(1)Under existing law, the Division of Oil, Gas, and Geothermal Resources in the Department of Conservation regulates the drilling, operation, maintenance, and abandonment of oil and gas wells in the state. Existing law requires the State Oil and Gas Supervisor to supervise the drilling, operation, maintenance, and abandonment of wells and the operation, maintenance, and removal or abandonment of tanks and facilities related to oil and gas production within an oil and gas field, so as to prevent damage to life, health, property, and natural resources, as provided; to permit owners and operators of wells to utilize all known methods and practices to increase the ultimate recovery of hydrocarbons; and to perform the supervisors duties in a manner that encourages the wise development of oil and gas resources to best meet oil and gas needs in this state.

This bill would no longer require the supervisor to perform his or her duties in that manner. The bill would instead require the supervisor to authorize supervise the exploration and production of hydrocarbons, including, among other things, the drilling, operation, maintenance, and abandonment of wells, and the use of enhanced oil recovery methods, as defined, and stimulation, as provided, and would authorize the supervisor to allow an owner or operator of a well to drill, operate, maintain, and abandon wells utilizing all known methods and practices to increase the ultimate recovery of hydrocarbons if the supervisor finds that those methods and practices are consistent with existing law.

(2)Existing law requires the operator of a well to file a written notice of intention to commence drilling with, and prohibits any drilling until approval is given by, the supervisor or district deputy. Under existing law, the notice is deemed approved if the supervisor or district deputy fails to respond to the notice in writing within 10 working days from receipt and is deemed canceled if operations have not commenced within one year of receipt.

This bill would require an owner or operator of a well to file an application for approval to commence drilling, containing specified information, and would prohibit any drilling until written approval is given by the supervisor or the district deputy containing specified findings. The bill would authorize the supervisor, upon request, to grant a one-year extension if operations have not commenced within one year of the approval. The bill would require the applications and approvals by the supervisor or the district deputy to be posted on the divisions Internet Web site within 10 working days.

(3)The Permit Streamlining Act requires any public agency that is the lead agency for a development project to approve or disapprove of a project, as specified. Under that act, if the lead agency or responsible agency is required to provide public notice of the development project or to hold a public hearing on the development project, or both, and the agency has not provided the public notice or held the hearing, or both, at least 60 days prior to the expirations of specified time periods, the applicant may file an action to compel the agency to provide the public notice or hold the hearing, or both, as specified.

This bill would require the supervisor to perform his or her duties in conformance with that act.

(4)Existing law generally provides that well records filed by owners or operators with the supervisor are public records. However, existing law authorizes the supervisor, upon written request of an owner or operator, to maintain well records of exploratory wells, or other wells if the supervisor determines that there are extenuating circumstances, as confidential information. Under existing law, the confidential period for an onshore or offshore well is up to 2 or 5 years, respectively, from the cessation of drilling operations, as defined. Existing law authorizes the supervisor to extend the period of confidentiality of a well for 6 months upon written request documenting extenuating circumstances and requires that the total period of confidentiality, including all extensions, for onshore and offshore wells not exceed 4 or 7 years, respectively, from the cessation of drilling operations.

This bill would limit the authorization to maintain the confidentiality of well records to exploratory wells and only if the owner or operator includes specified information in the written request. The bill would deem both the request for, and the granting of, confidential well status to be public records and would require that information to be accessible on the divisions Internet Web site. The bill would require all well records of a confidential well, as defined, to be posted on the divisions Internet Web site within 10 working days once the confidential well period has ended. The bill would require that the confidential period for an offshore well not exceed 3 years from the cessation of drilling operations and would authorize the supervisor to extend the period of confidentiality for confidential wells for only 6 months, upon receiving a written request documenting extenuating circumstances.

(5)Existing law requires an owner or operator of a well to keep a log, core record, and history of the drilling of wells to be provided to the district deputy within 60 days after the date of cessation of drilling, rework, or abandonment operations or the date of suspension of operation. Under existing law, a person who fails to comply with this and other requirements relating to the regulation of oil or gas operations is guilty of a misdemeanor.

This bill would in addition require an owner or operator of a well to report specified information to the applicable regional water quality control board within 5 days of any loss of well and well casing integrity. Because a violation of this requirement would be a crime, the bill would impose a state-mandated local program.

