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SB-724 Oil and gas: wells and production facilities.(2017-2018)

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Date Published: 02/17/2017 09:00 PM
SB724:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Senate Bill No. 724


Introduced by Senator Lara

February 17, 2017


An act to amend Sections 3203, 3206.5, 3237, 3250, 3255, and 3258 of, to amend the heading of Article 4.2 (commencing with Section 3250) of Chapter 1 of Division 3 of, and to repeal and add Section 3251 of, the Public Resources Code, relating to oil and gas.


LEGISLATIVE COUNSEL'S DIGEST


SB 724, as introduced, Lara. Oil and gas: wells and production facilities.
(1) Under existing law, the Division of Oil, Gas, and Geothermal Resources in the Department of Conservation regulates the drilling, operation, maintenance, and abandonment of oil and gas wells in the state. Existing law requires the State Oil and Gas Supervisor to supervise the drilling, operation, maintenance, and abandonment of wells and the operation, maintenance, and removal or abandonment of tanks and facilities related to oil and gas production within an oil and gas field, so as to prevent damage to life, health, property, and natural resources, as provided; to permit owners and operators of wells to utilize all known methods and practices to increase the ultimate recovery of hydrocarbons; and to perform the supervisor’s duties in a manner that encourages the wise development of oil and gas resources to best meet oil and gas needs in this state. Under existing law, a person who fails to comply with an order issued under these provisions and other requirements relating to the regulation of oil or gas operations is guilty of a misdemeanor.
Existing law requires the operator of a well to file a written notice of intention to commence drilling with, and prohibits any drilling until approval is given by, the supervisor or district deputy. Under existing law, the notice is deemed approved if the supervisor or district deputy fails to respond to the notice in writing within 10 working days from receipt and is deemed canceled if operations have not commenced within one year of receipt.
This bill would extend the time period to commence operations from one year to 24 months before the notice is required to be deemed canceled, and would prohibit the notice from being extended.
(2) Existing law authorizes a city or county to request from the supervisor a list of those wells within its jurisdiction that have not continuously produced oil or natural gas, or have not been utilized continuously for injection purposes for a 6-month period during any consecutive 10-year period prior to or after January 1, 1991.
This bill instead would authorize a city or county to request from the supervisor a list of all idle wells, as defined, within its jurisdiction.
(3) Existing law authorizes the supervisor or district deputy to order the plugging and abandonment of a well that has been deserted whether or not any damage is occurring or threatened by reason of that deserted well.
This bill would additionally authorize the supervisor or district deputy to order the decommissioning of an attendant production facility of a well that has been deserted. Because a violation of an order issued under these provisions would be a crime, the bill would impose a state-imposed local program.
(4) Existing law authorizes the supervisor to order certain operations to be carried out on any property in the vicinity of which, or on which, is located any well that the supervisor determines to be either a hazardous or idle-deserted well, as specified. Existing law prohibits the division from expending, commencing with the 2015–16 fiscal year, more than $1,000,000 in any one fiscal year for these purposes related to hazardous or idle-deserted wells.
This bill would expand this authorization to allow the supervisor to order or undertake certain operations, as applicable, to be carried out on any property in the vicinity of which, or on which, is located any well or facility that the supervisor determines to be a hazardous well, an idle-deserted well, a hazardous facility, or a deserted facility, as defined. The bill would raise the cap on spending for these purposes from $1,000,000 to $5,000,000 in any one fiscal year.
This bill would require the division to provide certain information regarding those wells and facilities to cities and counties upon request. The bill would authorize a city or county to apply to the division to enter into a contract with the division to either receive funds to reimburse a city or county for its costs related to plugging and abandoning a well and decommissioning production facilities, or for the division to conduct work related to plugging and abandoning a well and decommissioning production facilities, as specified. The bill would prohibit the division, on or after July 1, 2018, from commencing any activity to plug and abandon a well or decommission a production facility within the jurisdiction of a city or county without entering into a contractual memorandum of understanding with the city or county, except as provided.
This bill would require the department to report on October 1, 2019, to the Legislature on the estimated number of orphan wells, hazardous wells, idle-deserted wells, deserted facilities, and hazardous facilities remaining, the estimated costs of abandoning or decommissioning those wells and facilities, and a timeline for future well abandonment and decommissioning of facilities with a specific schedule of goals. The bill would require the department to provide the Legislature with an update to this report on October 1, 2022, containing specified information.
(5) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

The people of the State of California do enact as follows:


SECTION 1.

