My colleague, Mike Mills, had the chance to speak with Colin O'Keefe of LXBN TV today regarding several bills currently under consideration by the California legislature that would impose a moratorium on hydraulic fracturing. In the interview, Mike said it was very likely a fracking moratorium bill will be passed in some form. The real question, he added, will be whether Governor Jerry Brown will sign the bill. The Governor's decision will likely depend on what happens with draft fracking regulations currently being developed by state regulatory agencies.
Yesterday, the Senate Committee on Environmental Quality advanced two bills that would increase regulation of hydraulic fracturing. The first of these bills, SB 4, would (1) impose a permit requirement specific to fracking activities and (2) prohibit fracking beginning January 1, 2015, pending the completion of a study on the impact of fracking (see April 11, 2013, post). The second bill, SB 395, would (1) subject the disposal of fracking-related water to underground injection control regulations, from which oil and gas operations are currently exempt, and (2) effectively prohibit the disposal of fracking wastewater containing hazardous waste by injection (see April 8, 2013, post). Both bills were referred to the Committee on Appropriations, from which they may advance to the Senate floor.
If SB 4 passes in the Senate, it will compete with three Assembly bills proposing fracking moratoriums. The Assembly Committee on Natural Resources also advanced those three bills this week (see May 1, 2013, post). SB 4 is the least restrictive of the proposed bills, allowing fracking activities to continue at least until 2015, while the Assembly bills would each prohibit fracking immediately.
On Monday, the Assembly Committee on Natural Resources passed three separate bills that would each place a moratorium on hydraulic fracturing. The next stop for these bills is the Assembly Committee on Appropriations, then the bills may advance to the floor.
Each of the three bills would restrict fracking activities pending a determination of whether and under what conditions fracking may be conducted without risk to human health or the environment. Two of the bills, AB 1301 and AB 1323, would prohibit fracking anywhere in the state. The third bill, AB 649, would only prohibit fracking, as well as the use of clean freshwater for fracking purposes, within a yet to be determined distance of an aquifer.
Other than the scope of the prohibition on fracking, the requirements of AB 649 and AB 1323 are the same. Before the prohibited fracking activities could recommence, the bills would require an advisory committee, convened by the Secretary of the Natural Resources Agency and the Secretary for Environmental Protection, to develop a report addressing potential health and environmental impacts of fracking, potential economic impacts of increased enhanced oil and gas recovery, potential effects on communities, a review of existing regulations and determination of whether they are adequate, and recommendations for emergency planning and regulations to address issues identified. The bills would require completion of the final report by January 1, 2018, and a determination of whether and under what conditions fracking may be conducted by January 1, 2019. However, the prohibition on fracking imposed by these bills would go into effect immediately.
AB 1301, in contrast to the other two bills, would prohibit fracking in the state until the Legislature, as opposed to the agencies, determines whether and under what conditions fracking may be conducted without risk to human health or the environment. AB 1301 is otherwise less detailed than AB 649 and 1323. AB 1301 does not indicate how and on what timeline the Legislature should determine whether and under what conditions fracking activities may recommence.
Under any of the three proposed bills, a fracking moratorium, at least within some distance of an aquifer, would be certain and the timeline for lifting that moratorium would likely be on a scale of years. If either AB 649 or AB 1323 are enacted as currently written, the best case scenario for lifting an imposed moratorium on fracking is probably January 1, 2019. Although it is possible that a determination regarding whether and under what conditions fracking may be conducted could occur before that deadline, that is unlikely, and it is more likely that the agencies would fail to meet that deadline and fracking activities would be further delayed. If AB 1301 is enacted, without a given timeline and without any detail regarding how the Legislature is to make a determination regarding the impacts of fracking, the results are even less certain.
The Assembly bills proposing a moratorium on fracking would have an effect on fracking operations sooner than their counterpart in the Senate. In contrast, the Senate bill, SB 4, would allow fracking activities until January 1, 2015, and would only prohibit fracking after that date if a study on its impacts is not completed (see April 11, 2013, post).
On the eve of target date to commence construction, the California High-Speed Rail Authority (the “Authority”) managed to settle the remaining environmental lawsuit that jeopardized the construction of the initial segment of the High-Speed Rail project. On April 18, 2013, the Madera County Farm Bureau, Merced County Farm Bureau, Chowchilla Water District, Preserve Our Heritage, certain individual farmers, and the Authority reached a settlement agreement to resolve their lawsuit challenging the Authority’s approval of environmental impact reports for a section of the High-Speed Rail project that will bysect farmland in Madera and Merced counties.
The settlement agreement requires the Authority to create a $4 million agricultural land mitigation fund to protect farmland and to allow local farm groups to collaborate with the Authority for agricultural mitigation. The resolution of this suit along with three other environmental suits settled earlier this year will allow the Authority to finally move forward with construction on the first segment of the $86 billion project.
See the Authority’s press release for more details.
