Expanding Regulatory Control Over Oil Production in California

Over the past 10 years, dozens of new bills and regulatory rulemakings have been enacted affecting nearly every facet of California’s oil and natural gas producing industry.

State Budget: More Than 330% Growth In Less Than 10 Years

The Department of Conservation’s Geologic Energy Management Division (CalGem) operating budget is funded almost entirely from fees that are assessed on oil and natural gas producers. Those fees are reflected in the cost of production and are likely to impact what consumers ultimately pay for gasoline, diesel, aviation fuels, and other products that depend upon oil and gas for manufacturing and transportation.

Since the 2009/10 budget year, CalGem’s budget has been increased by more than $56 million. The majority of the increase is attributable to new permitting, field inspection, and enforcement staff. Industry has actively supported most of the proposed increases over this period.

The FY 17/18 proposed budget includes another $10 million increase in CalGem’s budget. If approved, CalGem’s budget will have increased 60% in a four-year period.

Budget Highlights

2015/2016 Budget Highlights:

CalGem: 23 new permanent positions, $3.5 million in funding for well evaluations.
SWRCB: 19 new positions, $2.9 million in funding to inventory oil and gas wells and enforce drinking water standards.
DOC: 21 new positions, $10 million to develop the WELLSTAR public data base.
DWR: $625,000 to improve accessibility to oil and gas well completion reports.

2016/2017 Budget Highlights:

CalGem: Two additional positions, $1.3 million increase for comprehensive training program for CalGem staff.
Pipelines: Ten permanent positions, $1.4 million increase to fund new pipeline oversight positions.
Studies: Two-year limited term funding of $2.5 million to complete additional independent scientific studies.
Orphan Wells: $2 million to remediate hazardous orphan wells.
CARB: $2.3 million and four positions to support neighborhood air quality monitoring near oil and gas facilities and enhance CARB’s emergency response capabilities.

2017/2018 Proposed Budget Highlights:

CalGem: 15 new permanent positions and $1.5 million to implement an idle well program.
OEHHA: $366,000 to evaluate chemicals used in well stimulation operations.
SWRCB: $1 million for to seven positions to support CalGem’s ongoing review of Class II UIC Injection Wells.
CalGem: Additional $45 million over 5 years to implement WELLSTAR public data base

New Legislative Mandates

2008 – AB 1960 (Nava): Expanded CalGem’s regulatory authority over oil field facilities, imposed new repair and maintenance requirements on small pipelines, and required installation of new facilities that contain and prevent oil field related spills.
2010 – SB 550 (Florez): Imposed new landowner notification requirements for specified activities.
2010 – SB 855 (Kehoe): Directs DOC to report on CalGem’s permitting and enforcement activities.
2012 – AB 1966 (Ma): Imposes new landowner notification requirements for drilling related activities.
2013 – SB 4 (Pavley): Established a comprehensive permitting and regulatory structure and mandated landowner notification for well stimulation treatments including well stimulation operations.
2013 – AB 665 (Wolk): Increases bonding obligations on oil and gas operators.
2014 – SB 1281 (Pavley): Requires comprehensive reporting of how and where water is produced, treated and used as part of oil production operations.
2014 – SB 861 (Budget): Imposed new oil spill program training and notification requirements on operators in the San Joaquin Valley and other inland areas.
2015 – AB 1420 (Salas): Imposes new requirements on natural gas production pipelines in urban areas.
2015 – AB 864 (Williams): Requires incorporation of Best Available Technology for pipelines near the Coastal Zones.
2016 – AB 2729 (Williams): Imposes increased bonding requirements and new testing requirements for idle wells.
2016 – AB 2756 (Thurmond): Provides Supervisor expanded authority and latitude to determine civil penalties on oil and gas operators.
State Budget 2014 – 2017: Increased CalGem budget by 60% to pay for new regulations, oversight, enforcement and permitting staff. Increases paid entirely by oil and natural gas producers.

Major Agency Rulemakings & Initiatives

1. CalGem

  • Comprehensive update of underground injection related regulations
  • New regulations for cyclic steaming operations
  • $55 million data management modernization effort
  • Expanded field inspection and enforcement staffing
  • Annual injection project reviews
  • SB 4 permitting and program regulations

2. U.S. EPA

  • Comprehensive technical and geologic review of approved injection boundaries for all oil fields

3. State and Regional Water Quality Control Boards

  • New regulations and permitting requirements for produced water pits and ponds
  • Eliminated specified surface disposal operations
  • New regional groundwater monitoring requirements
  • Expanded review of injection related permit applications
  • Scientific review of use of produced water in agricultural operations
  • Increased chemical use monitoring and reporting

4. California Air Resources Board

  • Oil and Gas Production GHG Methane Reduction Rule (most stringent in nation)
  • New oil field air monitoring and sampling program requirements related to well stimulation operations

5. Kern County

  • New drilling and facility installation permitting requirements
  • New air, traffic, and public safety impact fee assessments
  • New regulatory goals for water recycling
  • New landowner notification and collaboration requirements

Additional Agencies with Regulatory Oversight over Petroleum Production in California:

  • Department of Conservation
  • Department of Toxic Substances Control
  • Office Environmental Health Hazard Assessment
  • California State Lands Commission
  • Regional Air Districts
  • Local City and County Governments
  • State Fire Marshall
  • California Fish and Wildlife
  • U.S. Fish and Wildlife
  • California Office of Spill Prevention and Response
  • California Coastal Commission
  • California Department of Water Resources
  • California Energy Commission
  • California Department of Public Health California
  • Department of Industrial Relations

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