 Section 3203 of the Public Resources Code is amended to read:

3203.
 (a) The operator of any well, before commencing the work of drilling the well, shall file with the supervisor or the district deputy a written notice of intention to commence drilling. Drilling shall not commence until approval is given by the supervisor or the district deputy. If the supervisor or the district deputy fails to give the operator written response to the notice within 10 working days from the date of receipt, that failure shall be considered as an approval of the notice and the notice, for the purposes and intents of this chapter, shall be deemed a written report of the supervisor. If operations have not commenced within one year 24 months of receipt of the notice, the notice shall be deemed canceled. canceled and may not be extended. The notice shall contain the pertinent data the supervisor requires on printed forms supplied by the division or on other forms acceptable to the supervisor. The supervisor may require other pertinent information to supplement the notice.
(b) After the completion of any well, this section also applies as far as may be, to the deepening or redrilling of the well, any operation involving the plugging of the well, or any operations permanently altering in any manner the casing of the well. The number or designation of any well, and the number or designation specified for any well in a notice filed as required by this section, shall not be changed without first obtaining a written consent of the supervisor.
(c) If an operator has failed to comply with an order of the supervisor, the supervisor may deny approval of proposed well operations until the operator brings its existing well operations into compliance with the order. If an operator has failed to pay a civil penalty, remedy a violation that it is required to remedy to the satisfaction of the supervisor pursuant to an order issued under Section 3236.5, or to pay any charges assessed under Article 7 (commencing with Section 3400), the supervisor may deny approval to the operator’s proposed well operations until the operator pays the civil penalty, remedies the violation to the satisfaction of the supervisor, or pays the charges assessed under Article 7 (commencing with Section 3400).

SEC. 2.

 Section 3206.5 of the Public Resources Code is amended to read:

3206.5.
 (a) Any city or county may request from the supervisor a list of those all idle wells within its jurisdiction which have not continuously produced oil or natural gas, or have not been utilized continuously for injection purposes for a six-month period during any consecutive 10-year period prior to or after January 1, 1991. jurisdiction.
(b) After receiving the list from the supervisor, the city or county may identify idle wells within its jurisdiction which it has determined, based on a competent, professional evaluation, have no reasonable expectation of being reactivated, and formally request the supervisor to make a determination whether the wells should be plugged and abandoned.
(c) Upon receiving the written request of a city or county, as specified in subdivision (b):
(1) The supervisor may, within 60 days of receiving a written request from a city or county, require the operator or operators to file a statement for each well outlining those reasons why the wells should not be plugged and abandoned.
(2) The supervisor shall, within 120 days of receiving a written request, make a determination as to whether any of these wells should be plugged and abandoned, pursuant to the criteria contained in this chapter.
(d) Failure of the operator to file, for any well, the statement required under this section shall be conclusive evidence of desertion of the well, thereby permitting the supervisor to order the well abandoned.

SEC. 3.

 Section 3237 of the Public Resources Code is amended to read:

