On November 15, 2013, the California Department of Conservation, Division of Gas and Geothermal Resources (DOGGR) took several actions to advance the development of California’s regulation of hydraulic fracturing (fracking). DOGGR’s actions are in response to SB 4, which was signed into law by Governor Jerry Brown on September 20, 2103 to regulate fracking operations and other “well stimulation treatments” in the state. DOGGR announced its latest actions in three concurrent releases:
• DOGGR issued for public review and comment draft regulations that will become effective on January 1, 2015. (Public comments due by 5:00 pm January 14, 2014.)
• DOGGR issued a notice that it will prepare an Environmental Impact Report (EIR) “to evaluate the impacts of existing and potential future oil and gas well stimulation treatments occurring within California.” (Public comments due by 5:00 pm January 16, 2014.)
• DOGGR published a “Senate Bill 4 Implementation Plan” setting milestone dates for SB 4’s regulatory regime, including that:
• on December 13, 2013 it will issue emergency interim regulations to govern fracking activities during 2014. (No official comment period, however persons may wish to submit comments as soon as possible.).
• by March of 2014, it will release draft regulations addressing procedures for group authorization of well stimulation programs.
These actions will have major implications for future fracking operations in California.
Summary of Key Provisions of Draft Fracking Regulations
As envisioned in SB 4 (additional information about SB 4 may be found here and here), DOGGR’s draft regulations establish a permitting program for well stimulation activities focused on ensuring that well stimulation is done safely with detailed public disclosure. The regulations clarify that they apply to all well stimulation practices including hydraulic fracturing and most acid stimulation techniques used to improve recovery, and that they do not apply to routine well operations or underground injection projects. Following is a summary of some of the key provisions of the proposed regulations:
• Application Requirements/Fluid Disclosure. Operators are not allowed to conduct fracking or other well stimulation techniques without a DOGGR permit. The permit application must include 26 information items listed in the regulations. These items include: (a) the wellbore path; (b) the size and location of the induced fractures; (c) the anticipated volume, rate and pressure of fracking fluid to be injected; (d) the identity and concentration of each chemical used in the fracking fluid; (e) a well stimulation radius analysis that must identify all nearby water and other wells; (f) a water management plan; (g) an estimate of waste generated and a disposal plan; and (h) certification from the Regional Water Board that the well is covered by a groundwater monitoring plan. As provided in SB 4, Public Resource Code Section 3160(j), an operator can claim that the chemical constituents of the stimulation fluid are a trade secret if it asserts the protection in the initial application. If the trade secret claim is substantiated, the information still needs to be provided to DOGGR but it shall not be publicly released. The draft regulations give DOGGR the flexibility to approve multiple applications that are part of a “single project.”
• Public Notification. At least 30 days before beginning fracking operations, operators must provide to all property owners and tenants within a 1,500-foot radius of the wellhead a copy of the DOGGR permit. The notification must be provided by an independent third party retained by the operator. This person must submit to DOGGR both the names of those notified and the method by which notice occurred.
• Evaluation of Well Integrity Prior to Fracking. Operators are responsible for ensuring, prior to engaging in fracking or other well stimulation activity, that the well is capable of withstanding the proposed stimulation activity and that the well stimulation fluids will be confined. The regulations require that an operator conduct specific tests to demonstrate the integrity of the well, unless waived by DOGGR. The operator is also required to gather information regarding the geological formations and other wells in the vicinity of the target well. It must model the fracturing fluids' movement to ensure that the fluids will not migrate outside the intended zones. The operator is also required to pressure test the well no more than 24 hours prior to commencing stimulation activities.
• Monitoring During Fracking. While fracking activities are underway, operators are required to monitor injection rates and pressure. If pressures exceed certain enumerated limits or the operator suspects a breach, fracking activities must cease. The operator must then perform diagnostic testing and provide DOGGR with notice and an opportunity to witness the tests. If testing shows that a breach has occurred, the operator must provide information about the well and the breach to DOGGR and the Regional Water Board.
• Storage and Handling of Fracking Fluids. The regulations require operators: (a) to store fracking and other well stimulation fluids in accordance with the “secondary containment requirements” of preexisting regulations; (b) to account for fluids in a Spill Contingency Plan; (c) to store fluids in containers (as opposed to sumps or pits); and, in the event of a spill, (d) to notify “appropriate response entities” as well as DOGGR.
• Post-Fracking Monitoring. After a well has undergone fracking or another well stimulation treatment, operators remain responsible for monitoring the well’s continued production to ensure that the well has not failed. Production pressure, as well as the amount of gas, oil and water produced, must be monitored and reported to DOGGR every two days for the first thirty days. Production pressure must continue to be reported on a monthly basis. Annular pressures must be reported annually or immediately upon exceeding certain enumerated values. The regulations also require the installation of a pressure relief device, although DOGGR may waive this requirement if the operator can demonstrate that the device is unnecessary. If installed, all pressure releases must be immediately reported to DOGGR.
