In Saltonstall, et al. v. City of Sacramento, No. C077772 (Cal. Ct. App. 3rd Dist., Feb. 18, 2015), the Third Appellate District affirmed the judgment of the Superior Court in holding that the City of Sacramento did not violate the California Environmental Quality Act (“CEQA”) by beginning construction of the downtown arena. This appeal comes just months after the Third Appellate District rejected the same petitioners’ arguments that expedited CEQA timelines were unconstitutional. (Saltonstall et al., v. City of Sacramento, No. C077031 (Cal. Ct. App. 3rd Dist., Nov. 20, 2014) (Saltonstall I).)
California Assemblymember Das Williams (D-Carpinteria) has introduced an oil and gas bill to ensure that the state comes into compliance with the Class II underground injection (“UIC”) requirements under the federal Safe Drinking Water Act (“SDWA”). According to the U.S. Environmental Protection Agency (“USEPA”), California is currently out of compliance with certain requirements for some Class II injection wells (oil and gas wastewater disposal wells) because fluid from these wells is being injected into non-exempt aquifers, which is prohibited. Assembly Bill 356 (“AB 356”) was introduced on February 17, 2015 following publication of a letter from the Division of Oil, Gas and Geothermal Resources (“DOGGR”) to the USEPA addressing California’s Class II UIC program.
The bill authorizes the DOGGR Supervisor to require operators to implement a groundwater monitoring program for underground oil production tanks, facilities, and disposal and injection wells. In addition, AB 356 would require operators to submit this monitoring plan, with a schedule for monitoring and reporting groundwater quality data, to the local regional water quality control board. Data would then be submitted to the State Water Resources Control Board for inclusion in the geotracker database. The purpose of the bill is to protect underground drinking water sources from potential contamination arising from oil and gas operations.
On Thursday, Feb. 19, the Center for Biological Diversity (“CBD”) filed suit against the Bureau of Ocean Energy Management (“BOEM”), the Bureau of Safety and Environmental Enforcement (“BSEE”), and the Department of the Interior (“DOI”) in the U.S. District Court for the Central District of California. (CBD v. Bureau of Ocean Energy Management et al., Case No. 2:15-cv-01189.) The complaint alleges that the federal agencies issued permits for drilling off the coast of California without adequate environmental review. Specifically, CBD claims that the federal government violated the Outer Continental Shelf Lands Act, the National Environmental Policy Act, and the Coastal Zone Management Act “without analyzing fracking pollution’s threats to ocean ecosystems, coastal communities and marine wildlife, including sea otters, fish, sea turtles and whales.” (CBD Press Release, Feb. 19, 2015.)
On Friday, February 6, California’s Division of Oil, Gas, and Geothermal Resources (“DOGGR”) published a letter to the US Environmental Protection Agency (“USEPA”) addressing issues with California’s Class II Oil and Gas Underground Injection Control program (“UIC”). DOGGR wrote the letter in response to two previous letters from the USEPA where the USEPA pointed out “serious deficiencies in California’s Class II program and inconsistencies with federal UIC regulations.” California is currently out of compliance with the Safe Drinking Water Act (“SDWA”) requirements for Class II injection wells because fluid from these wells is being injected into non-exempt aquifers, which is prohibited.
The USEPA classifies injection wells into six categories, based on the materials in the injection fluid. Class II wells are wells in which fluids from oil and gas operations are injected. The fluid is injected in order to safely dispose of it, and most of the fluid is “brine that is produced when oil and gas are extracted from the earth,” according to the California Department of Conservation. To date, there are over 50,000 Class II wells in the state and all are subject to regulation under the Class II UIC program.
The primary issue addressed in the letter from DOGGR to USEPA is that fluids from Class II wells are being injected into aquifers that have not been exempt by the USEPA. An “exempt aquifer” is defined by the USEPA as a well for which “protection under the SDWA has been waived by the UIC Program.” This means that the aquifer is not a source of drinking water or a source of water for public works. The exemption requirement is in place due to public health concerns — the USEPA wants to ensure there is no risk of contamination. If an aquifer is non-exempt, oil and gas waste disposal is prohibited under the SDWA.
