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Fracking News & Flashes

Our Commentary on Recent Fracking News

  • Governor Newsom’s Order Promises Substantial Change to the Fossil Fuels Industry in California
    September 30, 2020
    California

    On September 23, 2020, Governor Gavin Newsom of California published an executive order (the “Order”) targeted at reducing both supply and demand for fossil fuels in the state. California has previously announced a “zero carbon” goal for 2045. Most of the focus from the Order has been on California’s plan to phase-out sales of emissions-producing passenger vehicles by 2035 (and medium- and heavy-duty vehicles by 2045). However, the Order also contains language focused on phasing out fossil fuel production in the state.

    Most notably, in the preamble, the Order calls for an end to the issuance of new hydraulic fracturing permits by 2024. The Order does not put in place such a ban. Governor Newsom has announced that he plans to ask the state legislature to promulgate legislation to end the issuance of new hydraulic fracturing permits on this timeline, though it is currently unclear whether that would also extend to other well stimulation practices, such as steam injection.

    This would build on California’s temporary ban in 2019, when the state halted the issuance of new hydraulic fracturing permits until an independent, scientific review could be conducted by the Lawrence Livermore National Laboratory. The first such review was completed earlier this year, but the review process has been slow, with only a handful of projects having received approval since the resumption of permitting in April 2020.

    The Order also contains several other items focused on reducing California’s involvement with fossil fuels, including:

    • A requirement for the California Environmental Protection Agency and the California Natural Resources Agency (together, the “Agencies”) to expedite regulatory processes to repurpose and transition upstream and downstream oil production facilities, with an action plan to be provided no later than July 15, 2021.
    • A requirement for the Agencies to develop strategies, recommendations, and actions by July 15, 2021 to “manage and expedite the responsible closure and remediation of former oil extraction sites as the state transitions to a carbon-neutral economy.”
    • A requirement for the California Department of Conservation’s Geologic Energy Management Division (“CalGEM”) to propose a significantly more stringent health and safety draft rule for oil extraction activities by December 31, 2020.

    While it is unclear whether the California legislature will follow through with a ban on new hydraulic fracturing permits on Governor Newsom’s 2024 timeline, these other requirements may significantly constrain oil and gas operations in the state. Vinson & Elkins energy and regulatory attorneys have extensive experience advising clients on navigating regulatory issues and their potential impacts, as well as representing clients before various government bodies.

  • EPA Methane Regulations Back in a Holding Pattern after Court Issue Stay
    September 21, 2020

    As discussed in these two previous posts, EPA recently released two rules changing the volatile organic compound (“VOC”) and methane emissions requirements for new sources in the oil and gas sector, which alter or roll back some of the requirements put in place under the Obama administration (“Methane Rule”). The predecessor to EPA’s most recent methane regulations spent significant time bouncing back and forth between the agency and several federal courts in Washington D.C., and it’s already clear the Methane Rule is likely to share a similar fate. Two lawsuits were filed to block the rule within days of its official release. And as with many other environmental regulations and roll-backs over the past few years, the Methane Rule spent very little time on the books before being put on hold by a court.

    On September 14, 2020, EPA’s final Methane Rule was officially published in the Federal Register, making the rollback effective. On the very same day, a group of states filed a new lawsuit in the D.C. Circuit asking the court to review EPA’s new methane regulations. A number of environmental groups followed suit the next day, asking the court to put an emergency halt to the rule.

    On September 17, 2020, the D.C. Circuit administratively stayed the Rule, meaning that it can’t go into effect until the court has time to consider the requests filed by the environmental groups.

    Industry members, trade groups, and environmental organizations will have until October 14, 2020, to ask the court to intervene in the states’ law suit, and until October 15, 2020, to ask to join the environmental group’s lawsuit, although it is possible the court may have already reached a decision on whether to grant a longer-term stay of the Methane Rule by that time.

