Oil & Gas Related Bills Introduced in the 2017-2018 Legislative Session

February 17, 2017 marked the deadline by which legislators had to introduce bills for the first half of the 2017-2018 Legislative Session.  The Stoel Rives’ Oil & Gas Team has been and will continue to monitor bills throughout the current two-year session and will provide periodic updates as to the status of those bills.  Below is the current status and summary of some of the bills Stoel Rives is monitoring.

Please also reference our Renewable + Law post summarizing bills related to energy law here.

AB 55 (Thurmond, D):  Refineries: turnarounds

STATUS: Introduced December 5, 2016; referred to Committee on Labor & Employment on January 19, 2017

The California Refinery and Chemical Plant Worker Safety Act of 1990 requires every petroleum refinery employer to submit to the Division of Occupational Safety and Health a full schedule for the following calendar year of planned turnaround every September 15th. The employer is also required, upon the request of the division, to provide the division with specified documentation relating to a planned turnaround within a certain period of time. This bill would require the documents to be provided to the division upon request also include all documentation necessary to demonstrate compliance with the above-described skilled and trained workforce requirements.  A violation of the bill’s requirements would be a crime.

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80% of Oil and Gas Injection Wells under EPA Review Will Not be Shut-In on February 15

As an update to our prior blog post, on January 17, 2017, the California Division of Oil, Gas and Geothermal Resources (“DOGGR”) released a letter sent to notify the U.S. Environmental Protection Agency (“EPA”) of California’s progress toward compliance with the Safe Drinking Water Act.  DOGGR stated that it will allow oil field wastewater injection to continue in aquifers in 29 fields (covering approximately 1,650 wells), pending U.S. EPA approval.  After a thorough review, DOGGR estimates that 80% of the aquifer applications currently under review qualify as exempt aquifers and should be approved by U.S. EPA as such.  The remaining 20% of wells in the areas under review will be subject to shut-in on February 15, pending completion of the regulatory agencies’ formal review.  We will continue to monitor the situation as the February 15 deadline draws near.

Updated January 30, 2017

On January 25, 2017, the U.S. EPA, Region IX, issued a response letter to DOGGR. The U.S. EPA stated that they “generally concur with the approach outlined in your [DOGGR’s] recent letter.”  However, the U.S. EPA requested that DOGGR provide more details of its current analysis regarding aquifer exemption proposals that may not meet the February 15, 2017 deadline, including the basis for the potential exempt status and the anticipated timeline for DOGGR’s concurrence on exemption.  Stay tuned for future updates.

Oil Industry Caught in “Catch-22” with New Wastewater Injection Approval Requirements; Files Suit Against California Agencies

On January 19, 2017, three oil industry trade groups filed suit against the California Department of Conservation and the Division of Oil, Gas and Geothermal Resources (“DOGGR”) (jointly “Department”) in Kern County Superior Court alleging that DOGGR’s oil field wastewater injection regulations violate operators’ constitutional rights.  Western States Petroleum Association, California Independent Petroleum Association, and Independent Oil Producers Agency (collectively “Plaintiffs”) seek “declaratory and injunctive relief to prevent the arbitrary and unlawful shut-in of potentially thousands of Class II injection wells in violation of Plaintiffs’ members’ due process rights.”  Complaint at 1.

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Three Air Quality Regulatory Actions Ripe for Litigation in 2017

Which air quality regulatory actions are most likely to see noteworthy litigation activity in 2017? My colleagues Krista McIntyre and Rachel Cox are guest-blogging today with commentary on key areas we’re watching: the Clean Power Plan, Boiler MACT and Methane Rule.

All eyes are on the D.C. Circuit Court of Appeals for a decision on the enforceability of the Clean Power Plan under the CAA.  Regardless of the outcome, observers predict review by SCOTUS.  President-elect Trump’s views on climate change could influence the litigation in three not-so-subtle ways: (1) new EPA and DOJ leadership could less zealously pursue defense of the Plan; (2) a fast track appointee to SCOTUS could influence that body’s inevitable review; and (3) the new administration could withdraw from the litigation altogether.  Whatever play the new administration may be considering, however, the only “win” is a full judicial knockout.  A remand prompting rulemaking, even rulemaking that repeals the regulations, risks more litigation from states, cities and environmental groups that support the current Plan.  Noteworthy litigation to follow.  Wouldn’t it be easier for the new administration to embrace the Clean Power Plan, winning a few symbolic points from their critics, and then direct EPA to exercise all the discretion and leniency created by the rules to ease implementation?