(6)Existing law recognizes the Conservation Committee of California Oil and Gas Producers and authorizes it or any other committee of oil producers to make voluntary recommendations to the supervisor regarding, among other things, maximum efficient rates of production, as defined, if specified conditions are satisfied.

This bill would instead authorize any committee of oil producers to make recommendations to the supervisor regarding oil and gas exploration and production, as specified, and would require the division to post any recommendations received by the supervisor on the divisions Internet Web site.

(7)The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

(1)Under existing law, the Division of Oil, Gas, and Geothermal Resources in the Department of Conservation regulates the drilling, operation, maintenance, and abandonment of oil and gas wells in the state. Existing law requires the State Oil and Gas Supervisor to supervise the drilling, operation, maintenance, and abandonment of wells and the operation, maintenance, and removal or abandonment of tanks and facilities related to oil and gas production within an oil and gas field, so as to prevent damage to life, health, property, and natural resources, as provided; to permit owners and operators of wells to utilize all known methods and practices to increase the ultimate recovery of hydrocarbons; and to perform the supervisors duties in a manner that encourages the wise development of oil and gas resources to best meet oil and gas needs in this state.

This bill would no longer require the supervisor to perform his or her duties in that manner. The bill would instead require the supervisor to authorize the exploration and production of hydrocarbons, including, among other things, the drilling, operation, maintenance, and abandonment of wells, and the use of enhanced oil recovery methods, as defined, and authorize the supervisor to allow an owner or operator of a well to utilize drill, operate, maintain, and abandon wells utilizing all known methods and practices to increase the ultimate recovery of hydrocarbons if the supervisor finds that those methods and practices are consistent with existing law.

(2)Existing law requires the operator of a well to file a written notice of intention to commence drilling with, and prohibits any drilling until approval is given by, the supervisor or district deputy. Under existing law, the notice is deemed approved if the supervisor or district deputy fails to respond to the notice in writing within 10 working days from receipt and is deemed canceled if operations have not commenced within one year of receipt.

This bill would require an owner or operator of a well to file an application for approval to commence drilling, containing specified information, and would prohibit any drilling until written approval is given by the supervisor or the district deputy containing specified findings. The bill would authorize the supervisor, upon request, to grant a one-year extension if operations have not commenced within one year of the approval. The bill would require the applications and approvals by the supervisor or the district deputy to be posted on the divisions Internet Web site within 10 working days.

(3)The Permit Streamlining Act requires any public agency that is the lead agency for a development project to approve or disapprove of a project, as specified. Under that act, if the lead agency or responsible agency is required to provide public notice of the development project or to hold a public hearing on the development project, or both, and the agency has not provided the public notice or held the hearing, or both, at least 60 days prior to the expirations of specified time periods, the applicant may file an action to compel the agency to provide the public notice or hold the hearing, or both, as specified.

This bill would require the supervisor to perform his or her duties in conformance with that act.

(4)Existing law generally provides that well records filed by owners or operators with the supervisor are public records. However, existing law authorizes the supervisor, upon written request of an owner or operator, to maintain well records of exploratory wells, or other wells if the supervisor determines that there are extenuating circumstances, as confidential information. Under existing law, the confidential period for an onshore or offshore well is up to 2 or 5 years, respectively, from the cessation of drilling operations, as defined. Existing law authorizes the supervisor to extend the period of confidentiality of a well for 6 months upon written request documenting extenuating circumstances and requires that the total period of confidentiality, including all extensions, for onshore and offshore wells not exceed 4 or 7 years, respectively, from the cessation of drilling operations.

This bill would limit the authorization to maintain the confidentiality of well records to exploratory wells and only if the owner or operator includes specified information in the written request. The bill would deem both the request for, and the granting of, confidential well status to be public records and would require that information to be accessible on the divisions Internet Web site. The bill would require all well records of a confidential well, as defined, to be posted on the divisions Internet Web site within 10 working days once the confidential well period has ended. The bill would require that the confidential period for an offshore well not exceed 3 years from the cessation of drilling operations and would authorize the supervisor to extend the period of confidentiality for confidential wells for only 6 months, upon receiving a written request documenting extenuating circumstances.

(5)Existing law requires an owner or operator of a well to keep a log, core record, and history of the drilling of wells to be provided to the district deputy within 60 days after the date of cessation of drilling, rework, or abandonment operations or the date of suspension of operation. Under existing law, a person who fails to comply with this and other requirements relating to the regulation of oil or gas operations is guilty of a misdemeanor.

