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).
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.
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.
A federal judge in the United States District Court for the Northern District of California in San Jose ruled that the Bureau of Land Management (BLM) failed to fully evaluate the potential impacts of hydraulic fracturing operations in granting oil and gas leases for approximately 2,700 acres of land over California's Monterey Shale Formation. The court concluded that BLM violated the National Environmental Policy Act (NEPA) by unreasonably relying on a 2006 resource management plan and environmental impact statement governing management of the larger planning area encompassing the leases. In the 2006 plan, BLM had determined, based on a survey of past oil and gas activities, that no more than 15 wells would be drilled in the entire planning area. Using this figure to evaluate the impact of granting the leases, BLM assumed that no more than one exploratory well would be drilled on the leased land and concluded in an environmental assessment that granting the leases would result in no significant impact on the environment.
The court disagreed with BLM's analysis, finding that BLM failed to consider the impact of current fracking technology on the availability of oil from the Monterey Shale. By relying on the 2006 plan, based on outdated technologies, the court concluded that BLM failed to take into account the "reasonably foreseeable" possibility that current technologies would lead to significantly increased oil production in the area of the leases. Based on the current scale of fracking, BLM should have performed further environmental analysis to determined the "new and significant environmental impacts" associated with granting the leases.
The court agreed with BLM that the impacts of fracking are largely unknown; however, it also found that this was "precisely why proper investigation was so crucial in this case." But the court refused to issue a remedy at this stage, ordering the parties to submit a joint recommendation. If the parties cannot reach agreement on a proposed remedy, each will argue their respective position for a final decision on the remedy.
The judge emphasized that the decision was not a determination regarding the environmental impacts of fracking, only that BLM failed to adequately consider such impacts under NEPA. Nonetheless, this case does suggest that recent developments in fracking technologies have resulted in unknown and potentially significant adverse impacts to the environment. This will certainly prompt increased environmental analyses of the impacts of fracking in the context of other federal, state and local authorizations and increase the time and administrative costs of obtaining such studies and approvals.
Last week, the South Coast Air Quality Management District (SCAQMD) adopted a rule requiring pre-notification and reporting of air emissions and chemicals used in hydraulic fracturing operations. SCAQMD regulates air quality in Orange County and major portions of Los Angeles, San Bernardino and Riverside counties. The rule arose from a September 2012 symposium on fracking in the South Coast Air Basin, including representatives from the government, industry and environmental groups. In addition to fracking, the rule applies to other production stimulation activities such as gravel packing and acidizing. The rule will go into effect in early June, 60 days after its adoption on April 5.
The rule will be implemented in two steps, the first of which is the notification and reporting requirements. At least 24 hours before commencing drilling, well completion or rework activities, the rule requires operators to submit written notification to SCAQMD that specifies the location of the well, the type of activity that will be performed, and the distance, up to 1,500 feet, from the well to the nearest "sensitive receptor". Sensitive receptors include residences, educational facilities, daycare centers and health care facilities. SCAQMD will post this information on its website within 24 hours of its receipt.
The rule also requires operators and suppliers of chemicals used to report to SCAQMD information relating to air emissions and chemical use. Within 60 days of completing drilling, well completion or rework activities, the operator must report information relating to combustion equipment and fugitive dust emissions and the volume, management and chemical ingredients of fluids used in the operations. Suppliers of chemicals for drilling, well completion or rework activities are also required to report the chemicals that are delivered to oil and gas well operators. SCAQMD will post the information provided for the chemicals used at each well on its website, excluding certain details relating to chemicals for which suppliers claim trade secret protection. For chemicals identified as trade secrets, SCAQMD will post only the chemical family (or similar descriptor) and identify whether the chemical is an air toxic.
The purpose of the first step of the rule is to gather information on emissions and chemical use relating to fracking and other production stimulation activities. No later than two years after implementation of the first step, the second step of the rule will be a report evaluating the information collected and potentially recommending further regulation. Although the first step of the rule does not at this time restrict fracking activities, it does impose additional administrative requirements and could likely lead to future regulation including emission control requirements and fluid ingredient, volume and management limitations for fracking and other production stimulation activities.
Last week, California Senator Hannah-Beth Jackson amended the bill she introduced earlier this year to further regulate the management of water produced in fracking operations. As amended, SB 395 would eliminate the exemption from underground injection control (UIC) regulations for wells regulated by the Department of Conservation’s Division of Oil, Gas, and Geothermal Resources (DOGGR) and used for the disposal of water associated with fracking activities. The amended SB 395 also would exclude from the definition of oilfield wastewater any material containing hazardous waste. This would effectively prohibit the disposal of fracking wastewater containing hazardous waste by injection and subject the disposal of any water produced in fracking operations to UIC regulations.
