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Update on Proposed California Fracking Legislation

April 7, 2013 by Eric Adair in News with 0 Comments

The California legislature has been very active in the current session in proposing legislation that would regulate, directly or indirectly, the oil well stimulation technique known as hydraulic fracturing, or “fracking.” We have previously reported on certain of the bills pending in the current session. (See here and here.) The level of legislative activity in the current session far exceeds that of past sessions, suggesting that the members of the legislature and their constituents may be dissatisfied with the pace and extent of California’s efforts to regulate fracking administratively. As we have previously reported, the California Division of Oil, Gas & Geothermal Resources (DOGGR) has long been engaged in a process that is expected to culminate in a set of regulations specifically directed at fracking. (See hereherehere, and here.) Given that DOGGR has yet to commence a formal rulemaking process, the legislature now appears poised to take action to ensure that the practice of fracking will be regulated in the state.

The following is an updated excerpt from a paper prepared by HGA attorney Eric Adair for an upcoming speaking engagement. It will first consider legislation considered in past legislative sessions, none of which became law, and will then address fracking-related legislation now pending in the current session.

I.  PAST LEGISLATIVE SESSIONS

Two legislators who have been actively involved in proposing fracking legislation are Senator Fran Pavley of California’s 27th Senate District and Assembly Member Bob Wieckowski of the 25th Assembly District. Assembly Member Wieckowski proposed Assembly Bill 591 (pdf) on February 16, 2011. AB 591 would have required, among other things, that oil well operators disclose certain fracking activities and the content of fracking fluid, subject to protection for proprietary and trade secret information. AB 591 failed to make it out of committee at the end of the 2011-12 legislative session.

Senator Pavley introduced Senate Bill 1054 (pdf) on February 29, 2012. SB 1054 would have required, among other things, that oil and gas operators notify nearby property owners of planned drilling operations, including fracking activities, before those activities commenced. That bill failed to survive a vote of the Senate in May 2012.

A third significant fracking bill, Assembly Bill 972 (pdf), was proposed by former Assembly Member Betsy Butler of California’s 53rd Assembly District on June 14, 2012. AB 972 would have imposed a moratorium on all fracking in the state pending DOGGR’s adoption of a regulatory scheme governing the practice. Like AB 591, Ms. Butler’s proposed moratorium bill was not acted upon and died in committee at the end of the 2011-12 session.

The failure of SB 1054 and AB 972 to find greater support in the legislature is not terribly surprising. Industry has not favored pre-notification requirements such as those proposed by SB 1054, which was voted down in committee much earlier than the other bills. The moratorium proposed by AB 972 faced strong industry opposition, lacked mainstream support outside the environmental community, and was not supported by the current administration. Senate staff had projected the potential for $9 million in delayed or lost revenues if the moratorium were enacted, and a moratorium on fracking in one of the nation’s most productive oil and gas producing states was, and likely remains, politically unpalatable. AB 591, on the other hand, had not been strongly opposed by industry. Various oil and gas producing states have adopted comparable disclosure schemes, including, most recently, Texas and Colorado. It now appears likely, given the scope of DOGGR’s proposed regulations (discussed above) and the absence of strong opposition from industry, that California will almost certainly adopt a comparable disclosure requirement at some point.

The political and practical reality underlying the demise of fracking legislation in past legislative sessions is that the legislature elected to defer to DOGGR as it develops fracking regulations. Rather than take legislative action independent of DOGGR — the administrative body entrusted to regulate oil and gas activity in the state — the legislature likely concluded that it would be more expedient politically to allow the regulatory process to run its course.

II.  CURRENT LEGISLATIVE SESSION

The 2013-14 legislature, perhaps not convinced that DOGGR is acting with sufficient speed to satisfy their increasingly vocal constituents, has been much more active in proposing legislation related to fracking. At present, twelve bills have been introduced that would impact, or at least relate to, fracking activities in the state.

Legislative activity began on the very first day of the current session. On December 3, 2012, Senator Pavley and Assembly Member Wieckowski introduced separate but largely identical bills that would regulate fracking.