This bill would in addition require an owner or operator of a well to report specified information to the applicable regional water quality control board within 5 days of any loss of well and well casing integrity. Because a violation of this requirement would be a crime, the bill would impose a state-mandated local program.

(6)Existing law recognizes the Conservation Committee of the California Oil and Gas Producers and authorizes it or any other committee of oil producers to make voluntary recommendations to the supervisor regarding, among other things, maximum efficient rates of production, as defined, if specified conditions are satisfied.

This bill would instead authorize any committee of oil producers to make recommendations to the supervisor regarding oil and gas exploration and production, as specified, and would require the division to post any recommendations received by the supervisor on the divisions Internet Web site.

(7)The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

(1)Under existing law, the Division of Oil, Gas, and Geothermal Resources in the Department of Conservation regulates the drilling, operation, maintenance, and abandonment of oil and gas wells in the state. Existing law requires the State Oil and Gas Supervisor to supervise the drilling, operation, maintenance, and abandonment of wells and the operation, maintenance, and removal or abandonment of tanks and facilities related to oil and gas production within an oil and gas field, so as to prevent damage to life, health, property, and natural resources, as provided; to permit owners and operators of wells to utilize all known methods and practices to increase the ultimate recovery of hydrocarbons; and to perform the supervisors duties in a manner that encourages the wise development of oil and gas resources to best meet oil and gas needs in this state.

This bill would no longer require the supervisor to perform his or her duties in that manner. The bill would instead require the supervisor to authorize the exploration and production of hydrocarbons, including, among other things, the drilling, operation, maintenance, and abandonment of wells, and the use of enhanced oil recovery methods, as defined, and authorize the supervisor to allow an owner or operator of a well to utilize all known methods and practices to increase the ultimate recovery of hydrocarbons if the supervisor finds that those methods and practices are consistent with existing law.

(2)Existing law requires the operator of a well to file a written notice of intention to commence drilling with, and prohibits any drilling until approval is given by, the supervisor or district deputy. Under existing law, the notice is deemed approved if the supervisor or district deputy fails to respond to the notice in writing within 10 working days from receipt and is deemed canceled if operations have not commenced within one year of receipt.

This bill would require an owner or operator of a well to file an application for approval to commence drilling, containing specified information, and would prohibit any drilling until written approval is given by the supervisor or the district deputy containing specified findings. The bill would authorize the supervisor, upon request, to grant a one-year extension if operations have not commenced within one year of the approval.

(3)The Permit Streamlining Act requires any public agency that is the lead agency for a development project to approve or disapprove of a project, as specified. Under that act, if the lead agency or responsible agency is required to provide public notice of the development project or to hold a public hearing on the development project, or both, and the agency has not provided the public notice or held the hearing, or both, at least 60 days prior to the expirations of specified time periods, the applicant may file an action to compel the agency to provide the public notice or hold the hearing, or both, as specified.

This bill would require the supervisor to perform his or her duties in conformance with that act.

(4)Existing law generally provides that well records filed by owners or operators with the supervisor are public records. However, existing law authorizes the supervisor, upon written request of an owner or operator, to maintain well records of exploratory wells, or other wells if the supervisor determines that there are extenuating circumstances, as confidential information. Under existing law, the confidential period for an onshore or offshore well is up to 2 or 5 years, respectively, from the cessation of drilling operations, as defined. Existing law authorizes the supervisor to extend the period of confidentiality of a well for 6 months upon written request documenting extenuating circumstances and requires that the total period of confidentiality, including all extensions, for onshore and offshore wells not exceed 4 or 7 years, respectively, from the cessation of drilling operations.

This bill would limit the authorization to maintain the confidentiality of well records to exploratory wells and only if the owner or operator includes specified information in the written request. The bill would deem both the request for, and the granting of, confidential well status to be public records and would require that information to be accessible on the divisions Internet Web site. The bill would require all well records of a confidential well, as defined, to be posted on the divisions Internet Web site once the confidential well period has ended. The bill would require that the confidential period for an offshore well not exceed 3 years from the cessation of drilling operations and would authorize the supervisor to extend the period of confidentiality for confidential wells for only 6 months, upon receiving a written request documenting extenuating circumstances.