Like the prior version of the bill (see March 8, 2013 post), the amended bill would continue to define “produced water” broadly (any fluid that is emitted from an oil or gas production well), and could be interpreted to include even natural groundwater brought up during oil and gas operations. Under the amended bill, this definition would mean that the injection of any water brought up during oil and gas operations would be subject to UIC regulation. The amended bill would also shift the prior focus from regulating fracking wastewater as hazardous waste to regulating fracking wastewater disposal. Specifically, it would prohibit the injection of any wastewater containing hazardous waste.
This month, California State Senator Fran Pavley introduced significant amendments to her bill to regulate hydraulic fracking activities (SB 4), including a ban on fracking until completion of a study on its impacts and a permit requirement specific to fracking activities. The bill as first introduced would only have required disclosure of the chemicals and the amount of water used in fracking operations (see December 9, 2012, post).
After the amendments, SB 4 would require the Natural Resources Agency to complete a study on the impact of fracking before 2015. If the study is not completed and peer reviewed by that time, the bill would prohibit the Department of Conservation’s Oil, Gas & Geothermal Resources (DOGGR) from issuing any permits allowing fracking beginning January 1, 2015, until the study completed and peer reviewed. Also, despite DOGGR’s assertions that induced seismicity is not a concern associated with fracking, the study would include an examination of the potential seismic effects.
The amended bill would also require operators to obtain a permit specifically allowing fracking activities, which the operator would need to provide to certain surface property owners at least 30 days before commencing fracking operations. The application for the permit would require an estimate of the amount of water to be used in the proposed fracking activities, the source of that water, and the estimated length, height and direction of the fractures. DOGGR would be responsible for determining whether the proposed fracking activities present an “unreasonable risk.”
SB 4 as amended is not the first bill proposed in the California Legislature to require a permit specific to fracking activities. AB 288, introduced in the Assembly in February (see March 8, 2013, post), would also require a fracking-specific permit. These bills contrast with DOGGR’s current discussion draft of regulations governing fracking activities (see December 19, 2012, post), which would not require fracking-specific approval.
However, the amendments to SB 4 introduce the first potential moratorium on fracking activities in the state since the California Legislature tabled an Assembly bill last summer that would have barred fracking activities pending state regulations (see August 17, 2012, post). SB 4, on the other hand, would only prohibit the issuance of fracking permits if the study on its impacts is not completed and peer reviewed before 2015. Nonetheless, it is likely that the study and the peer review process would not be completed before the 2015 deadline and the fracking moratorium would go into effect until such time as that work is completed.
On March 20, 2013, the Supreme Court ruled in Decker v. Northwest Environmental Defense Center 586 U.S. (2013) reversing a ruling from the U.S. Court of Appeals for the Ninth Circuit that would have required Clean Water Act permits (CWA) for stormwater running off logging roads. The decision turns largely on deference to EPA’s interpretation of its own regulations. Whether this holding will be extended to mining or oil and gas activities depends upon the factual circumstances of the activities and the scope of existing regulations.
The Decker court was asked to consider whether forest roads associated with logging activities are “industrial facilities” for the purposes of storm water regulation under the Act. The CWA requires a discharge permit for discharges of stormwater from sites associated with industrial activity, including immediate access roads, and the question presented to the Court was whether the discharges from logging roads fit within EPA’s definition of “stormwater discharges associated with industrial activities” at 40 C.F.R. 122.26(b)(14).
EPA argued that its definition with respect to timber activities was limited to “traditional industrial sources such as sawmills” and was not intended to extend more generally to timber harvesting or to associated logging roads. The Court concluded that EPA’s interpretation was permissible, and accordingly deferred to EPA.
The Court also pointed out that one reason why EPA’s interpretation of its own regulations should be granted deference is that the State of Oregon has made extensive efforts to develop a comprehensive set of best practices to manage storm water runoff from logging roads. Whether the same argument can be made for roads in oil and gas extraction fields raises a question of fact that requires a case by case analysis.
Stoel Rives LLP represented several timber industry clients, including the Oregon Forest Industries Council, through the district court and Ninth Circuit proceedings, and helped prepare the petition for Supreme Court review.
Last month, California legislators introduced three bills that relate to hydraulic fracturing. On February 20, 2013, Senator Hannah-Beth Jackson introduced SB 395 to regulate water produced during fracking operations. The bill would require the regulation of “produced water,” defined to expressly include water produced by fracking, as a hazardous waste by the Department of Toxic Substances Control (DTSC). This would give DTSC authority to regulate the management of fracking wastewater, including the requirement for hazardous waste manifests to transport these fluids, and add another administrative layer to the regulation of fracking operations in addition to the rules that have already been proposed by the Department of Conservation’s Division of Oil, Gas, and Geothermal Resources (DOGGR). For more details on DOGGR’s discussion draft regulations, see the December 19, 2012, post. SB 395 faces a difficult road to becoming law, however, as the scope of the definition of “produced water” (any water brought up from the hydrocarbon bearing formation strata during the extraction of oil and gas) goes well beyond fracking and conceivably could end up regulating “produced water” that is nothing more than pumped natural groundwater brought up during the oil and gas production process.
