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California Suspends Senate Bill 1137 Pending Referendum Vote

On February 3, 2023, the California Secretary of State certified a referendum challenging Senate Bill 1137 (“SB 1137”), which institutes a 3,200-foot setback for new oil and gas operations and includes new requirements for operators of existing oil and gas production facilities. SB 1137 took effect on January 1, 2023, and the California Geologic Energy Management Division’s (“CalGEM”) regulations implementing the law (“Implementation Regulations”) went into effect on January 6, 2023. The certification, by operation of law, suspends SB 1137’s provisions and CalGEM’s associated regulations pending the results of the referendum vote during the 2024 general election.

CalGEM notified operators of the suspension on the same day the suspension was certified. Per CalGEM’s notification, operators who have received notices of intention to commence drilling (“NOIs”), or who have pending NOI applications before CalGEM, no longer need to take the additional actions required to comply with the provisions of SB 1137 or CalGEM’s Implementation Regulations.

SB 1137 and the Referendum

SB 1137’s setback provision prohibits CalGEM from approving NOIs within health protection zones, except in a handful of specified circumstances. “Health protection zones” are defined as areas within 3,200 feet of a “sensitive receptor,” meaning residences, education resources (e.g., schools, daycare centers, parks), community resources (e.g., youth centers), health care facilities, dormitories, or any building open to the public. SB 1137 also requires operators submitting NOIs to submit a sensitive receptor inventory and map for the area within a 3,200-foot radius of the proposed wellhead location. The law would also impose more stringent obligations on operators over the course of the coming years, including new water quality sampling requirements, additional annual reporting, and implementation of leak detection and response (“LDAR”) plans.

The referendum to reverse SB 1137 was organized by the California Independent Petroleum Association in October 2022. After receiving the necessary signatures, the referendum was certified on February 3, 2023, and will be placed on the November 5, 2024, general election ballot.

Effect of the Suspension

The certification has suspended both the statutory provisions established by SB 1137 and CalGEM’s Implementation Regulations, pending resolution of the referendum. As explained by CalGEM, the suspension has several implications for operators:

  • Previously Approved NOIs: For NOIs approved prior to February 3, 2023, operators will not need to take additional action in connection with the NOI in order to comply with the provisions of SB 1137.
  • NOIs Pending Review by CalGEM: NOIs submitted to CalGEM that have not yet received approval are no longer subject to the requirements of SB 1137. CalGEM will continue its review without requiring compliance with SB 1137. For NOIs that were returned for operators to update with additional information to evaluate for compliance with SB 1137, those NOIs may be resubmitted for review without the need for the additional information.
  • Operators Constructing or Operating New Production Facilities: A Notice of New Production Facility is no longer required before constructing or operating a new production facility.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.