(5)Existing law requires an owner or operator of a well to keep a log, core record, and history of the drilling of wells to be provided to the district deputy within 60 days after the date of cessation of drilling, rework, or abandonment operations or the date of suspension of operation. Under existing law, a person who fails to comply with this and other requirements relating to the regulation of oil or gas operations is guilty of a misdemeanor.

This bill would in addition require an owner or operator of a well to report specified information to the applicable regional water quality control board within 5 days of any loss of well and well casing integrity. Because a violation of this requirement would be a crime, the bill would impose a state-mandated local program.

(6)Existing law recognizes the Conservation Committee of the California Oil and Gas Producers and authorizes it or any other committee of oil producers to make voluntary recommendations to the supervisor regarding, among other things, maximum efficient rates of production, as defined, if specified conditions are satisfied.

This bill would instead authorize any committee of oil producers to make recommendations to the supervisor regarding oil and gas exploration and production, as specified, and would require the division to post any recommendations received by the supervisor on the divisions Internet Web site.

(7)The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

SB 545 (Jackson) - Oil and gas operations

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

SB 545 would require that a well operator file a written application to the Division of Oil, Gas, and Geothermal Recovery (DOGGR) before commencing drilling a well, which would be posted on the DOGGR website.

Fiscal Impact:

Unknown revenue losses in the millions to tens of millions of dollars to the Oil, Gas, and Geothermal Administrative Fund as a result of decreased oil production.

Background:

DOGGR in the Department of Conservation is the state’s oil and gas regulator and is headed by the oil and gas supervisor. The supervisor is generally charged with overseeing the drilling, operation, maintenance, and abandonment of wells, tanks, and other facilities used in oil and gas regulation to prevent damage to life, health, property, and natural resources. Existing law requires the state’s oil and gas supervisor to produce a public annual report containing information about the state’s oil and gas production and other related material, as specified.

Existing law requires the operator of an oil and gas well to file a written notice of intention to commence drilling or to rework a well. It prohibits drilling until the notice is approved by the supervisor or division district deputy, although if neither responds in writing within 10 working days, the notice is deemed approved. The operator has one year to complete the work described in the notice (PRC §3203).

Existing law generally provides that well records filed by the well owners and operators are public. However, existing law (PRC §3234) allows the supervisor, upon written request from a well owner or operator, to keep certain well records of exploratory or certain other wells confidential for specified periods of time after the well has been drilled. For both onshore and offshore wells, the initial confidential periods of 2 and 5 years, respectively, can be extended up to another 2 years each, with further extension possible with the supervisor’s approval and subject to certain conditions.

Primary oil and gas production is when the oil and gas reservoir has sufficient internal pressure that the oil/gas can be produced using only pumping or other artificial lift method. Secondary and tertiary oil and gas production methods, collectively known as Enhanced Oil Recovery (EOR) methods, typically involve the addition of pressure and/or heat via injection well to the hydrocarbon reservoir in order to promote hydrocarbon production. Primary and EOR-assisted production are used both on and offshore.

Existing law recognizes the existence of the Conservation Committee of California Oil Producers and explicitly recognizes that the committee can lawfully issue recommendations on maximum efficient rates of productions.

Proposed Law:

This bill would make various changes to DOGGR’s authority and practices. Specifically, this bill would:

• Revise the process by which a well owner must obtain approval for well drilling, reworking, deepening, redrilling or plugging so that a permit application replaces the existing notice of intent. The application would be required to demonstrate that the drilling and any method utilized will pose de minimums risk to public health and safety. The application must be approved in writing and the approval and application must be publically available online.

• Require that the appropriate regional water quality control board be notified of a loss of well and well casing integrity within five days.

• Revise the requirements to obtain and retain confidential well status, as specified, including to require additional information, documentation, and public posting requirements. The total and initial time limits for confidential well status would be reduced.

• Define enhanced oil recovery and confidential wells.

• Revise the supervisor’s broad authority to regulated oil and gas field activities.

• Revise the recognition of the Conservation Committee of California Oil Producers.

Staff Comments:

The administrative changes in this bill largely can be absorbed by DOGGR, including the revisions to the supervisor’s broad authority over oil and gas field activities.