3237.
 (a) (1) The supervisor or district deputy may order the plugging and abandonment of a well and the decommissioning of attendant production facilities of a well that has been deserted whether or not any damage is occurring or threatened by reason of that deserted well. The supervisor or district deputy shall determine from credible evidence whether a well is deserted.
(2) For purposes of paragraph (1), “credible evidence” includes, but is not limited to, the operational history of the well, the response or lack of response of the operator to inquiries and requests from the supervisor or district deputy, the extent of compliance by the operator with the requirements of this chapter, and other actions of the operator with regard to the well.
(3) A rebuttable presumption of desertion arises in any of the following situations:
(A) If a well has not been completed to production or injection and drilling machinery have been removed from the well site for at least six months.
(B) If a well’s production or injection equipment has been removed from the well site for at least two years.
(C) If an operator has failed to comply with an order of the supervisor within the time provided by the order or has failed to challenge the order on a timely basis.
(D) If an operator fails to designate an agent as required by Section 3200.
(E) If a person who is to acquire a well that is subject to a purchase, transfer, assignment, conveyance, exchange, or other disposition fails to comply with Section 3202.
(F) If an operator has failed to maintain the access road to a well site passable to oilfield and emergency vehicles.
(4) The operator may rebut the presumptions of desertion set forth in paragraph (3) by demonstrating with credible evidence compliance with this division and that the well has the potential for commercial production, including specific and detailed plans for future operations, and by providing a reasonable timetable for putting those plans into effect. The operator may rebut the presumption set forth in subparagraph (F) of paragraph (3) by repairing the access road.
(b) An order to plug and abandon a deserted well or to decommission attendant production facilities of a deserted well may be appealed to the director pursuant to the procedures specified in Article 6 (commencing with Section 3350).
(c) (1) The current operator, as determined by the records of the supervisor, of a deserted well that produced oil, gas, or other hydrocarbons or was used for injection is responsible for the proper plugging and abandonment of the well. well and the decommissioning of attendant production facilities of the well. If the supervisor determines that the current operator does not have the financial resources to fully cover the cost of plugging and abandoning the well, well and the decommissioning of attendant production facilities of the well, the immediately preceding operator shall be responsible for the cost of plugging and abandoning the well. well and the decommissioning of attendant production facilities of the well.
(2) The supervisor may continue to look seriatim to previous operators until an operator is found that the supervisor determines has the financial resources to cover the cost of plugging and abandoning the well. well or decommissioning attendant production facilities of the well. However, the supervisor may not hold an operator responsible that made a valid transfer of ownership of the well prior to January 1, 1996.
(3) For purposes of this subdivision, “operator” includes a mineral interest owner who shall be held jointly liable for the well and attendant production facilities if the mineral interest owner has or had leased or otherwise conveyed the working interest in the well to another person, if in the lease or other conveyance, the mineral interest owner retained a right to control the well operations that exceeds the scope of an interest customarily reserved in a lease or other conveyance in the event of a default.
(4) No prior operator is liable for any of the costs of plugging and abandoning a well and decommissioning attendant production facilities of a well by a subsequent operator if those costs are necessitated by the subsequent operator’s illegal operation of a well.
(5) If the supervisor is unable to determine that an operator that who acquired ownership of a well after January 1, 1996, has the financial resources to fully cover the costs of plugging and abandonment, abandonment of the well and decommissioning attendant production facilities of the well, the supervisor may undertake plugging and abandonment of the well and decommissioning attendant production facilities of the well pursuant to Article 4.2 (commencing with Section 3250).
(d) (1) Notwithstanding any other provision of this chapter, the supervisor or district deputy, at his or her sole discretion, may determine that a well that has been idle for 25 years or more and that fails to meet either of the following conditions is conclusive evidence of desertion, and may order the well abandoned:
(A) The operator is operating in compliance with a valid idle well management plan that is on file with the supervisor pursuant to paragraph (4) (2) of subdivision (a) of Section 3206 or is covered by an indemnity bond provided under Section 3204, subdivision (c) (a) of Section 3205, or subdivision (a) of Section 3205.2.
(B) The well meets the relevant testing standards for idle wells required by the district’s Idle Well Planning and Testing Program and Section 1723.9 of Title 14 of the California Code of Regulations. under the regulations implementing this chapter.
(2) The supervisor or district deputy shall provide the operator a 90-day notice of warning once a determination has been reached pursuant to this subdivision that a well has been deserted. An operator may rebut the determination, made pursuant to paragraph (1), of the supervisor or district deputy by demonstrating compliance with subparagraphs (A) and (B) of paragraph (1).
(3) An order to plug and abandon a deserted well under this section due to the supervisor’s or district deputy’s determination of an operator’s noncompliance with either subparagraph (A) or (B) of paragraph (1) may be appealed to the director pursuant to the procedures specified in Article 6 (commencing with Section 3350).