The other two bills were introduced in the Assembly and relate to DOGGR’s approval of well drilling activities. On February 11, 2013, Assembly Member Marc Levine introduced AB 288 to require fracking-specific approval. Under the current law, DOGGR grants general approval to drill an oil and gas well, but specific, additional approval is not required for fracking activities. The bill would prohibit fracking without such approval and eliminate the automatic “10-day deemed approved” permitting scheme under current law that operates if DOGGR does not respond to a permit application during an initial 10-day period after a permit application is submitted. The bill would also authorize DOGGR to establish a fee for the costs of regulating fracking. This contrasts with DOGGR’s current discussion draft rule, which would not require specific approval for fracking.
On February 22, 2013, Assembly Member Das Williams introduced AB 982 to require an agency-approved groundwater monitoring plan for fracking operations. The bill would require an operator to submit such a plan to DOGGR, as well as the Regional Water Quality Control Board, for review and approval together with any notice of intent to drill, rework or deepen a well that also included fracking activity. The plan would include a characterization of groundwater quality in the zone of influence of the well, information relating to constituents in the fracking fluid, a plan for monitoring to detect contamination during and after the fracking activities, and an emergency monitoring plan in the event of a well casing failure or other similar event. These monitoring requirements are similar to those imposed under DOGGR’s current discussion draft rule; however, DOGGR’s rule requires monitoring of the integrity of the well while AB 982 focuses more on measuring direct impacts to the groundwater aquifer. Also, like the bill introduced in the Senate, this bill would directly involve yet another agency, the Regional Water Quality Control Board, in fracking activities.
The Department of Conservation, Division of Oil, Gas and Geothermal Resources (DOGGR) today announced the second of three public workshops on its draft discussion regulations governing hydraulic fracturing. The agenda includes pre-fracking well testing, advance notification, monitoring, and disclosures, trade secrets and handling relating to fracking fluids.
The second workshop will be on March 13 at the Four Points Sheraton on Bakersfield. See DOGGR's website for additional information.
On February 12, California lawmakers convened a joint legislative hearing to discuss the proposed regulations governing hydraulic fracturing in California. For further information about the proposed regulations, see the December 19 post. The lawmakers heard from four panels, including the Department of Conservation’s Division of Oil, Gas and Geothermal Resources (DOGGR), Department of Toxic Substances Control, State Water Resources Control Board, Air Resources Board and various local agencies, stakeholders and environmental organizations.
Lawmakers asked the agencies to address potential impacts of fracking relating to seismic activity, soil contamination, and drinking water quality. In response, the agencies indicated that they do not believe fracking poses significant risk to the environmental or public health. Other key questions raised focused on the timeline for notification of planned fracking activities to surrounding property owners and the disclosure of the ingredients in fracking fluids. Participants also questioned whether regulatory agencies had enough qualified personnel on staff to conduct critical inspections and enforce the regulations.
DOGGR’s regulations are still moving through the rule-making process. The first public workshop was held in Los Angeles on February 19. See DOGGR’s website for information on dates, time and locations for additional workshops in Bakersfield and Sacramento.
The Department of Conservation, Division of Oil, Gas and Geothermal Resources (DOGGR) announced it will hold the first of three stakeholder workshops next week for input on the discussion draft regulations governing hydraulic fracking that it released in December. For more information about the discussion draft, see the December 19, 2012, post. The first workshop will be held on February 19 in Los Angeles. DOGGR also plans to hold workshops in Bakersfield and Sacramento. Information about the workshops is available at DOGGR's homepage.
DOGGR emphasized in its announcement that the discussion draft regulations are not yet a part of a formal rulemaking process. Rather, DOGGR intends the discussion draft as a starting point for these discussions with stakeholders before it commences formal rulemaking.
The Center for Biological Diversity filed another lawsuit yesterday in Alameda County Superior Court against the California Department of Conservation, Division of Oil, Gas, and Geothermal Resources (DOGGR) challenging permits issued for oil and gas well operations that allow hydraulic fracturing. This is the second complaint the Center has filed in the past six months against DOGGR relating to fracking activities. The first was filed in October 2012 under the California Environmental Quality Act. In that action, the Center alleged that DOGGR failed sufficiently review the impacts of issuing oil and gas permits relating to fracking (see October 16, 2012, post).