Last month the D.C. Circuit Court of Appeals remanded the Boiler MACT regulations, originally vacated, to EPA to conform to the court’s earlier July 2016 ruling.  The court was persuaded that vacating the emissions standards would carry more harmful effects, allowing greater emissions until EPA completes rulemaking. Now the work begins on review of standards and EPA’s decision to exclude certain sources from its calculations in setting emissions limitations.  The court’s earlier ruling was unclear about exactly which MACT subcategories were subject to its ruling.  EPA has yet to issue its interpretation and listing of affected subcategories. The court did not impose a schedule, but an expectation for promptness and an invitation to initiate a mandamus petition, if needed, were clearly expressed in the recent opinion.  We probably haven’t heard the last of this one.  Wouldn’t it be nice to get these Boiler MACT rules completed so regulated entities have certainty about compliance expectations?

In 2016, EPA finalized the Methane Rule as part of the Obama Administration’s efforts under its Climate Action Plan to reduce greenhouse gas emissions.  The Rule requires oil and gas companies to significantly reduce emissions from new, reconstructed and modified processes and equipment at hydraulically fractured oil wells, among other sources.  The Methane Rule was appealed to the D.C. Circuit Court of Appeals by 15 states, including gas-rich North Dakota, arguing that the Rule is unnecessary and costly.  It is unclear whether the Trump Administration will continue this legal battle defending the Methane Rule, but in our opinion this is unlikely.  EPA has also been in the process of gathering information from industry on possible new regulations on methane emissions from existing oil and gas operations.  This rulemaking will now be left to the Trump Administration, but our best guess is that the effort will be abandoned.  Stay tuned for updates on the fate of the Methane Rule and other rules that hang in the balance during the change in administration!

 

With Time Running Out for EPA to Act, Oil & Gas Operators Grow Increasingly Anxious about Pending Aquifer Exemption Applications

December 31, 2016 marked a deadline for oilfield operators to comply with the Division of Oil, Gas and Geothermal Resources’ (“DOGGR”) Aquifer Exemption and Compliance Schedule Regulations.  Operators were required to either cease injection of oilfield wastewater or obtain an aquifer exemption to continue injecting such wastewater.  This deadline was applicable to 11 aquifers that were historically treated as “exempt” aquifers, but have recently undergone review by DOGGR due to compliance issues with the federal Safe Drinking Water Act (“SDWA”).

For any underground injection project approved by the Division [DOGGR] for injection into one of the 11 aquifers listed in subdivision (b)(1), injection shall cease by December 31, 2016, unless and until the U.S[.] Environmental Protection Agency, subsequent to April 20, 2015, determines that the aquifer or the portion of the aquifer where injection is occurring meets the criteria for aquifer exemption.

Cal. Code Regs. tit. 14, § 1779.1(b)

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California Sues Federal Government Alleging Inadequate Environmental Review of Offshore Drilling Proposal

In one of her last major legal actions before leaving office as California’s Attorney General, Kamala Harris, along with the California Coastal Commission (jointly the “Attorney General”), filed suit against various federal agencies in the United States District Court for the Central District of California, challenging the issuance of the Final Programmatic Environmental Assessment (“PEA”) and Finding of No Significant Impact (“FONSI”) for well stimulation treatments on the Southern California Outer Continental Shelf.  The December 19, 2016 Complaint names the Department of the Interior, the Bureau of Ocean Energy Management, and the Bureau of Safety and Environmental Enforcement (jointly the “Agencies”) as defendants.  The Attorney General’s lawsuit follows similar lawsuits filed by the Environmental Defense Center and Santa Barbara Channelkeeper on November 11, 2016, and a separate suit filed by the Center for Biological Diversity (“CBD”) on November 15, 2016.

The Proposed Action is the approval of well stimulation treatments at 22 production platforms on 43 leases on the Southern California Outer Continental Shelf, which sits off the coast of the southern half of the state.  The Complaint asserts that the Agencies violated the National Environmental Policy Act (“NEPA”) and the Coastal Zone Management Act (“CZMA”) because they issued the FONSI for the Proposed Action without adequate environmental review.  The Agencies “improperly concluded that allowing such activities would result in no significant impacts, in violation of the requirements of [NEPA],” despite the substantial record showing the potential for significant environmental effects.  Complaint, at 3.  Further, the Attorney General alleges that the Agencies violated the CZMA by failing to determine whether the Proposed Action is consistent to the “maximum extent practicable” with the enforceable policies in California’s coastal zone management program.

