California Legislature Looks to Colorado in Considering Increased Setbacks
On April 22, 2019, the California Assembly’s Natural Resources Committee passed Assembly Bill 345 (“AB 345”), which, similar to Colorado’s failed Proposition 112 ballot initiative, would require that all new oil and gas development and rework operations on non-federal land be located at least 2,500 feet from any residences, schools, childcare facilities, playgrounds, hospitals, and health clinics. These requirements would take effect beginning on January 1, 2020. In addition, the bill authorizes cities and counties to impose setback requirements even greater than the 2,500-foot base requirement.
The bill includes a variance mechanism whereby operators could obtain a reduction to the “maximum achievable” setback distance where necessary to access legal subsurface rights. Applications for a variance must include “competent, substantial, and relevant evidence” demonstrating, among other things, that the proposed variance is “consistent with the intent” of AB 345 and “protect[s] public health and safety.” Such variance requests would be subject to review by the state’s Oil and Gas Supervisor. However, an analysis prepared by the Assembly’s Natural Resources Committee observed that “it is unlikely the variance could ever be used” because, counter to the requirement that a variance be “consistent with” AB 345, the bill explicitly declares that “[p]roximity to oil and gas extraction, including the use of hydraulic fracturing, well acidization, and other nonconventional oil and gas extraction techniques, adversely impacts public health and safety.”
As was the case with Proposition 112 in Colorado, implementing the requirements of AB 345 could have a devastating impact on new oil and gas exploration and production activities in California, which currently ranks fourth among states in annual oil production. The Natural Resources Committee’s analysis states that even a lower 1,500-foot setback from only residential developments would have affected 65 permits issued in Los Angeles County alone in 2018. Even more troubling for California operators is the Committee’s observation that, as currently drafted, the “definition of new oil and gas development and rework operations may capture any permit necessary to keep existing wells producing.” The California Division of Oil, Gas, and Geothermal Resources issued 1,100 such permits last year, amounting to 15% of the total permits it issued. Similarly, the Committee found that AB 345’s definitions of “oil and gas development” and “rework operations” subject to the setback requirement could include routine repairs, the addition of new flowlines, or additional treatment of waste.
The bill will now move to the Committee on Appropriations for further consideration. Should the bill advance out of committee, it would move to the Assembly for further readings and a vote. To become law, the bill must be passed by the Assembly and Senate, and then approved by the Governor, who can either sign the bill into law, or allow it to become law without signature. Read the current text of AB 345 in full here.
Finally, AB 345 was not the only bill affecting the oil and gas industry to advance out of the Assembly’s Natural Resources Committee on April 22. The Committee also passed AB 1440, which would again borrow from Colorado by eliminating language encouraging the development of oil and gas resources from the statutory mandate of the California’s Oil and Gas Supervisor. Colorado, of course, recently enacted legislation that revised the mandate of the Colorado Oil and Gas Conservation Commission to focus primarily on the protection of public health and the environment, rather than “fostering” the development of oil and gas resources. Like AB 345, AB 1440 will now move to the Committee on Appropriations for further consideration. Read the current text of AB 1440 in full here.