SEC. 4.

 The heading of Article 4.2 (commencing with Section 3250) of Chapter 1 of Division 3 of the Public Resources Code is amended to read:
Article  4.2. Hazardous Wells and Facilities

SEC. 5.

 Section 3250 of the Public Resources Code is amended to read:

3250.
 The Legislature hereby finds and declares that hazardous and certain idle-deserted oil and gas wells, wells and hazardous and deserted facilities, as defined in this article, are public nuisances and that it is essential, in order to protect life, health, and natural resources that such those oil and gas wells and facilities be abandoned, reabandoned, produced, or otherwise remedied to mitigate, minimize, or eliminate their danger to life, health, and natural resources.
The Legislature further finds and declares that, although the abatement of such public nuisances could be accomplished by means of an exercise of the regulatory power of the state, such regulatory abatement would result in unfairness and financial hardship for certain landowners, while also resulting in benefits to the public. The Legislature, therefore, finds and declares that the expenditure of funds to abate such nuisances as provided in this article is for a public purpose and finds and declares it to be the policy of this state that the cost of carrying out such abatement be charged to this state’s producers of oil and gas as provided in Article 7 (commencing with Section 3400).

SEC. 6.

 Section 3251 of the Public Resources Code is repealed.
3251.

For the purposes of this article, an oil or gas well is a “hazardous well” if the supervisor determines that the well is a potential danger to life, health, or natural resources and there is no operator determined by the supervisor to be responsible for plugging and abandoning the well under subdivision (c) of Section 3237. Also, for the purposes of this article, an oil or gas well is an “idle-deserted well” if the supervisor determines that the well is deserted under Section 3237 and there is no operator responsible for its plugging and abandonment under Section 3237.

SEC. 7.

 Section 3251 is added to the Public Resources Code, to read:

3251.
 For the purposes of this article, the following definitions apply:
(a) “Deserted facility” means an attendant production facility of a well determined by the supervisor to be deserted under Section 3237 and for which there is no operator responsible for its decommissioning under Section 3237.
(b) “Decommission” means the removal of all well equipment or associated production facilities, as applicable, and remediation and reasonable site restoration as deemed necessary by the supervisor or a district deputy.
(c) “Hazardous facility” means an attendant production facility of a well determined by the supervisor to be a potential danger to life, health, or natural resources and for which there is no operator determined by the supervisor to be responsible for its decommissioning under Section 3237.
(d) “Hazardous well” means an oil and gas well determined by the supervisor to be a potential danger to life, health, or natural resources and for which there is no operator determined by the supervisor to be responsible for its plugging and abandonment under Section 3237.
(e) “Idle-deserted well” means an oil and gas well determined by the supervisor to be deserted under Section 3237 and for which there is no operator responsible for its plugging and abandonment under Section 3237.

SEC. 8.

 Section 3255 of the Public Resources Code is amended to read:

3255.
 (a) Notwithstanding any other provision of this division, the supervisor may order that to be carried out, or may undertake, any of the following operations be carried out operations, as applicable, on any property in the vicinity of which, or on which, is located any well or facility that the supervisor determines to be either a hazardous or well, an idle-deserted well: well, a hazardous facility, or a deserted facility:
(1) Any inspection or tests necessary to determine what action, if any, would be appropriate to effectuate the purpose of this article.
(2) The abandonment of such a the well.
(3) The reabandonment of such a the well.
(4) The redrilling and production of an existing well for purposes of remedying, mitigating, minimizing, or eliminating danger to life, health, and natural resources.
(5) The drilling and production of a well for purposes of remedying, mitigating, minimizing, or eliminating danger to life, health, and natural resources.
(6) The decommissioning of attendant production facilities.