Commenting on her bill, Senate Bill 4 (pdf), Senator Pavley stated that the legislation “would direct DOGGR to enact fracking regulations that include advance public notice of planned fracking activities and fracking fluid chemical disclosure.” She continued:

Public interest and concern remain high about the practice of fracking wells to facilitate oil and gas production here in California. Significant environmental, health and public safety concerns have been raised across the country by fracking.

Nationally, numerous interests including water providers and agriculture have raised serious concerns about fracking impacting their businesses while homeowners have seen their property values negatively impacted. I am introducing this bill today because the status quo is unacceptable. DOGGR has promised to release draft fracking regulations in the very near future and I will take those draft regulations into consideration once they are released.

Assembly Member Wieckowski, speaking about his Assembly Bill 7 (pdf), said:

The public has a right to know the type of chemicals that are being pumped underground in case there is a leak or contamination. Our state has done a poor job of collecting this important information and the public is demanding answers.

I intend to craft this legislation to work in conjunction with [DOGGR’s] regulations. Californians deserve a disclosure bill on fracking that is worthy of our state’s strong history of environmental protection.

Both SB 4, as originally proposed (a significant recent amendment is discussed below), and AB 7 would require DOGGR to adopt rules and regulations specific to fracking, working in conjunction with the Department of Toxic Substances Control (DTSC), the State Air Resources Board (CARB), and the State Water Resources Control Board (SWRCB). With limited exceptions (noted below), the bills are virtually identical. Both include definitional sections, defining a variety of fracking-related terms, and both direct DOGGR to consider revisions to existing regulations on construction of wells and well casings to ensure well integrity, as well as those designed to ensure the geologic and hydrologic isolation of oil and gas formations following fracking.

A significant aspect of the legislation is the disclosure requirement. If passed, the bills would require “full disclosure of the composition and disposition of hydraulic fracturing fluids,” including the date of fracking, a list of chemicals in the fracking fluid, the volume of fluid used, whether that fluid is water suitable for irrigation or domestic purposes or some other fluid, the source, volume, and disposition of all water, the disposition of all fracking fluids other than water, any radiological components or tracers, and the location of the portion of the well fracked. Operators would be required to notify DOGGR at least thirty days in advance of any fracking treatment and complete that treatment within one year of the date of the notice. DOGGR would then be required to make the notice available publicly within ten days. The operator must again notify DOGGR no less than seventy-two hours before fracking actually begins, thereby allowing DOGGR an opportunity to supervise. The legislation also would require that fracking-related information be posted on a website to be developed or designated by DOGGR, such as FracFocus. Disclosure exceptions would be made for information claimed to be trade secret. Full disclosure would be required to DOGGR, but certain categories of information would be exempt from public disclosure under Evidence Code Section 1060 and the Uniform Trade Secrets Act.

Both bills address concerns for induced seismicity associated with fracking. Senator Pavley’s bill would require identification of known faults within a certain distance of the well bore. Assembly Member Wieckowski’s proposal would more generally require that DOGGR “take into consideration and document the risk posed by potential seismicity.”

The legislation also requires a post-fracking report to DOGGR, including copies of the well log, core record, and history of the work performed, within 60 days of completion of fracking. That information must be included on the website designated by DOGGR, searchable and sortable in a variety of specified ways. DOGGR is also required to provide a comprehensive report to the legislature, containing aggregated information about the disposition of any produced water, the names and locations of seismic faults, the number of emergency responses to a spill or release, the number of times trade secret information was not disclosed to the public, and information on loss of well and well casing integrity. DOGGR must deliver that report to the legislature by January 1, 2016.

Two significant differences exist between the two bills. First, AB 7 would require that the proposed regulations take effect January 1, 2014. SB 4 would delay the effective date until January 1, 2015. Second, AB 7 includes language not present in SB 4 that documents DOGGR’s right to enjoin any violations of the fracking regulations. It also creates a private right of action whereby any person who might be adversely affected by a violation could seek to enjoin the violation if DOGGR declines to do so after being notified of the violation. That private right of action does not provide for civil damages. Other differences exist between the bills but the functional intent is similar.