In the complaint filed yesterday, the Center alleges that DOGGR’s issuance of permits for well operations that include fracking violates the state’s Underground Injection Control (UIC) program and Public Resources Code. The Center argues that fracking operations constitute “underground injection” activities regulated by the UIC program and therefore DOGGR must monitor and supervise such activities. Further, the Center argues that DOGGR, in issuing these permits without investigation and subsequent monitoring or supervision, has failed to take appropriate measures to prevent damage to life, health, property and natural resources as required under the Public Resources Code. The Center seeks a declaration that DOGGR’s ongoing failure to regulate fracking under the UIC program and to prevent damage to public resources violates state laws, as well as an injunction prohibiting DOGGR from continuing to issue permits for oil and gas well operations that include fracking.
Although the 2005 Energy Policy Act made most forms of fracking exempt from the federal UIC program under the Safe Drinking Water Act, the Center bases its allegations on the assertion that California did not adopt into the state UIC program the amended definition of “underground injection” that excludes fracking. Nonetheless, the federal program only requires that the implementing states develop a program that is at least as stringent as the federal program, which would allow DOGGR to also exclude fracking from its UIC program. Previously DOGGR’s position was that the Safe Drinking Water Act fracking exemption also applied to its UIC program and that fracking was “well treatment,” not subject to UIC regulation, rather than “underground injection” as the Center now alleges. However, DOGGR announced at the end of 2012, in response to an EPA review of its UIC program, that it would initiate rulemaking in 2013 to regulate fracking under its UIC program (see December 3, 2012, post). Ultimately, if DOGGR moves forward with this rulemaking, it could make the Center’s claims moot.
On December 20, the Alaska Oil and Gas Conservation Commission (AOGCC) released proposed regulations governing hydraulic fracturing. The regulations would require AOGCC approval to conduct fracking activities. This is in contrast to the California Department of Conservation’s Division of Oil, Gas, and Geothermal Resources Division (DOGGR) recently proposed “discussion draft” of potential fracking regulations (see December 19 post), which would impose certain requirements on fracking operations but would not require additional approval. See the Mineral Law Blog for a summary of the proposed Alaska regulations.
Both the Alaska proposed regulations and the DOGGR discussion draft require an evaluation of the ability of the well to withstand fracking operations and the integrity of the well throughout fracking operations. The significant differences between the two proposed rules are:
- Alaska would require pre-approval before conducting fracking activities while DOGGR would not;
- Alaska would require a more substantial preliminary investigation into the other wells in the area and groundwater monitoring during the fracking operations;
- Alaska would require direct notification to nearby land owners and well operators; and
- Alaska would not provide trade secret protection.
At this stage, the DOGGR regulations are only posed in the form of a “discussion draft” and may be another year away from final. The Alaska regulations will likely go into effect first and may well impact future versions of DOGGR’s proposed regulations.
Initial comments from environmental groups are in support of Alaska’s proposed regulations, again in contrast to initial reactions to DOGGR’s draft discussion rule. The proposed Alaska regulations have been deemed “quite comprehensive” by Mike Paque, Executive Director of the Ground Water Protection Council. Plaque told the Platts news service that the Alaska regulations “go into significant detail on protecting local groundwater or drinking water.”
Yesterday, the California Department of Conservation’s Division of Oil, Gas, and Geothermal Resources (DOGGR) released what they are calling a “discussion draft” of a rule regulating hydraulic fracturing. The draft rule imposes new requirements specific to fracking operations, including testing, monitoring, disclosure and fluid handling obligations.
Current state rules require an operator to obtain authorization from DOGGR before drilling an oil and gas well. DOGGR grants approval based on the proposed well construction and authorizes the depth and type of the well (i.e. production, injection or disposal). This authorization allows the operator to construct and operate the well, including fracking activities, so long as the well meets regular mechanical integrity tests.
The discussion draft rule, as written, would not require additional approval to conduct fracking operations, but the rule would require operators to evaluate the integrity of the well and provide notice before fracking, monitor the well during fracking, and publicly disclose certain information when fracking is complete. Before fracking a new or existing well, the rule would require operators to evaluate the integrity of the well based on the proposed fracking radius and design the fracking treatment accordingly to prevent groundwater contamination. At least 10 days before commencing fracking operations, the operator would need to provide notice to DOGGR, including the evaluation and fracking treatment design and an estimate of the volume and pressures of fracking fluid. The rule would also require continuous monitoring of several parameters relating to well integrity during fracking. In addition to regulating activities in the well, the rule would impose fracking fluid storage and handling requirements similar to those for petroleum or other hazardous materials. After fracking activities are complete, the rule would require monitoring for at least an additional five years and public disclosure of the volume and components of the fracking fluid. The rule would allow for trade secret protection but would require disclosure to DOGGR or health professionals under certain circumstances.