    Brief History of EPA’s Methane Regulations for the Oil and Gas Industry

    On June 3, 2016, EPA finalized Quad Oa — more formally known as the “New Source Performance Standards (NSPS) for VOC and methane emissions from the oil and gas sector.” This was the first time EPA specifically regulated methane from the oil and gas sector, and the rule applied to upstream, midstream, and downstream operations. Before then, EPA had only regulated VOCs from the sector, and since VOCs and methane both come from natural gas leaks, the previous regulations (“Quad O”) had the effect of also limiting methane emissions.

    Methane was regulated as an air pollutant based on its contribution to climate change. As EPA has previously explained, the oil and gas industry is a “significant source of emissions of methane, a potent greenhouse gas with a global warming potential more than 25 times that of carbon dioxide.” EPA estimates that the oil and natural gas production, natural gas processing, and natural gas transmission and storage sectors emit 25% of U.S. anthropogenic methane.

    By explicitly regulating methane as a separate air pollutant, Quad Oa acted as a stepping stone to additional methane regulations in the future. While Quad Oa only applied to new or modified sources after the rule’s effective date, releasing the rule triggered an obligation to regulate methane from existing wells and equipment, as well. In November 2016, EPA followed up on that intention by sending an Information Collection Request to operators, asking them to identify ways to control methane from existing oil and gas sources. In March 2017, the Trump administration’s EPA canceled the Information Collection Request, and in April 2017, EPA announced its intention to review Quad Oa. As a result, existing sources of methane emissions in the oil and gas industry are not currently regulated by EPA.

    Why Does This Roll-Back Matter? Existing Sources and Future Methane Regulation

    On the surface, EPA’s Methane Rule removes some of the regulatory requirements that industry considered burdensome, including leak monitoring and repair and recordkeeping and reporting requirements. Among the biggest changes was removing transportation and storage sectors (including midstream or pipeline companies) of the oil and gas industry from VOC and methane regulation entirely. As EPA explained, the “Clean Air Act requires EPA to make a formal finding that a pollutant contributes significantly to air pollution before setting NSPS requirements. Since the Obama EPA did not make this finding, the addition of the transmission and storage segment to the oil and gas category and the additional methane control requirements in the 2016 rule were inconsistent with the law.”

  • EPA Methane Regulations for Oil and Gas Industry Finally Finalized and Immediately Headed Back to Court
    September 16, 2020

    As discussed in this previous post, EPA recently released two rules changing the volatile organic compound (“VOC”) and methane emissions requirements for new sources in the oil and gas sector, which alter or roll back some of the requirements put in place under the Obama administration (“Methane Rule”). The predecessor to EPA’s most recent methane regulations spent significant time bouncing back and forth between the agency and several federal courts in Washington D.C.

    On September 14, 2020, EPA’s Methane Rule was officially published in the federal register, meaning that the roll-back has now become effective. On the very same day, a group of states filed a new law suit in the federal D.C. Circuit court asking the court to review EPA’s new methane regulations. Industry members, trade groups, and environmental organizations will have 30 days to ask to ask the court to join in the law suit.

    Brief History of EPA’s Methane Regulations for the Oil and Gas Industry

    On June 3, 2016, EPA finalized Quad Oa — more formally known as the “New Source Performance Standards (NSPS) for VOC and methane emissions from the oil and gas sector.” This was the first time EPA regulated methane from the oil and gas sector, and the rule applied to upstream, midstream, and downstream operations. Before then, EPA had only regulated VOCs from the sector, and since VOCs and methane both come from natural gas leaks, the previous regulations (“Quad O”) had the effect of also limiting methane emissions.

    Methane was regulated as an air pollutant based on its contribution to climate change. As EPA has previously explained, the oil and gas industry is a “significant source of emissions of methane, a potent greenhouse gas with a global warming potential more than 25 times that of carbon dioxide.” EPA estimates that the oil and natural gas production, natural gas processing, and natural gas transmission and storage sectors emit 25% of U.S. anthropogenic methane.

    By explicitly regulating methane as a separate air pollutant, Quad Oa acted as a stepping stone to additional methane regulations in the future. While Quad Oa only applied to new or modified sources after the rule’s effective date, releasing the rule triggered an obligation to regulate methane from existing wells and equipment. In November 2016, EPA followed up on that intention by sending an Information Collection Request to operators, asking them to identify ways to control methane from existing oil and gas sources. In March 2017, the Trump administration’s EPA canceled the Information Collection Request, and in April, EPA announced its intention to review Quad Oa. As a result, existing sources of methane emissions in the oil and gas industry are not currently regulated by EPA.