DOGGR’s Rulemaking & Data Collection
To address this noncompliance, DOGGR will initiate a rulemaking by April 1, 2015. The purpose of the rulemaking is to establish a “regulatory compliance schedule to eliminate Class II injection into undisputedly non-exempt aquifers statewide.” (Letter from DOGGR to USEPA, at p. 6.) DOGGR also announced that it will phase out injection into nonexempt aquifers by February 15, 2017.
Further, DOGGR is going to begin collecting data from oil and gas operators in order to support requests for aquifer exemptions for certain aquifers. This will allow Class II injection to continue into aquifers once they have received an exempt status. DOGGR announced that there will be two USEPA-sponsored workshops to assist in the data collection process: one in Bakersfield during the last week in February 2015 and one in Los Angeles during the last week in March 2015. (Letter from DOGGR to USEPA, at p. 5.)
DOGGR also stated that there are no health issues associated with the current UIC program in California: “the analytical data from the water supply wells that the State ordered to be tested have not shown any contamination of the water supply wells by oil and gas injection activities.” (Letter from DOGGR to USEPA, at p. 5.)
On January 26, the U.S. Fish and Wildlife Service (“USFWS”) issued a letter to the California High-Speed Rail Authority (the “Authority”) that found that the Authority’s contractors are not in compliance with the Authority’s original environmental commitments to the USFWS in performing the preliminary work on the first segment of the high-speed rail project (the “Project”).
The USFWS has alleged that the Authority, the Federal Railroad Administration, and with the contractor hired for the construction of the first segment, failed to comply with the conditions of the federal biological opinion issued to the Authority in 2012. The biological opinion sets forth terms describing how the Authority should treat sensitive habitat for endangered species during the construction period of the Project. Last summer, in preparation of the groundbreaking for construction of the first segment, the contractors prepared equipment-staging and test-piling sites, however, these sites were prepared outside of the environmental footprint agreed upon by the Authority and the USFWS. This work violated the terms of the USFWS biological opinion. More importantly, the sites disrupted an area considered San Joaquin Kit Fox habitat.
The San Joaquin Kit Fox is a small fox, weighing about five pounds and has been on the Federal Endangered Species List since 1967 because of several factors, including, but not limited to, habitat loss and degradation resulting from human activity, such as the conversion of historic habitat to agriculture, as well as rodent-poisoning efforts. The kit fox is largely nocturnal and uses underground burrows as dens. The Authority’s preliminary work for the Project that disrupted the kit fox habitat is what the USFWS is now describing as an “unauthorized take” of kit fox habitat.
The Endangered Species Act prohibits anyone, without a permit issued by the Secretary of the Interior, from “taking” any federally-listed threatened or endangered species. “Take” is defined as “to harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect, or to attempt to engage in any such conduct.” A violations of the Endangered Species Act is a Class A Misdemeanor, carrying a maximum corporate penalty of 1 year incarceration, a $200,000.00 fine, or both.
The USFWS has stated that the Authority is currently working cooperatively with the USFWS to remedy these violations and no fines or penalties will be assessed at this time.
On December 10, 2014, the California Supreme Court granted petition for review in Friends of the Eel River v. North Coast Railroad Authority to resolve a split between the First and Third District Courts of Appeal. (230 Cal.App.4th 85 (2014), cert. granted, 339 P.3d 329, Cal. S.C. Case No. S222472 (2014).) The Court will consider two questions:
(1) Does the Interstate Commerce Commission Termination Act (“ICCTA”) (49 U.S.C. § 10101 et seq.) preempt the application of the California Environmental Quality Act [CEQA] (Pub. Res. Code, § 21050 et seq.) to a state agency’s proprietary acts with respect to a state-owned and funded rail line or is CEQA not preempted in such circumstances under the market participant doctrine (see Town of Atherton v. California High Speed Rail Authority (2014) 228 Cal.App.4th 314)?
(2) Does the ICCTA preempt a state agency’s voluntary commitments to comply with CEQA as a condition of receiving state funds for a state-owned rail line and/or leasing state-owned property?
The Supreme Court’s decision on this issue has the potential to affect crude by rail shipments in California, which has increased dramatically within California and nationwide in the past several years. In 2013, railroads transported almost 40 million tons of crude oil across the U.S., as compared to approximately 20 million tons in 2012 and 7 million tons in 2011, according to data from the Association of American Railroads.
Does ICCTA Preempt CEQA?