The draft rule focuses on disclosure and on potential impacts to the surface and groundwater but does not address potential air emissions or seismic activity. As DOGGR indicates in a set of FAQs released with the rule, the local air quality control districts are evaluating the need for further regulations relating to fugitive air emission associated with fracking activities. DOGGR also takes the position that induced seismicity is not a concern associated with fracking, perhaps in response to the proposed assembly bill that would require DOGGR to consider any seismicity impacts in its fracking rulemaking (see December 9 post). Rather, DOGGR indicates that reports of induced seismicity relate to long-duration, high-volume injection of waste fluids into disposal wells that are already addressed by the state’s underground injection control regulations.
Given that the draft rule imposes further requirements without significantly restricting fracking operations, environmental groups are likely to seek more limitations on fracking than the draft rule provides. Also, with a Democratic supermajority in the state legislature, there is the possibilty that lawmakers may seek to further restrict fracking activities by statute.
Although the rule does offer some specific benchmarks associated with pre-testing and monitoring of fracking activities, DOGGR emphasizes that the “discussion draft” of the rule is intended only as a starting point for stakeholder discussions and anticipates the formal rulemaking process will commence in early 2013. Given the public attention to fracking, we can expect potentially significant revisions to the draft rule as the rulemaking process progresses. Meanwhile, comments on the draft rule may be emailed to email@example.com.
Last week, new bills were introduced in the state Assembly (AB 7) and Senate (SB 4) to require disclosure of the chemicals and the amount of water used in hydraulic fracturing operations. This is at least the third attempt at fracking disclosure legislation, the most recent of which was tabled during the last session (see August 17 post). Both new bills would require disclosure of the names, maximum concentrations and Chemical Abstract Service (CAS) numbers of the chemicals used in the fracking process. The bills would also require disclosure of the volume of carrier fluid used and the source, volume and disposition of water used. Both bills provide for trade secret protection.
There are some differences between the bills. For example, AB 7 would require the Division of Oil, Gas, and Geothermal Resources (DOGGR) to adopt rules specific to fracking by 2014, while SB 4 would allow DOGGR until 2015 to adopt such rules. AB 7 also requires DOGGR to consider any risk posed by potential seismicity as part of its rulemaking process.
Environmental groups filed a complaint today in Alameda County Superior Court against the California Division of Oil, Gas and Geothermal Resources (DOGGR) alleging that DOGGR violated the California Environmental Quality Act (CEQA) by issuing permits for oil and gas wells that allowed hydraulic fracturing activities without sufficient environmental review. The complaint alleges that there are several environmental and public health impacts associated with fracking that DOGGR fails to consider in its CEQA analyses for oil and gas well permits. The complaint also alleges that DOGGR improperly excludes new oil and gas well permits from CEQA based on categorical exemptions for minor alternations to land or existing facilities. According to the complaint, DOGGR has never prepared an Environmental Impact Report under CEQA for an individual oil or gas well permit, finding that each well either fell under a categorical exemption or would not have a significant impact on the environment. The plaintiffs, Center for Biological Diversity, Earthworks, Environmental Working Group and Sierra Club, seek a declaratory judgment that DOGGR has failed to comply with CEQA in permitting oil and gas wells and an injunction prohibiting DOGGR from approving new oil and gas wells until DOGGR “complies with its legal requirements to evaluate and mitigate the significant environmental and public health impacts caused by hydraulic fracturing at oil and gas wells.”
The lawsuit, however, is not a typical CEQA action because it does not challenge a particular permit application but rather an alleged “pattern and practice” regarding CEQA for all proposed wells. CEQA is not “a one size fits all” statute. Indeed, CEQA requires that an agency evaluate the “specific impacts” of a particular proposed project to determine the level of environmental review required for that project. This lawsuit asks the court to ignore CEQA’s procedure for conducting a case-by-case fact specific inquiry and to order DOGGR to apply CEQA in a particular uniform way to all future proposed wells, without regard for the actual impacts of those proposed wells. Such a request is highly unusual and arguably in conflict with CEQA’s procedural requirements.
DOGGR has announced that it plans to issue draft regulations specific to fracking by the end of the year and finalize the regulations in 2013.
A study released Wednesday on the impacts of hydraulic fracturing at the Inglewood Oil Field found that fracking would not harm the environment. The study focused on the approximately 1,000-acre Inglewood Oil Field in the Baldwin Hills of Los Angeles County. Fracking has occurred in the area since about 2003. The study showed that there has been no impact linked to fracking on groundwater, well integrity, methane levels, earthquakes or community health. The study also showed that air emissions, noise levels and vibration levels in the area have remained within the regulatory limits.