    Why Does This Roll-Back Matter? Existing Sources and Future Methane Regulation

    On the surface, EPA’s Methane Rule removes some of the regulatory requirements that industry considered burdensome, including leak monitoring and repair and recordkeeping and reporting requirements. Among the biggest changes was removing transportation and storage sectors (including midstream or pipeline companies) of the oil and gas industry from VOC and methane regulation entirely. As EPA explained, the “Clean Air Act requires EPA to make a formal finding that a pollutant contributes significantly to air pollution before setting NSPS requirements. Since the Obama EPA did not make this finding, the addition of the transmission and storage segment to the oil and gas category and the additional methane control requirements in the 2016 rule were inconsistent with the law.”

  • Texas Railroad Commission Publishes Proposed Order on Proration Volume for Oil Wells
    April 30, 2020
    Texas

    On April 29, 2020, the Texas Railroad Commission (the “Commission”) published a proposed order that it plans to consider at its May 5 Commissioner’s Conference.  The proposed order was brought forth by Commissioner Ryan Sitton, following weeks in which the Commission entertained arguments for and against such proration measures. The Commission will accept public comments on the proposed order before Monday, May 4, 2020.

    The proposed order would limit Texas producers to a “Proration Volume” of 80% daily production multiplied by the number of days in a month, based on an operator’s highest average daily oil volume for the month-long periods of October, November, or December of 2019.  The 80% limit is based on an initial “Market Demand Factor,” which is subject to future review by the Commission. Penalty for non-compliance will be $1,000.00 for each barrel of oil produced in excess of the allowable volume, on a monthly basis.

    Notably, under the proposed order, the proration measures would not take effect until other oil-producing states and countries (such as OPEC+) agree to certain “Complementary Proration Measures” totaling at least 4 million barrels of crude oil a day (in addition to those production cuts already announced by OPEC+). The proration measures would last until the earlier of when such “Complementary Proration Measures” ceased, or when global market demand for crude oil exceeds 85 million barrels a day. By linking proration to similar measures taken by other states and countries, the proposed order seeks to address previously voiced concerns that Texas producers should not alone shoulder the burden of production cuts.1 The proposed order also contains some exceptions and potential relief mechanisms:

    • The proposed order contains a definition of an “Excluded Operator,” which is one that produced less than 1,000 barrels of oil per day;
    • The Commission may reduce or eliminate a non-compliance penalty upon a showing of “good faith,” though the proposed order does not provide a definition or example of “good faith;”
    • Any operator may request a hearing to determine if the proposed order shall not apply to individual wells or leases, though the proposed order gives no guidance on what circumstances may qualify for the exception.

    Significant uncertainty exists as to whether this proposed order, in its current form, would be approved by the three-member Commission next week. For example, Chairman Wayne Christian has already expressed skepticism as to the need for such proration measures.

    Texas has not implemented oil proration since 1931, so there exists limited precedent for both Commission enforcement or court challenges, should the order pass. Vinson & Elkins energy and regulatory attorneys have extensive experience advising clients on these regulatory issues and their potential impacts, as well as representing clients before the Commission.

    1 The Oklahoma Corporation Commission plans to similarly consider proposed proration measures next month. 

  • District Court Upholds BLM Rollback of 2015 Hydraulic Fracturing Rule
    April 2, 2020
    California

    On March 27, 2020, the U.S. District Court for the Northern District of California granted the Bureau of Land Management’s (“BLM”) motion for summary judgement, upholding the agency’s decision to rescind, or roll-back, hydraulic fracturing regulations finalized during the Obama Administration (the “2015 Rule”). The Court’s decision in State of California v. Bureau of Land Management means that oil and gas operators on Federal and Indian lands will not have to comply with the additional requirements in the 2015 Rule. Instead, operators must continue to follow existing state and federal requirements. Because the 2015 Rule never went into effect before it was rescinded, operators will not have to change any of their existing practices.
    After studying the existing regulatory requirements, the Obama Administration decided that additional federal regulations were needed for hydraulic fracturing on Federal and Indian land. BLM passed the 2015 Rule, which would have included a comprehensive set of well-bore integrity requirements, the use of tanks for the interim storage of recovered waste fluids, mandatory notifications and waiting periods for key parts of the fracturing process, and chemical disclosures.