We were pleased to announce this week that client Southern Ute Alternative Energy, LLC received certification as a Minority-owned Business Entity (MBE) from the California Supplier Clearinghouse. Southern Ute Alternative Energy, LLC is a wholly owned subsidiary of the Southern Ute Indian Tribe’s Growth Fund (www.sugf.com).
Under General Order 156, the California Public Utilities Commission (“CPUC”) requires large investor-owned utilities and their regulated subsidiaries in California to implement programs that expand their business relationships with woman- and minority-owned businesses (“WMBEs”). The Clearinghouse is a CPUC-supervised entity that audits and verifies the status of WMBEs, and maintains a database of woman, minority, and service disabled veteran owned businesses that is accessible to both the CPUC and participating utilities. Obtaining official MBE status can make a company an attractive partner for California power utilities seeking to promote MBE business opportunities under General Order 156.
There are several ways to secure status in California for a minority owned business. The options include the National Minority Supplier Development Council (NMSDC), the Small Business Administration’s 8(a) Business Development Program (SBA 8(a)), as well as the CPUC certification process utilized by Southern Ute Alternative Energy, LLC. While these three certification processes are similar, selection of the certification process is a strategic one, guided by the business purpose and the types of contracts the minority owned business desires to secure.
To meet their diversity mandates or priorities, private and public sector firms search for minority-owned suppliers through programs that have formal certification processes. Without the necessary certification, eligible businesses stand to miss out on opportunities ranging from branding benefits to reduced-competition in securing a public contract.
Today saw two significant developments for oil and gas operators utilizing well stimulation treatments in California.
Pursuant to SB 4, the Department of Conservation’s Division of Oil, Gas and Geothermal Resources released a statewide programmatic Draft Environmental Impact Report (“EIR”) analyzing the potential environmental impacts associated with well stimulation treatments, including hydraulic fracturing (aka “fracking”).
The scope of the analysis in the EIR focuses on all activities associated with a stimulation treatment that could occur either at an existing oil and gas well, an oil and gas well that is drilled in the future with the intent to stimulate the well, or a well drilled with a reasonable possibility of becoming subject to a stimulation treatment. The technical analysis is divided into six study regions and addresses 24 environmental subject areas. The public review and comment period for the Draft EIR begins today and will end on March 16, 2015. To review the Draft EIR, visit: http://www.conservation.ca.gov/dog/SB4DEIR/Pages/SB4_DEIR_TOC.aspx.
SB 4 also mandates that the California Resources Agency prepare an independent, scientific study on well stimulation treatments for onshore and offshore oil and gas production in California. The California Council on Science and Technology and the Lawrence Berkeley National Laboratory released a portion of that independent scientific assessment today for the Resources Agency regarding well stimulation. The first volume, released today, provides the factual background on well stimulation treatments, and describes the general practices in California and where it has been used. The remaining two volumes are scheduled for full release in July 2015. To view or download the report, visit: http://www.ccst.us/projects/hydraulic_fracturing_public/SB4.php
The California Office of Environmental Health and Hazard Assessment (“OEHHA”) recently released its long anticipated Notice of Proposed Rulemaking proposing changes to the warning requirements under Proposition 65’s (“Prop 65”) implementing regulations. In summary, the proposed regulations would establish a new mandatory regulation regarding the responsibility of product manufacturers and others in the distribution chain and provide guidance on the methods and content for safe harbor warnings, including the statement that a person “can be exposed” to a listed chemical. Significantly, the proposed amendments include an update to the current safe harbor warning and require specific identification of certain chemicals on warning labels.
We issued a client alert advisory on the key details of the proposed rule changes, which you can read here.
On December 30, 2014, the California Office of Administrative Law (“OAL”) approved the Final Permanent Well Stimulation Treatment Regulations (“Permanent Regulations”). The regulations go into effect on July 1, 2015, and the Interim Regulations, which were operative all of last year, will remain the governing law in the meantime. By finalizing the Permanent Regulations, California leads the way with the most stringent, comprehensive hydraulic fracturing (“fracking”) regulations in the country.
The Permanent Regulations are the result of multiple regulatory revisions and reflect extensive input from the public, industry, and various state agencies. Please see our oil and gas resources page for more information about the development of the Permanent Regulations.