sufficiently protect public health and welfare or the
environmental and economic sustainability of the state.
Whether there are sufficient measures in place to ensure that
the state's progress to achieving greenhouse gas emissions are
not impeded by well stimulation treatments.
The committee would be required to receive public comment on
their tentative report and authorized to required additional
study to address areas of concern.
Once the report is completed, it would be submitted to the
Governor, the Governor would be required to determine if well
stimulations treatments "contribute to the deterioration of
environmental conditions in a way that threatens public health
and welfare or the environmental and economic sustainability of
SB 1132 (Mitchell)
Page 2
the state." Until the Governor makes a positive determination,
this bill would prohibit all well stimulation treatments.
Staff Comments: The agency has contracted with the California
Council on Science and Technology to conduct the independent
scientific study required by �3160(a). The agency would need to
renegotiate the cost of the study to increase the content but
anticipates that it would increase the cost of the contract by
one or two million.
State tidelands in Long Beach are leased for oil extraction
activities. Lease revenues are shared between the state and City
of Long Beach, who manages these lands on behalf of the state.
From FY 2008-09 to FY 2011-12, the state's revenue share ranged
from $261 million to $421 million for an average of $327 million
of annual revenue. At least parts of the oil operations on the
Long Beach unit have used a type of well stimulation technique.
Should this bill pass, these operations would be impacted,
potentially decreasing state revenues. The revenue losses are
unknown as it would depend on how much oil production would be
reduced without fracking and the price of oil. Staff estimates
that the state revenue losses are likely to be at least in the
mid-tens of millions based on the recent revenues from the Long
Beach unit.
Because a violation of the bill's requirements would be a crime,
this bill creates a state-mandate. However, no state
reimbursements would be required under the California
Constitution.
Author Amendments: Clarify that the committee must find that the
regulations and other specific measures ensure that well
stimulation treatments do not create adverse impacts to public
or environmental health or if there are adverse impacts, that
those impacts are sufficiently mitigated.