    In 2017, BLM rescinded the 2015 Rule because it believed it was “unnecessarily duplicative or state and some tribal regulations and imposes burdensome reporting requirements and other unjustified costs on the oil and gas industry.” The State of California and several environmental groups challenged BLM’s rescission of the 2015 Rule in a federal district court in California under the Administrative Procedure Act (“APA”), National Environmental Policy Act (“NEPA”) and Endangered Species Act (“ESA”). Essentially, these groups argued that BLM did not follow the proper procedures, complete the necessary level of environmental analysis, or sufficiently explain its reason for rescinding the 2015 Rule.

    In challenging the Rescission under the APA, California argued that the change in policy was an abuse of discretion because the agency failed to offer a reasoned explanation for reversing its policy and that its proffered reasons for the reversal run counter to the evidence before the agency. The Court disagreed and held that while the BLM could have provided more detail, its explanation was sufficient and “did enough to clear the low bar of arbitrary and capricious review, and that is all the law requires.” The Court also held that NEPA and the ESA did not apply to the Rescission, reasoning that there was no impact to the environment or endangered species because the 2015 Rule never went into effect and there was never change to the environmental status quo.

    The Rescission will save oil and gas operators from complying with additional federal requirements. But V&E Environmental & Natural Resources Counsel Corinne Snow, who argued this case on BLM’s behalf during her tenure at the U.S. Department of Justice, notes that as a practical matter, the 2015 Rule requirements are now largely duplicative of regulations now in place many states where hydraulic fracturing occurs on BLM lands, and BLM requires operators to also comply with the laws of the state where Federal or Indian land is located.

    Read our full analysis of State of California v. BLM here.

  • Pennsylvania Supreme Court finds that Rule of Capture May Bar Trespassing Claims
    February 12, 2020
    Pennsylvania

    On January 22, 2020, the Pennsylvania Supreme Court announced its decision in Briggs, et al. v. Southwestern Energy Production Company, No. 63 MAP 2018 (Penn. Jan. 22, 2020), vacating a Superior Court opinion and holding that the rule of capture applies to fracking and protects fracking companies from trespass liability when a well taps into oil and gas below a neighboring property so long as there is no actual physical invasion. The rule of capture is a common law principle stating that the first person to “capture” a resource owns that resource, regardless of whether it is drained from below adjacent land. With this decision, Pennsylvania joins Texas as one of two states with cases holding that fracking, in and of itself, does not constitute trespass. In limiting its holding to situations where there is no physical invasion, the Supreme Court leaves an opening for landowners who can prove actual physical invasion, difficult though that may be.

    In Briggs, the Briggs Family sued Southwestern Energy, an energy company conducting fracking operations on neighboring land. Southwestern Energy did not have leasehold interests on the Briggs Family’s land. The Briggs Family sued for trespass and conversion, alleging that Southwestern Energy’s wells illegally drained natural gas from beneath their land. Southwestern Energy argued that it did not physically invade the Briggs Family’s property and, to the extent it produced any gas drained from that property to its lease, it was protected by the rule of capture. In response, the Briggs Family argued that the rule of capture should not apply in circumstances where gas has been captured by fracking, because (1) “artificially stimulating” the cross-boundary flow of oil and gas renders the rule of capture inapplicable and (2) “any time natural gas migrates across the property lines resulting, directly or indirectly, from hydraulic fracturing, a physical intrusion into the plaintiff’s property must necessarily have taken place.”

