Fracking Update: Governor Brown Signs SB 4 into Law

On September 20, 2013, California Governor Jerry Brown signed a law that will establish a comprehensive regulatory program for a natural gas and oil extraction process known as hydraulic fracturing, or "fracking." Fracking involves injecting a high pressure stream of water, sand and chemicals into rock formations known as shale, to create fractures within the shale from which natural gas and oil is extracted.

Senate Bill 4, introduced by Senator Fran Pavley (D-Agoura Hills), would impose the following requirements:

  • Study: Requires the Secretary of the Natural Resources Agency to complete a scientific study to evaluate the hazards and risks associated with fracking by January 1, 2015;
  • Agency Coordination: Requires the Division of Oil, Gas and Geothermal Resources ("DOGGR") to consult with various natural resources agencies and departments to adopt fracking rules and regulations by January 1, 2015, and to further enter into formal agreements with those agencies and departments delineating respective authority and responsibility regarding the enforcement of fracking regulations;
  • Statewide EIR: Allows existing fracking operations to continue while DOGGR regulations are being developed, provided that (1) the fracking operation complies with certain disclosure and notification requirements; (2) the fracking operator provides DOGGR with a complete well history; and (3) DOGGR conducts, by July 1, 2015, an environmental impact report ("EIR") regarding any potential environmental impacts of fracking in the State of California.
  • Permit: Requires fracking operators to first apply for a permit with DOGGR. If DOGGR determines that the fracking operation complies with the California Environmental Quality Act ("CEQA") and all of its activities have been fully analyzed and mitigated, no additional environmental review shall be required.
  • Pre-Fracking Notification: Requires DOGGR to notify the regional water board, local planning entity where the operation is located, and the public within five days of issuing a fracking permit.
  • Water Quality Sampling: Requires the regional water board or its contractors to perform water quality sampling and testing if requested by a property owner who receives notice.
  • Post-Fracking Disclosure: Within 60 days after the cessation of the fracking operation, requires the fracking operator to post an internet website designated or maintained by DOGGR, which must contain all fluid composition and disposition information, including well identification number, well location, and collected water quality data.
  • Trade Secret: Allows suppliers of fracking operations to claim trade secret protections for the chemical composition of additives, but the suppliers must still provide the trade secret information to DOGGR. Requires suppliers to substantiate a trade secret claim, which is reviewed by DOGGR. If DOGGR receives a request for release of the trade secret information to the public, DOGGR must notify the suppliers of the request and give the suppliers at least 60 days to commence a court action to prohibit the release of information.
  • Trade Secret Exception: Prohibits the following to be protected as trade secret: the identifies of the chemical constituents of additives; the concentration of the additives in the fracking fluids; any air or other pollution monitoring data; health and safety data associated with fracking fluids; and the chemical composition of the flowback fluid, which describes that fluid which is recovered during the fracking process.

Perhaps the most debated issue during the final weeks of the legislative session was SB 4's requirement that fracking operators obtain a permit from DOGGR. SB 4's permit requirement is significant because discretionary approvals such as the DOGGR permit require CEQA review. According to SB 4's permit requirement, however, once DOGGR determines that the fracking operation complies with CEQA, "no additional review or mitigation shall be required." In other words, the language appears to preclude the local agency from conducting its own CEQA review, so long as DOGGR has determined that the fracking operation has been fully analyzed and mitigated under CEQA.

Certain stakeholder groups expressed concern with SB 4's limitation on CEQA review, as DOGGR regularly approves traditional oil and gas development proposals under CEQA's categorical exemptions for minor alterations to land or existing facilities, or by way of abbreviated environmental review in the form of a negative declaration or mitigated declaration. Indeed, on October 16, 2012, the Center for Biological Diversity and other groups sued DOGGR, arguing that DOGGR has improperly exempted or otherwise limited its review of oil and gas developments. The groups requested that DOGGR be enjoined from approving further oil and gas permits where fracking may occur until EIRs are prepared for those operations. The lawsuit is still pending.

It is worth noting that notwithstanding SB 4's provision limiting CEQA review, SB 4 requires DOGGR to prepare a broader EIR analyzing the potential environmental impacts of fracking in the State of California. Such EIR would likely establish a framework for "tiered" project-level EIRs for future fracking operations, an abbreviated environmental review document which would summarize and incorporate by reference much of the information contained in DOGGR's EIR.

The fracking debate in California is certain to continue as DOGGR promulgates its regulations and prepares its scientific study and EIR. We will continue to provide regular updates regarding these and other legislative and judicial developments as they arise.

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Categories: CEQA