This bill would replace the current requirement for a well operator to file a notice of intent to drill with an explicit requirement to file an application for approval to commence drilling. These changes are largely in line with its current practices, or at least what should be their current practices under existing law, with one exception, the requirement that the application demonstrate that the drilling and working of the well will have a de minimis risk to public health and safety. According to DOGGR, this requirement will be virtually impossible to reach, as all drilling will have some impact, though that impact may be minimized and mitigated. Because this bill is establishing a standard that practically cannot be met, the bill is in effect ending all new well drilling and well reworking. Because the state receives fees based on the barrels of oils produced to fund DOGGR’s activities, by decreasing the amount of oil that can be produced in the state, this bill will result in tens of millions of dollars of reduced revenues.

This bill contains a definition of enhanced oil recovery that is similar but different to the definition of that same term in SB 248 (Pavley). Staff recommends that the bills be amended so that both bills contain the same definition.

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SENATE COMMITTEE ON NATURAL RESOURCES AND WATER

Senator Fran Pavley, Chair

2015 - 2016 Regular

Bill No: SB 545 Hearing Date: April 14, 2015

Subject: Oil and gas operations.

BACKGROUND AND EXISTING LAW

1. According to the Division of Oil, Gas and Geothermal Resources (division), the state’s oil and gas regulator, there are approximately 90,000 active oil and gas wells in the state. These wells are primarily used for oil and gas production, injection for enhanced oil recovery (EOR) by a variety of methods, injection for oil and gas field wastewater disposal, and gas storage, among others. As of 2013, California was the #3 oil producing state by volume and in the top 20 for natural gas.

2. Primary oil/gas production is when the oil/gas reservoir has sufficient internal pressure that the oil/gas can be produced using only pumping or other artificial lift method. Secondary and tertiary oil/gas production methods, collectively known as enhanced oil recovery (EOR) methods, typically involve the addition of pressure and/or heat via injection well to the oil/gas reservoir in order to promote oil/gas production.

3. The division is located in the Department of Conservation.

4. Existing law provides broad authority to the head of the division – the State Oil and Gas Supervisor (supervisor). Existing law requires the supervisor to supervise the drilling, operation, maintenance, and abandonment of oil and gas wells, as specified, and the operation, maintenance, and removal or abandonment of tanks and facilities related to oil and gas production within an oil and gas field, so as to prevent damage to life, health, property, and natural resources; to permit owners and operators of oil wells to utilize all known methods and practices to increase the ultimate recovery of hydrocarbons; and to perform these duties in a manner that encourages the wise development of oil and gas resources to best meet oil and gas needs in the state. (Public Resources Code (PRC) §3106).

5. Existing law requires the operator of an oil and gas well to file a written notice of intention to commence drilling or to rework a well. It prohibits drilling until the notice is approved by the supervisor or division district deputy, although if neither responds in writing within 10 working days, the notice is deemed approved. The operator has one year to complete the work described in the notice (PRC §3203).

6. Existing law, the Permit Streamlining Act (act) requires any public agency that is a lead agency for a development project to approve or disapprove of a project, as specified. Under the act, in certain circumstances, the project applicant may file an action to compel the agency to provide the public notice or hold the hearing, or both, among other provisions. (Government Code (GOV) §§65920 et seq.) According to the Office of Planning and Research, the act requires public agencies to “follow standardized time limits and procedures for specified types of land use decisions.”

7. Existing law generally provides that well records filed by the well owners and operators are public records. However, existing law (PRC §3234) allows the supervisor, upon written request from a well owner or operator, to keep certain well records of exploratory or certain other wells confidential for specified periods of time after the well has been drilled. For both onshore and offshore wells, the initial confidential periods of 2 and 5 years, respectively, can be extended up to another 2 years each, with further extension possible with the supervisor’s approval and subject to certain conditions. While well record confidentiality practices vary from state-to-state, the underlying idea is to provide some time for the owner or operator of the exploratory well to take competitive advantage of knowledge gained through the risk taken.

8. Existing law recognizes the Conservation Committee of the California Oil and Gas Producers and authorizes it or any other committee of oil producers to make voluntary recommendations to the supervisor regarding, among other things, the maximum efficient rate of production, as defined (PRC §§3450 – 3451).

PROPOSED LAW

This bill would revise several statutes governing the division’s authority and practices. Specifically this bill would:

• Define both EOR methods and confidential wells.

• Revise the supervisor’s broad authority to regulate oil and gas field activities in the state and specify that the supervisor shall administer the division in conformance with the Permit Streamlining Act.