On March 11, 2013, Senator Pavley, joined by coauthor Senator Bill Monning of the 17th Senate District, amended SB 4 (pdf) in certain significant ways. Perhaps the most important change is the addition of a requirement that the Secretary of the California Natural Resources Agency (CNRA) must, by January 1, 2015, conduct an independent scientific study on the hazards and risks that fracking poses to natural resources and public, occupational, and environmental health and safety. That study must (1) use recognized experts and be peer reviewed and published, (2) identify areas where fracking is likely to enable oil and gas exploration and production, (3) evaluate all aspects of fracking, (4) consider air emissions, water contamination, induced seismicity, and disposition of fluids, (5) include a hazard assessment and risk analysis addressing occupational and environmental exposures to fracking, and (6) identify information gaps. DOGGR must then incorporate the results of the independent scientific study into the pending fracking regulations. Also, DOGGR would be required to implement a fracking-specific permitting program, where operators would be require to apply for and obtain a permit before commencing fracking operations. Finally, the amendment provides that no fracking permits may be issued after January 1, 2015, until the independent scientific study is completed and peer-reviewed by independent scientific experts.

Thus, the net effect of Senator Pavley’s proposed amendment to SB 4 would be the imposition of a moratorium on new fracking if the required study is not finalized by January 1, 2015. Given the scope of the proposed study, it seems unlikely that it could be completed in that time frame.

SB 4 is set for an April 9, 2013, hearing before the Senate Committee on Natural Resources and Water. An analysis of SB 4 prepared for the hearing is available here. Senator Pavley’s office issued a press release about the bill and the upcoming hearing, and Senator Pavley gave a recent interview about the bill, which can be viewed here. AB 7 has been referred to the Assembly Committee on Natural Resources, which will conduct a hearing on the bill on April 15, 2013.

In addition to these more comprehensive bills, the following fracking-related legislation has been proposed in the current legislative session:

  • Assembly Bill 288 (pdf)

This bill was introduced on February 11, 2013, by Assembly Member Marc Levine of Assembly District 10. The most significant elements of this bill would require that a well operator file with DOGGR a written notice of intent to conduct fracking operations at least 30 days before such operations begin. Absent express approval from DOGGR, fracking may not begin. Moreover, DOGGR must affirmatively act to approve or disapprove such operations (under current law, failure to disapprove is deemed approval). The bill would also repeal certain of the broad rights of lease operators to conduct oil and gas operations as they deem appropriate, as provided under Public Resources Code 3106. AB 288 has been referred to the Assembly Committee on Natural Resources.

  • Senate Bill 241 (pdf)

This bill was introduced on February 12, 2013, by Senator Noreen Evans of Senate District 2, along with several coauthors. The bill would impose a 9.9% oil severance tax on and after January 1, 2014. While not directly related to fracking, the bill appears to be calculated to maximize California’s potential recovery from a potential economic boom should fracking result in significantly enhanced recoveries of oil and gas. SB 241 has been set for an April 24, 2013, hearing before the Senate Committee on Governance and Finance.

  • Senate Bill 395 (pdf)

This bill was introduced on February 20, 2013, by Senator Hannah-Beth Jackson of Senate District 19, and amended on April 4, 2013. The bill addresses water produced in oil and gas operations and would eliminate the exemption currently extant in California Health and Safety Code Section 25159.24 regarding the disposal of oilfield wastewater into Class II injection wells. The bill expresses concern that such wastewater can become contaminated with chemicals used in fracking, thereby rendering the produced water hazardous, such that it should be treated the same as other hazardous wastes and not be exempted from the stringent requirements of the Health and Safety Code. SB 395 has been referred to the Senate Committee on Environmental Quality.