• Post-Fracking Disclosures and Reporting. Within 60 days after fracking a well, the operator is required to post information about the well and the fracking activity to the Chemical Disclosure Registry, including: (a) the well name and location; (b) the name, concentration and purpose of each fracking fluid additive; (c) the name, CAS number (if available), and concentration of each fracking fluid chemical constituent; (d) the total volume of fluid used and recovered; and (e) the source, volume and disposition of all water used during fracking. As previously noted, the information relating to the constituent of the stimulation fluid may be protected from public disclosure as a trade secret. Also within 60 days after fracking a well, the operator must submit a report to DOGGR describing the activity, pressures encountered and how the activity differs from that anticipated. Operators must specifically note the occurrence of any earthquakes greater than magnitude 2.0 that occurred in the area after fracking activities began.
It is anticipated that the proposed regulation will receive tens if not hundreds of thousands of comments. DOGGR has indicated that it will release a second draft regulation later this spring after having the benefit of such comments. The draft regulations do not address how well stimulation projects will be approved after the effective date of SB 4 but before adoption of the regulations.
Emergency Interim Regulations
As of January 1, 2014, operators will be required to certify that they are in compliance with specified provisions of SB 4 prior to engaging in any regulated well stimulation activity. However, the required components of the certification and how the certification will be processed remains unclear. To address these issues, DOGGR has announced that it will utilize its emergency regulatory authority to establish rules for the interim 2014 authorization process. The emergency regulations are anticipated to: identify the types of stimulation treatment regulated in the interim period, provide guidance regarding necessary groundwater monitoring and establish public disclosure requirements. Because these rules will be adopted under DOGGRs emergency powers, no public comment period will be provided. Given the import of the regulations on operations over the next year, interested members of the public may want to provide suggestions prior to release of the regulations or comments after publication.
Preparation of the Environmental Impact Report
SB 4 directs DOGGR to prepare a state-wide environmental impact report (EIR) to provide the public with “detailed information” regarding potential environmental effects associated with fracking and other well stimulation treatments. In its November 15, 2013 Notice of Preparation (NOP), DOGGR announced that it will evaluate the potential direct, indirect and cumulative impacts of fracking on a regional basis. The EIR will separately evaluate potential environmental impacts in each of DOGGR’s six administrative districts: Cypress, Ventura, Orcutt, Bakersfield, Coalinga and Sacramento. The public is invited to provide comments on the scope and content of the EIR. DOGGR also will hold scoping meetings on the EIR at various locations around the state over the next two months. Public comments in response to the NOP must be submitted to DOGGR by 5:00 pm January 16, 2014.
SB 4 established a framework for regulating fracking in California, which is viewed by many as the strictest in the nation. While DOGGR has undertaken many significant steps in the development of these regulations, substantial uncertainty remains as to what the contours of this final program will be.
In addition to the regulatory and CEQA process described above, DOGGR also announced in its Senate Bill 4 Implementation Plan (Nov. 15, 2013) that it will undertake the following actions:
• Adopt Interagency Agreements: In October 2013, DOGGR began contacting California regulatory agencies with responsibilities under SB 4 to adopt formal interagency agreements concerning their authority, responsibility and other matters. These interagency agreements are to be entered into by January 1, 2015.
• Develop Group Permitting Procedure: In January 2014, DOGGR will convene workshops to discuss Governor Brown’s directive that the fracking permit program should provide for group permitting based on factors such as known geologic conditions and environmental impacts. DOGGR will develop a proposed group permitting regulatory proposal by March 2014 with a goal of issuing the group permitting regulations as soon as possible after the effective date of the fracking regulations.
• Initiate Scientific Study: In December 2013, the Natural Resources Agency will initiate an independent scientific study “of well stimulation treatments, including hydraulic fracturing and acid well stimulation treatments.” The Agency is currently developing the scope of the study. This study is to be completed by January 1, 2015.
It is anticipated that each of these efforts has the potential to significantly affect the final outcome of the process and interested parties would be well advised to closely monitor and participate in the various processes.
SB4法案指令油气监察局准备全州范围内的环境影响报告，就压裂作业和其它油气井增产作业的潜在环境影响向公众提供“详细信息”。油气监察局于2013年11月15日作出准备通知，宣布其将在地区范围内评估压裂作业的潜在直接、间接和累积影响。环境影响报告将分别对油气监察局管辖的六个行政区域（包括Cypress、Ventura、Orcutt、 Bakersfield、Coalinga和 Sacramento）的潜在环境影响进行评估。公众可就环境影响报告的内容和范围提出意见。油气监察局亦将在随后两个月内在不同地方就环境影响报告召集范围确定会议。公众有关意见必须在2014年1月16日下午5时之前提交给油气监察局。
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:Gannon-Ella
This article was originally published by Bingham McCutchen LLP.