Over the past few years, California has taken strides to update the state’s oil and gas regulatory program to keep pace with new technological advances in resource extraction, such as hydraulic fracturing. One significant milestone was the passage of SB 4 in September 2013, a bill that demonstrated how California would be taking a different approach to hydraulic fracturing and unconventional shale gas development as compared to the approach taken by the State of New York.

While New York has opted for an outright ban on hydraulic fracturing in the state, California’s SB 4 established interim regulations and laid out plans for a thorough scientific and environmental review of hydraulic fracturing, leading up to the promulgation of permanent regulations, which went into effect on July 1, 2015.

SB 4 also required the California State Water Resources Control Board (SWRCB) to develop and adopt “model criteria” for monitoring groundwater in areas where hydraulic fracturing is used. The SWRCB announced the Model Criteria for Groundwater Monitoring in Areas of Oil and Gas Well Stimulation (Model Criteria) on July 7, 2015.

SB 4 Permanent Regulations in Effect July 1, 2015

In accordance with SB 4, the Department of Conservation (DOC) Division of Oil, Gas and Geothermal Resources (DOGGR) prepared an Environmental Impact Report (EIR) to provide the public with detailed information regarding any potential environmental impacts of well stimulation in the state, and the California Natural Resources Agency conducted a comprehensive independent scientific study on well stimulation treatments. While these studies were ongoing, SB 4 directed DOC to enact Emergency Regulations that allowed operators to use well stimulation treatments without obtaining a permit until the final regulations were developed.

On July 1, 2015, DOGGR certified the EIR titled “Analysis of Oil and Gas Well Stimulation Treatments in California.” The EIR serves as a “first tier” programmatic environmental review document that California agencies can rely on when evaluating oil and gas permits to drill. This is similar to the approach of the U.S. Bureau of Land Management (BLM) field offices in the context of National Environmental Policy Act (NEPA) requirements and Applications for Permits to Drill (APDs).

The DOGGR provides in its Certification Statement that, “for the vast majority of applications for well stimulation treatment permits, DOGGR expects [the EIR] will simply function as a first tier data base on which DOGGR and other agencies can build in order to allow future publicly circulated CEQA documents to focus on site-specific issues.” DOGGR further notes that DOGGR “will work with lead agencies to ensure adequate mitigation for all impacts that can be seen as direct or reasonably foreseeable indirect effects of well stimulation treatment.” DOGGR has considered efficiency and cost as well, suggesting that oil and gas field operators in the “same established field” request a single-project authorization for multiple applications in order to streamline CEQA review.

The DOGGR concluded that seven mitigation measures discussed in the EIR should be applied without change throughout the state and, therefore, should be converted into formal regulations. The mitigation measures DOGGR plans to incorporate into formal regulations include:

• GW-1a (Use Alternative Water Sources to the Extent Feasible);

• GW-4b (Install a Well Seal across Protected Groundwater for New Wells Subject to Well Stimulation Treatments);

• SWR-1b (Surface Water Protection);

• GEO-1a (Avoid Active Faults if Necessary);

• GEO-1b (Implement an Appropriate Setback if Necessary);

• GEO-1e (Include an Earthquake Response Plan within the Spill Contingency Plan); and

• HAZ-1a (Ensure that Spill Contingency Plan Provides Adequate Protection Against Leaks or Discharges of Dangerous Fluids and Other Potentially Dangerous Materials).

DOGGR is soon expected to release the “Mitigation Policy Manual,” which will set out other mitigation measures that may be necessary for certain well stimulation treatment permits.

Several volumes of the independent scientific assessment of well stimulation, Well Stimulation in California – An Examination of Hydraulic Fracturing and Acid Stimulations in the Oil and Gas Industry (July 2015) were released to the public on July 9, 2015. The scientific assessment covers impacts of well stimulation on water resources, air quality and seismic impacts of well stimulation, and potential impacts of well stimulation on wildlife, vegetation and human health. DOGGR indicated in its Certification Statement that it would be reviewing the scientific assessment and may amend the Mitigation Policy Manual and/or “propose additional regulations” as warranted.

On July 1, 2015, DOGGR’s permanent regulations went into effect. Among other requirements, the permanent regulations require an operator to (1) submit a detailed application and obtain a permit prior to performing well stimulation treatment (e.g., hydraulic fracturing or acidizing); (2) within 60 days after cessation of the well stimulation treatment, disclose information including the chemicals used; (3) prepare a post-well stimulation treatment report; (4) adhere to new standards for the storage and handling of well stimulation treatment fluids and wastes (including a prohibition on pit storage); and (5) monitor the well prior to, during and after well stimulation, including an evaluation of seismic activity in the vicinity of hydraulic fracturing.

SWRCB Model Criteria

On July 7, 2015, the SWRCB adopted water quality monitoring methods and requirements to be used in areas where hydraulic fracturing occurs. The Model Criteria sets out the process for how groundwater will be sampled and tested by oil and gas operators and designated contractors and how the State Water Board will perform regional monitoring. The “area-specific” requirements established in the Model Criteria are designed to “characterize baseline water quality conditions and detect potential impacts to beneficial use waters from well stimulation treatments.” The Model Criteria establishes that operators shall prepare groundwater monitoring plans with “site-specific information including geology, geophysics, hydrogeology, geochemistry, and current and past field operations.” Area-specific groundwater monitoring is required unless an operator receives approval from the State Water Board for an exclusion.

Generally, operators would be required to sample groundwater monitoring wells in accordance with the following area-specific requirements:

• Collect samples before well stimulation. Following well stimulation, area-specific groundwater monitoring wells shall be placed on a semi-annual monitoring schedule.

• The quarter selected for semi-annual sampling shall alternate each year. For example, the first year, the operator will collect samples during the first and third quarter; the following year, samples will be collected during the second and fourth quarters.

• All sampling work shall be collected under the oversight of a California Registered Professional Engineer or Professional Geologist.

• Sample for the “Required Analytes” as set forth in Table B1 of the Model Criteria (g., TDS, radionuclides, methane, BTEX, PAH, alcohols and glycols, biocides used during well stimulation and any tracers used during well stimulation).

• Submit a Groundwater Monitoring Report to the State Water Board.

With the promulgation of permanent regulations for well stimulation activities and the adoption of water quality monitoring requirements in California, oil and gas operators should carefully review their practices and procedures to ensure that exploration and production operations are being conducted in compliance with California law.