  • Assembly Bill 649 (pdf)

This bill, as amended, was introduced on March 19, 2013, by Assembly Member Adrin Nazarian of Assembly District 46. The critical aspect of this bill would be the imposition of a moratorium on fracking (including the use of freshwater for fracking) on wells within a to-be-determined distance from an aquifer until a report is completed by an advisory committee convened by the CNRA and the California Environmental Protection Agency (Cal-EPA). The committee, to be convened by July 1, 2014, would be comprised of representatives of Cal-EPA, the CNRA, the Department of Public Health (DPH), an environmental justice organization, the agricultural industry, the oil and gas industry, an academic researcher with fracking expertise, and a water agency. The committee must develop a report similar to that discussed above in connection with amended SB 4, and must complete that report by January 1, 2018. Cal-EPA and the CNRA would then have until January 1, 2019, to determine whether, and under what conditions, fracking may be permitted in California, after ensuring that fracking will not pose a risk to the pubic health, welfare, environment, or economy of the state. AB 649 has been set for an April 29, 2013, hearing before the Assembly Committee on Natural Resources.

  • Assembly Bill 669 (pdf)

This bill was introduced on February 21, 2013, by Assembly Member Mark Stone of Assembly District 29, and amended on April 1, 2013. As with SB 241, this bill does not specifically mention or regulate fracking directly. It would require DOGGR to include information in its annual reporting about the origin and amount of freshwater used in oil and gas operations, the amount and destination of disposed oilfield wastewater, and the frequency and cause of well casing failures. Also, well operators would be required to submit proof to DOGGR that the governing regional water quality control board has approved the method and location of wastewater disposal for any well to be drilled or redrilled. AB 669 has been set for an April 15, 2013, hearing before the Assembly Committee on Natural Resources.

  • Assembly Bill 982 (pdf)

This bill was introduced on February 22, 2013, by Assembly Member Das Williams of Assembly District 37, and was co-authored by Senator Lois Wolk of Senate District 3. The bill would require the development of a groundwater monitoring plan whenever fracking will be implemented, with monitoring data to be submitted to the State Water Resources Control Board’s GeoTracker database. It would also require the disclosure of the estimated quantity of water to be used in fracking, the source of that water, and a plan for disposal of wastewater produced in the fracking process. AB 982 has been set for an April 15, 2013, hearing before the Assembly Committee on Natural Resources.

  • Senate Bill 665 (pdf)

This bill was introduced on February 22, 2013, by Senator Wolk. The bill would modify certain provisions of the Public Resources Code setting the amounts of indemnity bonds associated with the drilling, redrilling, deepening, or other operation altering the casing of a well. The amounts of the bonds have not been set in the bill and will be the subject of further discussions with stakeholders. As with certain of the other bills discussed herein, the bill does not directly address fracking but may have an impact on the practice. SB 665 has been set for an April 23, 2013, hearing before the Senate Committee on Natural Resources and Water.

  • Senate Bill 802 (pdf)

This bill was introduced on February 22, 2013, by Senators Wolk and Evans. This very simple and brief bill would require that DOGGR comply with the Uniform Trade Secrets Act, set forth in Section 3426 et seq. of the Civil Code regarding rights and remedies associated with the misappropriation of trade secrets. SB 802 has been referred to the Senate Committee on Natural Resources and Water. However, based on a personal communication with Senator Evans’ office, we have learned that this is a spot bill and will shortly be amended such that it will no longer pertain to oil and gas operations.

  • Assembly Bill 1301 (pdf)

This bill, as amended, was introduced on March 21, 2013, by Assembly Member Richard Bloom of Assembly District 50. The bill would prohibit all fracking operations until the legislature enacts legislation that determines whether and under what conditions fracking may be conducted. It does not create a timeline or process for the development of such legislation. AB 1301 has been set for an April 29, 2013, hearing before the Assembly Committee on Natural Resources.

  • Assembly Bill 1323 (pdf)

This bill, as amended, was introduced on March 21, 2013, by Assembly Member Holly Mitchell of Assembly District 54. The bill is largely the same as Assembly Bill 649, with the primary distinctions being that all fracking (without respect to distance from an aquifer) will be prohibited until the development of the requisite report, and the report must be prepared two years earlier, by January 1, 2016. AB 1323 has been set for an April 29, 2013, hearing before the Assembly Committee on Natural Resources.

We will continue to monitor these bills and provide further updates as warranted.

For more information regarding California fracking issues, please contact Eric Adair. Follow Eric on Twitter:

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