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Up the Creek Without a Paddle: District Court Holds that Biological Opinion Must Consider Climate Change Impacts

In a narrow win for plaintiff Wild Fish Conservancy (“Plaintiff”), the U.S. District Court for the Eastern District of Washington held that the biological opinion (“BiOp”) for the Leavenworth National Fish Hatchery (“Hatchery”) was arbitrary and capricious because the National Marine Fisheries Service (“NMFS”) failed to adequately consider the effects of climate change.

This case concerns a Hatchery located on Icicle Creek about three miles south of Leavenworth, Washington.  The purpose of the Hatchery is to replace spawning habitat impacted by construction of the Grand Coulee Dam, and it is operated by the U.S. Fish and Wildlife Service (“FWS”) and the Bureau of Reclamation (“BOR”).  Icicle Creek is home to two Endangered Species Act (“ESA”) listed species: the Upper Columbia River Chinook salmon and the Upper Columbia River steelhead.

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Environmental Groups Sue Federal Agencies Again in Unending Legal Battle Over Offshore Oil Development

On November 11, 2016, the Environmental Defense Center (“EDC”) and Santa Barbara Channelkeeper jointly filed suit against several federal agencies including the Bureau of Ocean Energy Management and the Bureau of Safety and Environmental Enforcement (jointly “Agencies”) in the U.S. District Court for the Central District of California.  The lawsuit alleges violations of the National Environmental Policy Act (“NEPA”), the Endangered Species Act (“ESA”), and the Administrative Procedure Act (“APA”).  At the heart of their lawsuit, EDC and Santa Barbara Channelkeeper (jointly “EDC”) claim that the Agencies violated NEPA when they issued a Finding of No Significant Impact (“FONSI”) decision approving the Agencies’ Programmatic Environmental Assessment of the Use of Well Stimulation Treatments on the Southern California Outer Continental Shelf (the “PEA”).

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California DWR Releases Final Groundwater Basin Boundary Modifications

On October 18, 2016, the Department of Water Resources (DWR) released its final modifications to California’s groundwater basin boundaries in response to the emergency regulations adopted by DWR last October.  The basin boundary changes were implemented under the Sustainable Groundwater Management Act (SGMA) to provide flexibility to local public agencies to bring their groundwater basins into balanced levels of extractions and recharge.

To submit a boundary request, the local public agency was required to include a local agency board resolution formally initiating the local agency boundary modification request.  In addition, the SGMA required the local agency to demonstrate support for the change from other local agencies and public water systems that would be affected by the change, as well as provide technical and non‐technical information of the basin conditions and management practices to justify the modification.

DWR presented the final basin boundaries to the California Water Commission on October 18 and indicated that 39 basin boundary changes were approved out of 54 requests. Twelve of the 54 requests were denied and three were deemed incomplete.

The DWR website has a Basin Boundary Assessment Tool that identifies the existing groundwater basin boundaries and other relevant geological and geographic data.

DWR has indicated that another basin boundary modification request period may be held in 2018, depending on demand from local agencies and/or Groundwater Sustainability Agencies (GSAs).

Other important dates on the SGMA timeline include:

  • December 31, 2016 –DWR will post a report on Water Available for Replenishment on its website.
  • November 14-17, 2016 – DWR will conduct public meetings for input on its draft topic of Best Management Practices (BMPs).
  • January 1, 2017 – DWR will post BMPs on its website.
  • June 30, 2017 – Date by which local agencies in high- and medium-priority basins must form GSAs that cover the entire basin in order to avoid potential intervention by the State Water Resources Control Board.

With this latest development of modifying various basin boundaries, SGMA implementation is ramping up and bringing the inevitable ramp down of groundwater extraction closer. Please stay tuned for additional developments and analysis.

New Law Takes Aim at GHG Associated with California’s Water Sector

The recent wave of climate change legislation in California also included a new and not particularly well-known law aimed at curbing greenhouse gas (“GHG”) emissions associated with water use. SB 1425 will create a voluntary registry to track the water sector’s energy use and GHG emissions.

According to Senator Pavley, the author of SB 1425, “While some of the water-energy related climate pollution is already covered in the state’s cap-and-trade program (via the electricity generation sector), the state does not currently have a clear accounting of the total greenhouse gas emissions associated with the water system.”

SB 1425 requires CalEPA to oversee the development of a registry for GHG emissions that result from the “water-energy nexus” using the best-available data. Participation in the registry is voluntary and open to water agencies, large water consumers, businesses and others conducting business in the state.  SB 1425 provides that entities participating in the registry may qualify for GHG emission reduction incentives. Continue Reading

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