The owner and operator of the oil field, Plains Exploration & Production Company (PXP), funded the study as part of the settlement of a lawsuit relating to the validity of a district created by Los Angeles County to address the compatibility of oil production with land uses in the area. PXP hired an independent consultant to perform the study, and the study was peer reviewed by two experts selected by PXP and Los Angeles County.
The San Benito County Board of Supervisors asked its County Counsel to draft a moratorium on fracking for its October 15 meeting and asked staff to develop a timeline for revising its oil ordinance to address fracking. County Counsel had determined that, although the County did not have the authority to preempt the Division of Oil, Gas and Geothermal Resources (DOGGR) regulation of subsurface activities, the County could impose a narrow moratorium on surface activities.
The County Board acted in response to a petition with 500 signatures collected by a local group, Aromas Cares For Our Environment, based on speculation that seismic equipment in the area was for oil or natural gas exploration. In fact, the seismic equipment was used by the owner of a local rock quarry to determine the extent of granite deposits that it has been mining for decades. The company has never engaged in oil or gas exploration on the property.
Meanwhile, Supervisor Tim Kustic of DOGGR indicated at a fracking forum on September 18 that he planned to propose fracking regulations this fall.
On August 29, the Center for Biological Diversity served the Bureau of Land Management (BLM) with notice of intent to sue for BLM’s failure to reinitiate consultation under the Endangered Species Act (ESA) relating to oil and gas leases and drilling permits issued in California. The notice alleges that BLM has continued to authorize fracking activities in California based on outdated biological opinions that fail to evaluate the impact of new fracking techniques on listed species. If BLM does not reinitiate ESA consultation and “halt ongoing oil and gas leasing and drilling activities” with 60 days of the notice, the Center indicates it will file a citizen suit under the ESA.
The ESA requires federal agencies to consult with the federal fish and wildlife services (U.S. Fish and Wildlife Service or the National Marine Fisheries Service) to ensure that any action that the agency authorizes, funds or carries out is not likely to jeopardize the continued existence of any species listed as threatened or endangered. BLM did initially consult with the services relating to its issuance of oil and gas leases and drilling permits as required under the ESA. However, the Center alleges that BLM is now required to reinitiate consultation under the ESA because “new and intensified drilling techniques,” described as fracking, have so increased the economic feasibility and the associated environmental risks of drilling as to result in “(1) new information revealing that the action may have effects not previously considered or (2) modification of the action not previously considered.”
The notice calls out BLM’s Hollister and Bakersfield field offices, which issue leases and permits for activities on BLM-administered lands overlying the Monterey Shale. In the notice, the Center alleges that fracking in this area impacts habitats for five listed species in particular – the California condor, the San Joaquin kit fox, the blunt-nosed leopard lizard, steelhead and the giant kangaroo rat.
On Thursday, the Senate Appropriations Committee shelved two bills relating to fracking, AB 972 and AB 591. AB 972 would have placed a moratorium on fracking in California pending issuance of state regulations governing the practice (See August 14 post). AB 591 would have required operators to disclose fracking activities and chemicals (See May 8 post).
Thursday was the last day for legislative finance committees to address bills pending in the current session, ending August 31.
After the California Senate Appropriations Committee cancelled an August 13 hearing on AB 972 (see August 8 post), the Committee moved the bill to the suspense file to take up again this Thursday, August 16. The bill would place a moratorium on fracking in the state until the Division of Oil, Gas and Geothermal Resources (DOGGR) implements regulations governing the practice. Fracking is not currently tracked under state law, but in March of this year DOGGR asked well operators to voluntarily report their fracking activities to a disclosure registry, FracFocus.
The Committee’s analysis of AB 972 estimates that the ban would result in up to $9 million in delayed revenue to the state relating to tideland oil wells. Also in the suspense file and scheduled for hearing on Thursday is a bill requiring disclosure of fracking activities and chemicals, AB 591 (See May 8 post).
An August 13 hearing on the bill that would have imposed a moratorium on fracking (AB 972) in the California Senate Appropriations Committee was cancelled Monday at the request of the bill's author, Assemblywoman Betsy Butler. Stay tuned for more on Butler's reasons for requesting the cancellation.
The American Petroleum Institute (API) and America's Natural Gas Alliance (ANGA) recently issued a report from Battelle Memorial Institute pointing out the weaknesses in U.S. EPA's proposed study of hydraulic fracturing operations. For example: "Congress requested a study 'relying on best available science and independent sources of information.' It appears questionable, because of its genesis and design, whether the proposed case study element of the study program will be able meet this expectation and provide the scientifically defensible data and information required to support the fundamental research questions regarding the possibility of impacts of hydraulic fracturing on drinking water resources."