• Revise the process for a well owner or operator to obtain approval for well drilling, reworking, deepening, redrilling or plugging, as specified. A permit application replaces the existing notice of intent, an application must be approved in writing, and the applications and written approvals must be posted online, among other provisions.

• Delete the requirement that a notice of intent to drill is deemed approved if the division does not respond in writing within 10 days.

• Require in the event of a loss of well and well casing integrity that the operator report any resulting action to the applicable regional water quality control board within 5 days.

• Revise the requirements to obtain and retain confidential well status, as specified, including additional information, documentation and public posting requirements. The initial confidential time period for offshore wells is reduced from 5 years to 3 years. A single extension of confidential wells status for no more than 6 months is available.

• Delete an obsolete definition, and revamp and add transparency to the supervisor’s interaction with the Conservation Committee of California Oil and Gas Producers or any other committee of oil and gas producers, and recommendations made to the supervisor by these committees, if any, as specified.

ARGUMENTS IN SUPPORT

According to the author, “[t]o realize the Governor’s 2030 vision of deriving fifty percent of California’s electricity from renewable sources and to reduce the release of pollutants into the atmosphere, the prime directive of the [division] – the agency charged with overseeing oil and gas exploration and production in California – cannot continue to be to increase the recovery of underground oil and gas as currently stated in law. This bill reforms the [division] by changing its prime directive to allow for, and strictly regulate in a transparent fashion, the judicious exploration and extraction of oil and gas in a manner that protects public health and the environment.”

According to Environmental Working Group, and others writing in support, “it has come to light over the last several years that [the division] has been lax in [its] regulation of the oil drilling industry. In 2011, the Legislature became aware that [the division] was not regulation fracking or any form of well stimulation, and it has recently been revealed that the [division] has been allowing oil companies to inject toxic wastewater in aquifers that are capable of supporting agricultural and domestic uses. SB 545 addresses a number of concerns at [the division] that will help ensure that this [division] is serving the public and protecting the environment, while [it] gives oil companies fair and efficient service.”

ARGUMENTS IN OPPOSITION

In a late joint letter, Western States Petroleum Association, in apparent reference to the bill’s changes to the supervisor’s authority, states “[a]s amended, SB 545 would fundamentally alter the primary mission [of the division] by requiring [the division] to issue permits for virtually all oil field activities including routine maintenance.”

COMMENTS

This bill is a work-in-progress. While EOR is a well-established set of techniques and is already referred to in existing statute and regulation, it is not currently defined. A review of the definition of EOR from multiple sources, including other oil- and gas-producing states, indicates that the definition proposed here requires technical and clarifying revision. The committee may wish to direct staff to continue working with the author’s office, should the bill pass the committee, to resolve this and other necessary technical and clarifying changes, as noted below, in order to achieve the author’s intent.

The supervisor’s broad regulatory authority has evolved over time. In 1915, the supervisor’s essential job – the supervision of the drilling, operation, and maintenance and abandonment of petroleum and gas wells – was established. The justification cited for regulating the oil/gas industry in 1915 included preventing damage to the hydrocarbon reservoir, and protecting neighboring property owners and the public. In the ensuing decades, oil/gas exploration and production, and the hazards associated with it, changed. The law describing the supervisor’s job and justifying the supervisor’s authority evolved to reflect these changes. Protecting groundwater quality, for example, is now used to justify oil/gas industry regulation. This bill would continue this evolution. However, the supervisor is supposed to supervise, not just permit, oil/gas field activities. The committee may wish to revise the bill to avoid limiting the supervisor’s existing broad authority to regulate [Amendment 1].

Is it necessary for the supervisor to encourage the “wise use” of the oil and gas resource? It does not appear so. Committee staff was unable to find similar language in the relevant laws and regulations of other major oil- and gas-producing states, although the other principal reasons cited to supervise the development and operation of oil and gas resources were highly similar.

Implications of the Permit Streamlining Act to the division. As existing state law, the division is already subject to the act. In general, the act requires regulators to take certain permit-related actions, as defined, within set time periods. This includes actions taken on permits for “development projects,” as defined, by state and local agencies and by lead and responsible agencies, as applicable, under the California Environmental Quality Act (CEQA). (As noted below, CEQA is under the jurisdiction of the Senate Committee on Environmental Quality and the discussion here is therefore limited.) There are provisions of the act that the division clearly satisfies – such as the requirement that a state agency compile and make available a detailed list of the information required to be submitted with a permit application.

