And then there was one.  After multiple bills proposed to regulate the practice of hydraulic fracturing in California perished this legislative season in Sacramento, Senate Bill 4 (“SB 4″), authored by California Senator Fran Pavley, D-Agoura Hills, is the sole survivor.  Among the bills that did not survive were several that would have imposed moratoriums on hydraulic fracturing in California.  SB 4 contains no such moratorium, but does propose a extensive statutory framework for well stimulation regulation in California, which would apply to acidization as well as hydraulic fracturing techniques.

Hydraulic fracturing involves injecting a mixture of water and small amounts of chemicals and sand underground to fracture rock formations that contain oil or gas, in order to make the oil or gas easier to extract.  Although it has been used for decades, the technique has attracted much attention recently, following its extensive use in the Bakken shale in North Dakota and the Marcellus shale in the northeastern United States.  In California, techniques such as hydraulic fracturing and acidization may have the potential to unlock the Monterey Shale, one of the largest deposits of shale oil in the nation.  The United States Department of Energy estimates that the Monterey Shale contains more than 15 billion barrels of recoverable oil; enough, if tapped, to make California the country’s leading oil producer.

At a recent conference, Senator Pavley spoke of the necessity for “comprehensive” regulation of well stimulation techniques in California, citing an absence of both available data on the environmental and public health impacts of well stimulation techniques such as acidization and hydraulic fracturing, and regulations governing the use of these techniques.  At the same conference, California Assembly Member Das Williams, D-Santa Barbara, spoke in support of SB 4, noting that the “reasonable approach [of SB 4] is better than a void.”

In its current form, SB 4 would, among other things:

• Require an independent scientific study of well stimulation addressing occupational, public, and environmental health and safety to be completed by January 1, 2015.

• Require the California Department of Conservation, Division of Oil, Gas, and Geothermal Resources (“DOGGR”) to adopt well stimulation regulations by January 1, 2015.

• Require that DOGGR’s regulations include full disclosure of the composition and disposition of hydraulic fracturing and well stimulation fluids, with trade secret protection for chemical formulas extended to industry.

• Require that well operators obtain a permit for well stimulation, and provide estimates of the amount of water and the composition of the stimulation fluids planned to be used, a waste water disposal plan, and a groundwater monitoring plan.

• Require DOGGR to provide at least 30 days advance notice to the public, neighboring landowners and tenants, and the local Regional Water Quality Control Board of the intent to stimulate a well.

• Require well owners to specifically notify DOGGR 72 hours ahead of the scheduled job in order for DOGGR to witness the procedure, if needed.

• Require that DOGGR develop and maintain its own web-site for hydraulic fracturing information by January 1, 2016, although Fracfocus.org could be used in the interim.

• Increase the applicable civil fine provision to at least $10,000 and up to $25,000 per day per violation.

The State Senate approved SB 4 with a 28-11 floor vote, and the bill is now pending in the State Assembly.  Assembly Member Williams opined on July 17 that SB 4 has a “reasonable” chance of being passed in some form by the Assembly, but stated that he doubted that the bill has the two-thirds of the votes that it would need to overcome a veto by California Governor Jerry Brown.  Williams said that Brown has not indicated which way he might go on SB 4.  In addition, changes may still be made to the bill, which could impact its approval by the Assembly and Brown’s support.

It is unknown whether SB 4 will survive in its current form, or at all, to become law in California.  Nevertheless, the ultimate outcome of California’s legislative process is being watched closely by oil and gas operators not only in California, but across the country, as a potential indicator of future regulatory efforts by other jurisdictions.

This article was previously published in Oil & Gas Monitor.