    In its opinion, the Supreme Court rejected the Briggs Family’s arguments. The Supreme Court noted that the characterization of fracking as “artificial stimulation” was a distinction without a difference—all drilling is artificial. Even more to the point, the Supreme Court stated that early decisions had upheld application of the rule of capture to well-shooting and other forms of well stimulation. The Supreme Court held that the rule of capture protects fracking companies from trespass liability when a well taps into oil and gas below a neighboring property unless there is a physical invasion. Since the Briggs Family had not actually alleged physical intrusion into their subsurface property and the record did not support the conclusion that physical intrusion had occurred, the Supreme Court remanded the case for further factual development. Had the Briggs Family alleged actual invasion by fracture, fluid, or proppant, the Supreme Court indicated that a claim for trespass would have been viable, at least at the pleading stage.

    Briggs has been viewed as a split decision by landowners and fracking companies. Although it upholds the rule of capture’s applicability to fracking, it does not fully foreclose liability for drainage resulting from fracking. Ultimately, the Supreme Court’s ruling places the burden on landowners to prove that a physical intrusion onto their property actually took place—a pricey and complicated proposition.

  • Democratic Lawmakers Introduce Bill to Ban Fracking Nationwide
    January 28, 2020

    On January 28, 2020, presidential candidate Senator Bernie Sanders (D-VT) and Senator Jeff Merkley (D-OR) introduced Senate Bill 3247, which, if enacted as proposed, would ban hydraulic fracturing nationwide by 2025. The Bill, known as the “Ban Fracking Act” is Congress’ first-ever proposal to ban fracking across the United States and would achieve a total ban in three phases.

    First, the Bill would institute an immediate ban on all new federal permits for fracking-related infrastructure. This includes pipelines, natural gas import and export terminals, natural gas storage, ethane cracker plants, natural gas power generation plants, among other fracking infrastructure. The Bill also calls for an immediate national survey of all oil and natural gas wells in the United States where fracking has been or is being used. The survey will gather data on well location, proximity to homes and schools, production rates, and health and safety violations.

    Second, using data gathered in the national survey, the Bill would revoke federal permits for fracking within 2,500 feet of homes and schools in 2021. Finally, the Bill would ban all fracking in the United States, both offshore and onshore, in 2025.

    The Bill directs the Department of Labor to partner with other federal agencies and stakeholders to develop recommendations for ensuring the “health and safety of individuals residing in, and the prosperity of natural gas- and oil-producing regions” during the fracking phaseout. However, the Bill does not authorize any federal funds to implement any recommendations that the Department of Labor and other federal agencies may develop.

    The Bill has been referred to the Senate Energy and Natural Resources committee but will face an uphill battle in the currently Republican-controlled Senate. The Bill has several ambiguities and gaps. For example, the Bill does not specify what “federal permits for fracking” will be revoked in 2021 nor does it address any takings issues that would likely arise from banning fracking on private property. If adopted as written, the Bill will likely suffer setbacks due to legal challenges.

    Although unlikely to become law this year, the Bill may be a sign of how a progressive Democratic administration may approach energy policy as Democratic presidential candidates Senator Bernie Sanders and Senator Elizabeth Warren have both pledged to ban fracking.

    Read the full text of Senate Bill 3247 here.

  • California Announces “Independent Reviews” for New Hydraulic Fracturing Permits, Audit of Current Permit Approval Process
    November 20, 2019
    California

    On November 19, 2019, the California Department of Conservation’s Division of Oil, Gas and Geothermal Resources (“DOGGR”) announced that all new permits for well stimulation operations such as hydraulic fracturing must be reviewed by third-party, independent scientists “to ensure the state’s technical standards for public health, safety and environmental protection are met prior to approval of each permit.”  These reviews will be conducted by experts at the Lawrence Livermore National Laboratory in Livermore, California.