(6)

(7) Any other remedy or oilfield operation calculated to effectuate the purpose of this article.
(b) If, pursuant to this article, the supervisor orders that any operation be carried out with respect to a hazardous or well, an idle-deserted well well, a hazardous facility, or a deserted facility and such that operation will, by virtue of the physical occupation or destruction of all or any part of the property or the extraction of oil or gas from such the property, substantially interfere with the enjoyment of the property, the supervisor shall may acquire, as provided in Section 3256, such a minimal interest in the property as is necessary to carry out such the operation. No such acquisition may be made pursuant to this subdivision unless the supervisor finds and determines that the public benefits to be derived therefrom in remedying, mitigating, minimizing, or eliminating danger to life, health, and natural resources will exceed the cost of such the acquisition, irrespective of the manner in which such the acquisition is to be funded.
(c) An order of the supervisor to carry out any of the operations listed in subdivision (a) may be appealed by the owner of the property pursuant to Article 6 (commencing with Section 3350), except that in the case of an emergency no stay of the supervisor’s order shall accompany the appeal.

SEC. 9.

 Section 3258 of the Public Resources Code is amended to read:

3258.
 (a) The division shall not make expenditures pursuant to this article that exceed the following sum five million dollars ($5,000,000) in any one fiscal year: year. Moneys expended pursuant to this article shall be used exclusively for plugging and abandoning wells and decommissioning production facilities and shall not be used for nonwell or nonproduction facility-related activities and payments.

(1)Two million dollars ($2,000,000) commencing on July 1, 2008, for the 2008–09 fiscal year, and continuing for six fiscal years thereafter.

(2)One million dollars ($1,000,000), commencing with the 2015–16 fiscal year.