Environmental Groups Challenge More BLM Leases Based on District Court's Finding that BLM Failed to Adequately Consider the Impacts of Fracking
Less than a month after the United States District Court for the Northern District of California’s decision that BLM failed to fully evaluate the potential impacts of hydraulic fracturing operations in granting oil and gas leases (see April 11, 2013, post), the Center for Biological Diversity and the Sierra Club have initiated a second lawsuit challenging BLM’s award of oil and gas leases for a much larger area of federal lands in California. The first suit challenged BLM’s issuance of oil and gas leases for approximately 2,700 acres of land. The second suit calls into question federal leases for nearly 18,000 acres of land. Both sets of leases involve California’s Monterey Shale Formation.
In the first suit, the court held that BLM violated the National Environmental Policy Act (NEPA) by unreasonably relying on what the court found was an outdated resource management plan and environmental impact statement that lead to the assumption that only one exploratory well would be drilled on the approximately 2,700 acres of leased land. The court concluded that advances in fracking technology have since significantly increased the number of wells that were likely to be drilled in the area and that BLM should have re-evaluated the potential impact of fracking resulting from issuing oil and gas leases for those lands.
The environmental groups argue in the second suit that BLM again failed to consider current information regarding the potential impacts of fracking. In this latest suit, BLM assumed only one well would be drilled on the nearly 18,000 acres of leased lands. Give the larger area at issue in the second suit, it is likely that the court will again side with the plaintiffs and find that BLM's NEPA analysis failed to fully consider the potential impact of fracking.
The California Air Resources Board (CARB) is facing another legal challenge to its cap and trade program – Morning Star Packing Co. v. California Air Resources Board (Sacramento Superior Court case no. 34-2013-80001464, filed April 16, 2013). A coalition of twelve companies, trade associations, and individuals filed the new lawsuit on Tuesday, challenging the legality of the cap and trade auctions. The plaintiffs allege that revenues generated by cap and trade that go to the state constitute illegal taxes, unauthorized by AB 32, and in violation of article XIII A, section 3 of the California Constitution. Article XIII A requires that any new tax be adopted by a two-thirds vote of the California Legislature; AB 32 was passed with a simple majority. The lawsuit seeks to rescind the cap and trade regulations related to allowance auctions and force CARB to refrain from enforcing or implementing the cap and trade regulation, conducting further auctions, or collecting revenues from those auctions. The complaint also alleges that the suite of legislation passed in 2012 – SB 535, SB 1018, AB 1464, and AB 1532 – to allocate the use of revenues generated by cap and trade auctions is unconstitutional, as these laws were also not passed by a two-thirds majority of the Legislature. The Plaintiffs ask the court to enjoin CARB from implementing the new laws.
Morning Star Packing Co. is the second lawsuit challenging the cap and trade auction system as an unlawful tax. The California Chamber of Commerce sued CARB two days before the first cap and trade auction took place, in November 2012, raising claims similar to several of those advanced in Morning Star Packing Co. The Chamber of Commerce suit argues that CARB’s retaining the proceeds from its auction of cap and trade allowances amounts to a fee, unauthorized by AB 32. The Chamber also alleges that the cap and trade regulations violate article XIII A, section 3 of the California Constitution, as a tax passed with less than a two-thirds majority of the Legislature. The Chamber of Commerce asks that the court prohibit CARB from allocating cap and trade allowances to itself, conducting the auctions or selling off the allowances, and enforcing or imposing the regulation’s cap and trade auction provisions, but does not go as far as seeking a rescission of the cap and trade auction regulations. The Environmental Defense Fund, Natural Resources Defense Council, and the National Association of Manufacturers have intervened in the California Chamber of Commerce case and a hearing on the merits of the case is scheduled for August 28, 2013. Attorneys for Morning Star Packing Co. have filed a notice of related case with the California Chamber of Commerce v. CARB court.
South Coast Air Quality Management District Schedules Fifth Working Group Meeting on Proposed Rule 1304.1, Comment Period on Notice of Preparation of Environmental Assessment Open until May 8
The South Coast Air Quality Management District has scheduled its fifth working group meeting on the District’s proposed Rule 1304.1 for May 8, 2013. The proposed Rule would impose substantial new fees for the replacement or repower of electrical generating facilities within the District, by charging developers who obtain air emissions offsets from the District’s internal Priority Reserve offset account under existing rules. For more details on the proposed Rule, read our February 11, 2013 alert. The latest revisions to the proposed Rule soften some stringent provisions, but also make the Rule retrospective to July 1, 2013. The current proposed hearing date for the draft Rule is September 6, 2013. The most recent revisions:
- Provide developers with an option to pay the entire offset fee upfront or on an annual basis.
- Eliminate the requirement, if paying the fee annually, to provide the first five years of fees prior to the issuance of a permit.
- Relax the fee refund schedule, allowing for a 100% refund prior to commencement of operation if a project does not go forward.
- Reduce the fees charged for particulate matter, sulfur oxide, and volatile organic compound offsets.
- Charge a lower fee for the first 100 MW repowered at a facility.Make the offset fees applicable to any facility repowered after July 1, 2013.