The Senate Committee on Environmental Quality on July 3rd advanced a bill (AB 972) that would prohibit the State Oil and Gas Supervisor from approving the drilling of a fracking well until the Division of Oil, Gas and Geothermal Resources (DOGGR) adopts fracking regulations. Existing law requires a well operator to obtain approval before commencing drilling. The bill would require the operator to indicate in a request for approval whether fracking “will be used or is planned to be used in completing the well.” If the operator so indicates, the bill would prevent the approval of drilling until DOGGR fracking regulations are adopted and in effect. The bill would also define “hydraulic fracturing,” “hydraulic fracturing fluid” and “proppants.”
After the summer recess, the bill is schedule to be heard in the Senate Appropriations Committee on August 6.
House Democrats Seek Tighter Regulation of Fracking on Federal Lands and BLM Extends its Comment Period
Describing the proposed BLM rule for fracking as “a good first step,” a group of 38 Democrats in the House of Representatives called for disclosure of fracking chemicals before drilling. The proposed regulations require disclosure of fracking chemicals only after the operation is complete. In a letter to the Department of the Interior, the lawmakers said that increasing transparency is an “important start to what we hope will be broader, comprehensive energy development policies that will embrace best practices for both traditional and renewable energy development.” The letter cites Wyoming as a state that properly requires disclosure of the chemicals that will be used before drilling commences.
The letter was spearheaded by several proponents of tighter fracking regulations – Representatives Maurice Hinchey (NY), Diana DeGette (CO), Jared Polis (CO) and Raul Grijalva (AZ). None of the signatories represent Pennsylvania, where the Marcellus Shale is fueling both the economy and environmentalists’ concerns.
Responding to these concerns from lawmakers and environmentalists, some drilling companies are voluntarily releasing more details about their operations. Websites like FracFocus (also discussed in a May 8, 2012, post on the California Environmental Law Blog) offer a venue for operators to provide this information to the public.
In response to the industry’s request for more time to comment on the proposed rule, BLM extended the public comment period by 60 days to September 10. BLM indicated when it issued the proposed rule that it planned to finalize the rule by the end of 2012.
In Los Angeles this Wednesday, three City Council members introduced a resolution urging the Governor and California regulators to impose a moratorium on fracking until the state determines that the practice does not endanger public health, the water supply or the environment. The concern arises in part because California, unlike some other oil-producing states, does not require fracking operators to disclose the locations of their fracking operations or the chemicals they use. In the absence of statewide regulations, local communities are considering whether they should regulate fracking.
On a regional scale, South Coast Air Quality Management District (AQMD) officials are considering new rules that target emissions from fracking operations. South Coast officials discussed the AQMD’s authority to pursue the new rules at its June 1 meeting. Sources say South Coast is the first AQMD to consider fracking rules, which could come before state and federal regulations and may cover a wider scope of operations than EPA’s currently proposed rule (such as high-pressure gas wells). The South Coast rules would require fracking operators to disclose the types and amounts of chemicals used. Before deciding whether to pursue the new rules, District officials indicate that they want to study the issue in more detail and meet to discuss the issue with stakeholders. In response, the Western States Petroleum Association indicated that the types of air quality issues addressed by the proposed EPA rule are not generally associated with fracking for crude oil production, which accounts for most of the fracking operations in California.
On Wednesday, the California Senate voted 17 to 18 against SB 1054, which would have required notification to nearby property owners of planned fracking operations. See the April 19, 2012, blog post for more details on the bill. The Senate granted the bill “reconsideration”, which would allow another vote before Friday’s deadline for bill advancement.
Several members of the Western States Petroleum Association have agreed to share information about their fracking operations in response to the California Department of Conservation’s request for operators to report to a disclosure registry, FracFrocus (see May 8, 2012 post). Many, including Occidental Petroleum Corp. and XTO Energy/ExxonMobil, have already posted to the website, which currently provides information for more than 100 wells that have been fracked in California since the beginning of 2011. The information includes the supplier and the ingredients of the fracking fluid and the volume of water used.
This announcement coincides with Tuesday’s call from a national consumer advocacy group, Food & Water Watch, for a statewide ban on fracking. Food & Water Watch asserts that fracking poses risks to water, air and land that cannot be adequately addressed by regulation.
California currently has no regulations specific to fracking. There are two bills relating to fracking currently pending in the California legislature – one that would require disclosure the kind of information available on FracFocus (see May 8, 2012 post) and another that would require notification of planned fracking operations to neighbors (see April 19, 2012 post). The Department of Conservation also has announced plans to commission an independent study to examine the effects of fracking in California that may inform future regulation.
The U.S. Environmental Protection Agency (EPA) and the U.S. Department of Justice recently announced the latest proposed settlement in EPA’s Clean Air Act enforcement initiative against petroleum refiners. Hess Corporation will pay an $850,000 civil penalty and spend more than $45 million on new pollution controls at its Port Reading, New Jersey refinery to resolve alleged CAA violations.