(b) Upon request by a local entity, the division shall provide the local entity the total number, and location, of known idle wells, hazardous wells, idle-deserted wells, hazardous facilities, and deserted facilities identified within the local entity’s jurisdiction.
(c) A local entity may apply to the division to enter into a contract with the division to either receive funds to reimburse a local entity’s costs related to plugging and abandoning a well and decommissioning production facilities or for the division to conduct work related to plugging and abandoning a well and decommissioning production facilities.
(1) A local entity seeking to contract with the division pursuant to this section shall submit an application to the division. On or before July 1, 2018, the division shall specify the information to be included in a local entity’s application, consistent with this section, and including, but not limited to, all of the following:
(A) The location of the well to be plugged and abandoned and the production facilities to be decommissioned.
(B) (i) All required nonwell or nonproduction facility-related activities and payments the local entity believes will be required to complete the project, including, but not limited to, relocating and accommodating impacted residents, utility relocation, business and transportation impacts, and site restoration.
(ii) A stipulation that the local entity will pay all costs identified pursuant to clause (i).
(C) (i) A statement of facts indicating why the specific well or wells or production facility or facilities were chosen.
(ii) The statement shall provide details regarding the potential harms to public health and environmental safety posed by the well or facility as documented by the local agency or public health and safety agencies within the appropriate jurisdiction.
(D) Estimated costs, determined by a licensed operator or contractor, to plug and abandon a well and decommission associated production facilities.
(E) Estimated costs of all other activities identified in subparagraph (B).
(F) All permits, if any, the division must obtain before the commencement of work to plug and abandon a well or decommission a production facility, and the anticipated timeline for the project.
(G) A timeline for estimated project completion.
(H) A verification that any funds provided by the division shall only be spent on the plugging and abandoning of a well and decommissioning production facilities and will not be used for nonwell or nonproduction facility-related activities and payments, including, but not limited to, relocating and accommodating impacted residents, utility relocation, business and transportation impacts, and site restoration.
(I) A verification that the local entity will adhere to all state contracting and subcontracting rules, as specified in the state contract manual.
(J) If a local entity is seeking funding to perform the plugging and abandonment or decommissioning work itself, documentation that the local entity is the operator of the well or production facility, will become the operator of the well or production facility, or has an agreement with the operator of the well or production facility for the work to be performed.
(2) An application shall be approved by a vote of the local entity’s legislative body before it can be considered by the division.
(3) (A) In reviewing and evaluating applications related to plugging and abandoning a well or decommissioning a production facility, the division shall prioritize and decide to approve or deny applications based on, at minimum, all of the following criteria:
(i) The degree of potential danger to life, health, or natural resources posed by a specific well or production facility.
(ii) Whether the specific well or production facility is located within an economically disadvantaged community.
(iii) The cost and potential environmental or public health benefits of plugging and abandoning the well or decommissioning the production facility.
(iv) The availability of third-party funding, including private development fees and federal matching funds.
(v) Any other consideration or priorities the division deems necessary, including, division funding and the statewide priority level of the well or production facility identified in the application.
(B) This paragraph shall not be construed to require the division to approve an application.
(4) (A) Upon approving a local entity’s application, the division and the local entity shall enter into a contractual memorandum of understanding providing, at a minimum, all of the following:
(i) A statement identifying the costs each party will be responsible for paying.
(ii) A statement identifying the manner in which the city or county shall submit invoices for payment to the division.
(iii) A verification that the local entity agrees to pay all costs to plug and abandon a well and decommission the production facility in excess of the estimate provided in the application pursuant to subparagraphs (D) and (E) of paragraph (1).
(iv) A verification that the local entity shall be responsible for any cost not identified in the memorandum of understanding or the application.
(v) A verification that any funds provided by the division that are not utilized shall be returned to the division within 15 days of the completion of the project identified in the application.
(vi) Clearly state that the division shall only be responsible for the costs authorized pursuant to this section.
(B) Before the memorandum of understanding is effective, both of the following shall occur:
(i) The memorandum of understanding shall be approved by the legislative body of the local entity, and signed by an agent thereof, within 30 days of receiving notice of the division’s approval of the local entity’s application. A failure to submit the approved memorandum of understanding to the division within 30 days cancels the division’s approval of the local entity’s application.
(ii) The memorandum of understanding shall be approved by the supervisor. The supervisor shall approve a memorandum of understanding provided both of the following conditions are met:
(I) The division has sufficient funds to cover the plugging and abandonment of the well or decommissioning of the facility, based on a division’s estimate of the total cost of the work.
(II) The local entity provided all information and contractual conditions required by this section.
(d) On or after July 1, 2018, the division shall not commence any activity to plug and abandon a well or decommission a production facility within the jurisdiction of a local entity without entering into a contractual memorandum of understanding with the local entity pursuant to paragraph (4) of subdivision (c).
(e) Subdivisions (b), (c), and (d) do not apply to any idle wells, hazardous wells, idle-deserted wells, deserted facilities, or hazardous facilities located on property owned by a state agency.
(f) (1) Nothing in this section shall limit the division’s authority to plug and abandon a well or decommission a production facility deemed by the supervisor to pose a substantial threat to public health and environmental safety.
(2) If the division acts pursuant to paragraph (1), moneys shall only be expended on plugging and abandoning wells and decommissioning production facilities and shall not be used for nonwell or nonproduction facility-related activities and payments, including, but not limited to, relocating and accommodating impacted residents, utility relocation, business and transportation impacts, and site restoration.

(b)

(g) (1) On October 1, 2011, 2019, the department shall report to the Legislature on the number of orphan wells wells, hazardous wells, idle-deserted wells, deserted facilities, and hazardous facilities remaining, the estimated costs of abandoning and decommissioning those orphan wells, wells and facilities, and a timeline for future orphan well abandonment and decommissioning of those wells and facilities with a specific schedule of goals.
(2) On October 1, 2022, the department shall provide to the Legislature an update on the report required in paragraph (1) that describes the total costs, average costs per well and facility, the number of wells plugged and abandoned, the number of facilities decommissioned, the total number of projects completed, and any additional wells and facilities identified by the department requiring abandonment or decommissioning.
(3) The report and update to the report required to be submitted under this subdivision shall be submitted in compliance with Section 9795 of the Government Code.
(4) The requirement for submitting a report imposed under this subdivision is inoperative on October 1, 2026, pursuant to Section 10231.5 of the Government Code.
(h) For purposes of this section, the following terms have the following meanings:
(1) “Economically disadvantaged community” means a community with a median household income less than 80 percent of the statewide average.
(2) “Local entity” means a city or county.

SEC. 10.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.