    The requirement for independent reviews is a temporary measure pending a broader overhaul of California’s well stimulation permitting regime, which arises out of recent legislation that revised the name and mission of DOGGR, which will be renamed the Geologic Energy Management Division, or “CalGEM,” effective January 1, 2020.  Similar to Colorado’s S.B. 19-181, California’s A.B. 1057, which was signed into law in October 2019, also specifically requires that CalGEM’s mission include “protecting public health and safety and environmental quality, including reduction and mitigation of greenhouse gas emissions associated with the development of hydrocarbon and geothermal resources in a manner that meets the energy needs of the state.”  DOGGR began a review of its process for approving well stimulation permits in July 2019, after it was reported that the issuance of such permits had doubled since Governor Newsome took office in January 2019.  More recently, DOGGR requested an independent audit of its permitting processes for well stimulation and underground injection control by the California Department of Finance’s Office of State Audits and Evaluations.

    In addition to this ongoing review of well stimulation permitting procedures, DOGGR announced a new rulemaking effort aimed at strengthening protections for public health and safety near oil and gas extraction facilities.  The rulemaking process will begin in 2020 with “a series of pre-rulemaking workshops with interested parties to seek input on the best ways to protect human health through new rules.”  A variety of environmental and public health authorities are expected to consult on the forthcoming rulemaking, including the California Department of Public Health and the California Environmental Protection Agency.  Finally, DOGGR also announced a moratorium on new extraction wells that use high-pressure cyclic steaming to break apart underground geological formations to extract oil, a process that has been linked to recent oil leaks in Kern County, California.

    It remains to be seen how the independent panel will implement its new authority to evaluate well stimulation permits pending California’s continuing review of its permitting processes.  To the extent that this review recommends regulatory changes to California’s permitting regime, such changes would require a future notice and comment rulemaking.  In the meantime, operators should prepare to engage in the forthcoming rulemaking effort relating to protections for public health and safety near oil and gas extraction facilities.  As Colorado’s failed Initiative 97/Proposition 112 demonstrated in 2018, measures as simple as increased setback distances can have devastating effects on the percentage of surface lands available for production.

    Read DOGGR’s announcement in full here.

  • Texas Publishes Proposed Safety for Rural Gathering Pipelines
    October 18, 2019
    Texas

    The Railroad Commission has formally proposed rules that would add safety requirements for rural gathering pipelines. The action is far narrower than the draft rules that the Railroad Commission proposed this summer for informal comment. Historically, rural gathering pipelines have been largely unregulated. This summer’s draft proposal would have imposed on rural gathering lines broad proscriptive requirements related to corrosion control, damage prevention, public education, line marking, and leak surveys above and beyond rules recently finalized by the federal Pipeline and Hazardous Materials Safety Administration. The potential major change drew significant industry attention and many informal comments, both in writing and at a public meeting, including comments that the draft rules were not tied to identified public safety risks.

    At its October 1 meeting, the Commission formally proposed safety rules that are far narrower than the draft proposal this summer. Rather than the proscriptive requirements proposed in draft this summer, the current proposed rules would instead subject pipeline operators to a general performance standard – operate in a “reasonably prudent manner to promote safe operation” – and the following incident related requirements: 

    • Report incidents and accidents to the Commission (16 TAC 8.110(c));
    • Conduct investigations after incidents or accidents and cooperate with the Commission during a Commission investigation (16 TAC 8.110(d)); and
    • Submit, at the Commission’s request, corrective action plans to remediate accidents, incidents, threats to the public, or complaints (16 TAC 8.110(e)).

    The proposed rules align with H.B. 2982 (2013), which authorizes Commission rulemaking for rural gathering pipelines “based on the risks the transportation and facilities present to the public safety.” Indeed, the Commission acknowledged in the preamble to the proposed rules that it “has recognized the need to compile more accurate and complete information regarding the incidents and accidents that are occurring on gathering systems located in Class 1 locations and rural areas.” That said, the Commission also expressed its belief that these new reporting, investigation, and corrective action requirements “will allow the Commission to gather accurate data and analyze trends in incident or accident occurrences,” permitting it “to more thoroughly assess the risks [that rural gathering pipelines] . . . present to the public safety.” Thus, the data the Commission intends to gather could provide the Commission with the legal basis for a more expansive rule package in the future. 

    The proposed rules were formally published in the Texas Register on October 18, opening a 30-day public comment period.

  • California Legislature Looks to Colorado in Considering Increased Setbacks
    April 30, 2019
    CaliforniaColorado

    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.