As previously reported (here and here), Hinson Gravelle & Adair LLP attorney Eric Adair spoke at Law Seminar International’s (LSI) hydraulic fracturing conference on July 29-30, 2013, in Santa Monica. EnergyWire published a report on the conference, in which Mr. Adair and other speakers at the conference were quoted.
The text of the EnergyWire article is reprinted below.
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Reprinted from EnergyWire with permission from Environment & Energy Publishing, LLC. www.eenews.net. 202/628-6500
California draft rules weeks away; legislation with edicts could land near same time
Anne C. Mulkern, E&E reporter
Published: Tuesday, July 30, 2013
SANTA MONICA, Calif. — A flurry of activity likely to shape how unconventional oil and natural gas drilling goes forward in California will start within a few weeks, experts said here yesterday.
Legislation that would mandate the state’s first-ever oversight of hydraulic fracturing will be heard by an Assembly committee in mid-August and if approved would go to a floor vote in that chamber. Passage would send it to Gov. Jerry Brown (D)’s desk. Sen. Fran Pavley’s (D) S.B. 4 would require some disclosure on chemicals used, would require notification of residents before drilling starts and would create a system for testing groundwater.
Meanwhile, the state’s Division of Oil, Gas and Geothermal Resources (DOGGR) is close to releasing its proposed rules on fracking, a process where companies blast chemical-laced water underground at high pressure to break apart rock formations and release oil or natural gas.
The politics are heated, said K. Eric Adair, attorney at Hinson, Gravelle & Adair LLP. DOGGR’s releasing its work first could help Brown avoid having to sign S.B. 4, Adair said yesterday at a Law Seminars International forum on fracking here.
“My take? Governor Brown is really, really hoping that DOGGR and [the Department of] Conservation will get their job done just as quickly as possible so he does not face that decision,” Adair said. “I don’t think he wants to sign S.B. 4. I think if he sees DOGGR’s still a long ways off, he may feel pressure to do so.”
Brown has made several comments about the importance of oil and natural gas drilling in the state, including calling it “a fabulous opportunity” (EnergyWire, May 15).
But Tim Kustic, oil and gas supervisor at DOGGR, rejected the idea that Brown’s office is applying any pressure to act before Pavley’s bill gets to a floor vote.
“There’s been direction that we need to get these regulations moving forward,” but that isn’t tied to S.B. 4, Kustic said. Rather, the department had always wanted to be ready by summer’s end, he said.
Even if it’s not intentional, DOGGR’s rolling out its regulations before S.B. 4 has its final vote could be seen as political, said Bill Allayaud, California director of government affairs for the Environmental Working Group (EWG).
“We hope that DOGGR would not hurry to adopt draft regulations on the eve of Pavley’s S.B. 4 being resolved,” he said. “That’s not the right message for the administration to send to a very interested Legislature and public.”
California currently lacks regulations on fracking. Environmental organizations and some residents say rules are needed because there are too many risks and unknowns and that the process threatens water, air and species. The petroleum industry argues it has been done safely for decades.
In the Golden State, environmentalists see special urgency, given oil and gas companies’ exploration of the Monterey Shale, a swath of land stretching from the middle of the state south to Los Angeles County. It is believed to hold as much as 15.5 billion barrels of recoverable petroleum. If companies uncover ways to extract it, some have said that it would trigger a boom rivaling the original Gold Rush.
At the event yesterday, a few people said that boom isn’t likely in the near future. If oil companies had the ability to unlock the Monterey Shale, Adair said, it would have happened already.
But Allayaud said the possibility alone is a reason to get regulations in place now. Pavley’s bill is preferable to DOGGR rules, he said, because the latest version of S.B. 4 included language that made it apply to well stimulation and not just fracking. DOGGR has indicated to him that it’s not interested in expanding its regulations beyond hydraulic fracturing, Allayaud said.
Some oil companies consider acid stimulation a possible key to opening the Monterey Shale, Allayaud said.
“We need DOGGR to be ready to regulate that,” he said, as well as other “cutting-edge technology coming out.”
’50-50′ odds of bill passing
Pavley’s S.B. 4 is one of two bills to survive among what earlier this year were 10 measures that sought to place some rules on fracking and other oil and gas drilling. Some of those died in committee. One, a moratorium on hydraulic fracturing, was defeated in an Assembly floor vote (EnergyWire, May 31). S.B. 665 from Sen. Lois Wolk (D) also is still alive. It would increase bonding requirements on companies drilling for petroleum products.
S.B. 4 has a 50-50 shot of passing the Legislature, Allayaud said.
“I give it pretty good odds of making it, because it’s the last bill standing on fracking,” he said. “For a bill of this stature,” he said, even money “is good odds. This is an important bill with one of the most powerful interests in the history of Western civilization not liking it.”
“For it to get to the floor and get to the governor would be a pretty big deal,” Allayaud added. “We’re dealing with extremely powerful corporate interests when we’re talking Chevron, Occidental, Halliburton.”
The trade group for the oil and natural gas industry, the Western States Petroleum Association, opposes the bill. WSPA at an Assembly hearing in early July said that it disliked the bill because at that point it covered well stimulation and not just fracking. Tupper Hull, spokesman for the group, said yesterday that he did not know if that was in the latest version, as it was “a work in progress.”
“We are working with Sen. Pavley and are hopeful S.B. 4 will become the balanced, comprehensive package Sen. Pavley has said she is interested in developing,” Hull said in an email.
The Sierra Club California and Physicians for Social Responsibility also oppose the measure, Allayaud said. They object to a provision that would block the public from knowing what chemicals companies are using if they claim the information is competitive.
Under S.B. 4, companies would have to provide the names of chemicals but not the quantities used. Businesses could withhold the exact chemical formula by claiming trade secret status. They still would need to supply that information to DOGGR.
Maureen Bright, lawyer at Bright and Brown in Glendale, Calif., said that resolving the trade secret dynamic is difficult.
“What are we going to do about trade secrets versus the right to know?” Bright said. “Because agencies do need to know, and at the same time, these are cocktails. If someone finally figures out how to crack that Monterey Shale, it’s going to be worth billions. How do you balance those interests?”
The trade secret provision is one of the most controversial in the bill, Allayaud said.
Even with that language, Allayaud said, the bill has support from EWG, the Natural Resources Defense Council, Clean Water Action, the California League of Conservation Voters and the Environmental Defense Center of Santa Barbara.
“S.B. 4 is our remaining pressure point to bear on this agency,” Allayaud said of DOGGR, “which has been shown in the past to be too industry-friendly.” There is hope, he said, that the upcoming draft regulations “will reflect a lot of what’s gone on in the Legislature this year, whether or not bills get to the governor’s desk.”