It appears that the author’s intent, at least in part, is to substitute the longer period the act allows for the division to respond to a drilling notice (now permit) than the 10 days in existing law that the bill would delete. Committee staff have sought technical assistance in determining whether the current bill language addresses the author’s intent. Clarifying language may be required later as this is resolved.

Current law appears to allow the division to meet the 10 day response requirement without approving a notice by responding in writing that the notice is still under review.

Confidential wells. The supervisor’s annual report on the state’s oil and gas operations used to include a public tabulation of confidential wells. The information provided included the owner, location and drilling date of the well, among other non-secret information. Since the release of the 2009 annual report, however, the annual report’s tables have been limited to the specific information required in statute. Public information regarding confidential wells is still available from the division upon request. Limited review of the available historic data suggests that the total number of confidential wells during the period investigated was generally in the range of 100 – 150. The existing ability to maintain confidentiality for up to 4 and 7 years for onshore and offshore wells, respectively, without public review in California is relatively generous compared to many other states (6 months, as specified, in Colorado and Wyoming; 2 years only in Alaska; up to 3 or 6 years for onshore or offshore wells Texas).

Data management and handling. The division has acknowledged long-standing well data management and handling issues (see, for example, testimony at the March 10, 2015 joint hearing of the Senate Committees on Natural Resources and Water and Environmental Quality). The additional online posting of well information required by this bill may help spur needed reform, and provide more information to the public.

The interaction between the division and the state and regional water boards. There are at least two Memorandums of Agreement (MOAs) between the state water board and the state and regional water boards and the division. While the current interaction between the state and regional water boards and the division appears to be good, communication between them, particularly under the 1988 MOA related to the Underground Injection Control (UIC) program, has been inconsistent. This bill’s requirement that the operator notify the appropriate regional board in the event of a loss of well integrity seeks to ensure that the water quality regulator is notified in a timely manner of potential adverse impacts.

Maximum Efficient Rate (MER), as defined, appears to be obsolete. This bill deletes the definition of Maximum Efficient Rate and recasts the division’s statutory interaction with the Conservation Committee of California Oil Producers to remove, among other things, the reference to MER. MER generally means the maximum rate an oil reservoir can be produced without unduly impacting total recovery from the reservoir. The two relevant sections (PRC §§3450 – 3451) were added in the mid-1950s, have not been revised much since, and are not otherwise referenced in regulation. While some states may regulate some activities based upon MER, it does not appear that California does, although the state does consider the somewhat recast “ultimate economic recovery” in the context of unitized pools (see 14 CCR §1720). Additionally, the provisions of PRC §3160b appear to ensure the concept underlying MER is taken into consideration in the regulation of oil/gas activities.

This bill is double-referred. The Rules Committee referred this bill to both the Committee on Natural Resources and Water and to the Committee on Environmental Quality. Therefore, should this bill pass this Committee, it will be referred to the Committee on Environmental Quality, which will consider the issues in this bill in its jurisdiction (for example, CEQA).

Related legislation

SB 248 (Pavley, 2015) This bill would provide for reform of DOGGR and its injection well program, including improving public transparency and regulatory accountability (before the Senate Natural Resources and Water Committee at this hearing)

AB 356 (Williams, 2015) This bill would provide for reform of the UIC program with an emphasis on the role of the Water Boards and require groundwater monitoring in the vicinity of UIC wells (before the Assembly Natural Resources Committee)

SB 454 (Allen, 2015) This bill seeks to alter the aquifer exemption process for the UIC program (in the Senate Rules Committee)

SUGGESTED AMENDMENTS

AMENDMENT 1

Revise proposed PRC §3106 to ensure that the supervisor’s existing broad authority to supervise oil/gas field activities is retained.

SUPPORT

California League of Conservation Voters

Citizens Coalition for a Safe Community

Citizens for Responsible Oil and Gas

Clean Water Action

Earthworks

Environmental Working Group

Grassroots Coalition

League of Women Voters of California

Los Padres ForestWatch

Natural Resources Defense Council

Physicians for Social Responsibility

Save the Sespe

Sierra Club California

The Wildlands Conservancy

OPPOSITION

California Chamber of Commerce

California Independent Petroleum Association

Independent Oil Producers’ Agency

Western States Petroleum Association

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