The District also recently issued a notice of preparation (NOP) of a draft environmental assessment for proposed Rule 1304.1. The comment period for the NOP runs until May 8, 2013. The District has identified air quality and energy as the only environmental areas that may be adversely affected by the proposed Rule and will analyze these areas further in the environmental assessment. A public meeting on the scope of the proposed Rule’s environmental review has not yet been scheduled.
Yesterday, the California Assembly Committee on Natural Resources passed three bills that would impose new permitting and disclosure requirements on hydraulic fracturing operations. The Committee passed and referred these three bills, AB 288, AB 7 and AB 669, to the Committee on Appropriations.
As discussed in further detail in the blog post on April 11, 2013, AB 288 and AB 7 would respectively require an operator to obtain a permit specifically allowing well stimulation activities, including fracking, and to disclose the chemicals and volumes of water used in its operations. AB 669 would also require an operator, before commencing fracking activities, to obtain approval of its wastewater disposal method and location from the regional water board.
This vote moves the bills one step closer to the Governor’s desk, where the decision as to whether California should more stringently regulate fracking will ultimately be decided.
Last week, the UC Berkeley Center for Law, Energy and the Environment released a report recommending increased regulation and further study of the impacts of hydraulic fracturing activities in California on public health and the environment. The report focuses on the potential impacts to groundwater and surface water resources relating to the management of wastewater associated with fracking, but also touches on other environmental and public health issues, such as air emissions and increased demand for water in well completions.
The report identifies the major risk drivers as fracking wastewater storage and handling, wastewater disposal by injection, and potential groundwater contamination associated with failed well integrity. While acknowledging the discussion draft rules issued by the Department of Conservation, Division of Oil, Gas, and Geothermal Resources (see December 19, 2013, post), the report concludes that further regulation is required to adequately address those risks. In particular, the report recommends at least 30-day notice to regulators and the community before commencing fracking operations, while DOGGR’s discussion draft requires only 10-day notice. The report also recommends requiring well operators to disclose to DOGGR all chemicals in fracking fluids, including those that would be subject to trade secret protection under DOGGR’s discussion draft. Further, the report recommends more stringent well integrity testing prior to fracking activities and increased pressure monitoring during fracking operations.
Most of the recommendations in the report have already been addressed to some extent by one of the several bills before the California Legislature this session (AB 7, AB 288, AB 982, SB 4, SB 395); however, the report also introduces some new concepts relating to the disposal of fracking wastewater. In particular, the report recommends requiring unique tracer chemicals in fracking wastewater to track direct impacts to groundwater and surface water resources. The report also recommends requiring operators to maximize the recycling and reuse of flowback and produced water and prohibiting the discharge of any fracking wastewater to publicly owned treatment works.
In addition to more stringent reporting, monitoring and wastewater management requirements, the report recommends further study of the impacts of fracking, funded by an increase in DOGGR’s fees. The study would include an examination of the potential seismic impacts, despite DOGGR’s position that induced seismicity is not associated with fracking operations. The report also identifies other issues outside the scope of the report, such as an increased demand for water used in fracking, greenhouse gas and other air emissions, land use impacts and other potential public health impacts to workers and communities.
UC Berkeley’s report will likely be cited as support for one or more of the bills pending in the California Legislature that would require more stringent regulation of fracking operations than that proposed in the draft DOGGR regulations. Also, DOGGR may incorporate some of the report’s recommendations when it issues a proposed rule and initiates the formal rulemaking process. Even if the recommendations in the report do not make it into DOGGR’s proposed rule, the report will certainly be cited by commenters in support of more stringent regulation in the rulemaking process and could thus find their way into DOGGR’s final rule. In any case, it is quite possible that at least some of the recommendations in the report will become legal mandates in the very near future.
On Monday, Assembly Members amended two bills relating to hydraulic fracturing - one increasing the scope of regulated activities and another allowing trade secret protection of related disclosures. Assembly Member Levine amended AB 288, which originally proposed requiring operators to obtain a permit specific to fracking (see March 8, 2013, post), to expand the permit requirement to all types of well stimulation, specifically including fracking and acid stimulation.
In contrast, Assembly Member Wieckowski amended AB 7 to (1) allow for trade secret protection of information relating to disclosure of fracking operations and (2) exclude the mandate to Department of Conservation’s Oil, Gas & Geothermal Resources (DOGGR) to implement fracking regulations by 2014. AB 7 would still require operators to disclose the chemicals and volumes of water used in their fracking activities. See the blog post on December 9, 2012, for further details on AB 7 as originally introduced.
Also this week, Senator Pavley's amended SB 4 passed the Senate Natural Resources and Water Committee. The amended bill would require a permit specific to fracking and notification to affected property owners. The bill would also mandate a study on the impact of fracking before 2015 and prohibit the issuance of any permits from that time until the study is completed. See the blog post on March 28, 2013, for further details on SB 4. Lawmakers supporting the bill indicate that it would fill some of the gaps they see in the DOGGR's draft fracking regulations. See the blog post on December 19, 2012, for further details on DOGGR's discussion draft of its fracking rules.