This settlement includes several measures related to New Source Performance Standards and flaring. EPA has declared flaring an enforcement priority, and this settlement reflects the agency’s focus and will require Hess to adopt a number of new compliance and monitoring requirements.
This latest settlement follows April’s settlement with Marathon Petroleum Company for several CAA violations and continues a trend that has seen now 31 such agreements with petroleum refineries in the U.S. since 2000. As a result of these settlements, refiners have invested more than $6 billion in new pollution controls to reduce sulfur dioxide, nitrogen dioxide, and other emissions.
Last month, the California legislature revived a bill that was shut down last year that would require the disclosure of fracking chemicals. In a compromise with industry, the revived bill (AB 591) includes trade secret protection. Current law requires the owner or operator of a well to file a history of the work performed within 60 days of the end of ceasing operation. The new bill requires that history to include a list of the chemicals used that will be made publicly available, subject to the trade secret exceptions now in the bill.
Last week, California’s Department of Conservation released a road map outlining a plan to develop regulations governing fracking procedures. This announcement follows the Department of Conservation’s request at the end of March for operators to report their fracking operations to a disclosure registry, Frac Focus. The Department specifically requested information relating to the location and depth of wells and the chemicals used.
At the end of last week, EPA and BLM each released draft requirements relating to fracking. EPA released draft Underground Injection Control (UIC) Class II well permitting guidance for fracking activities that use diesel fuels. BLM released draft rules requiring public disclosure of fracking chemicals used on public and Indian lands.
The EPA guidance applies the Safe Drinking Water Act (SDWA) and regulations to fracking activities using diesel fuel. The injection of fracking fluids or propping agents, other than diesel fuels, are excluded from the requirements of the SDWA by the 2005 Energy Policy Act. EPA concludes in the guidance that fracking operations that use diesel fuel as a fracking fluid or propping agent are subject to Class II UIC permitting requirements for oil and gas activities. To determine whether diesel fuels are used in fracking, EPA proposes to use six Chemical Abstracts Service Registry Numbers (CASRNs) that are commonly identified as diesel fuels. EPA also proposes alternative permit terms and area of review delineation methods specific to wells used for fracking operations. EPA has requested comments on the proposed guidance relating to the use of the six CASRNs to identify the use of diesel fuels and data relating to the volumes and frequency of diesel fuels currently used in fracking operations.
The BLM draft rule regulates fracking operations on public and Indian land. The rule applies to “well stimulation,” described as “activities conducted in an individual well bore designed to increase the flow of hydrocarbons from the rock formation to the well bore by modifying the permeability of the reservoir rock,” (i.e. acidizing or fracking). The rule requires approval of the engineering design for fracking operations in connection with the existing approval process for general well drilling activities. Wells that are already generally approved would require an additional approval for fracking operations. The rule also requires a mechanical integrity test, a cement bond log to assess the impact on water, an estimate of the total volume of fluid that will be used and a plan for the handling of recovered fluids. The rule imposes monitoring and reporting requirements, including post-operations disclosure of the fluids used and the actual volumes of fluids and dimensions of the well. BLM says it plans to finalize the rule by the end of the year.
Last week, the California Senate’s National Resources Committee advanced a bill requiring notice to nearby property owners of planned fracking operations, and President Obama issued an Executive Order setting up an interagency working group to support safe and responsible fracking.
California law requires the operator to file a written notice of intent to commence drilling with the State Oil and Gas Supervisor or district deputy and deems the notice approved if there is no response within 10 working days from receipt. The Senate Bill (SB 1054) passed by the National Resources Committee last Tuesday amends existing law to extend the period for the State Oil and Gas Supervisor’s response to 15 working days from receipt of the notice and requires additional notice for fracking operations. The bill also requires that the well owner/operator notify property owners and occupants within a certain distance of the well, as well as property owners, occupants and water suppliers above underground waters that may be used for irrigation or domestic purposes. The notice would include the location of the well and a description of the planned operations. In its analysis, the Senate Committee noted that several other states include public notification to surface property owners as a part of the permit process for new wells, many including fracking provisions.
In related news, President Obama issued an Executive Order last Friday establishing an interagency working group to “support the safe and responsible production of domestic unconventional natural gas.” The EO instructs the working group to coordinate agency policy activities; coordinate the sharing of scientific, environmental and related technical and economic information; engage in long-term planning and ensure coordination relating to research, natural resource assessment, and infrastructure development; and promote interagency communication with stakeholders. The EO indicates that natural gas provided 25% of energy consumed in the US in 2011 and that natural gas production creates jobs, can reduce our dependence on oil, and provides a cleaner energy source (with appropriate safeguards).