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

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Date Published: 10/10/2017 09:00 PM
SB724:v94#DOCUMENT

Senate Bill No. 724
CHAPTER 652

An act to amend Sections 3203, 3206, 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, and making an appropriation therefor.

[ Approved by Governor  October 10, 2017. Filed with Secretary of State  October 10, 2017. ]

LEGISLATIVE COUNSEL'S DIGEST


SB 724, 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 deemed canceled, would prohibit the notice from being extended, and would require the cancellation to be noted in the division’s records.
(2) Existing law requires the operator of any idle well to either file with the supervisor a certain annual fee or file a plan with the supervisor to provide for the management and elimination of all long-term idle wells, as specified.
This bill would, if the operator has eliminated more wells than required in the prior 2 years under the plan, authorize the supervisor to deduct from the new requirement in the plan the net total of long-term idle wells eliminated in excess of those previously required.
(3) Existing law establishes the Hazardous and Idle-Deserted Well Abatement Fund in the State Treasury. Existing law directs fee moneys collected from operators of idle wells to be deposited in the fund. The moneys in the fund are continuously appropriated to the department for expenditure to mitigate a hazardous or potentially hazardous condition, by well plugging and abandonment, decommissioning attendant production facilities, or both, at a well of a feepaying operator.
This bill would instead provide that the moneys in the fund are continuously appropriated to the department for expenditure to mitigate a hazardous or potentially hazardous condition, by well plugging and abandonment, decommissioning production facilities, or both, at a well of a feepaying operator. Because the bill would expand the purposes for which moneys in a continuously appropriated fund may be used by no longer limiting those uses to attendant production facilities, it would make an appropriation.
(4) 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.
(5) 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 a production facility that has been deserted. Because a violation of an order issued under these provisions would be a crime, the bill would impose a state-mandated local program.
(6) 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. The Administrative Procedure Act governs the procedure for the adoption, amendment, or repeal of regulations by state agencies and for the review of those regulatory actions by the Office of Administrative Law.
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 temporarily raise the cap on spending for these purposes from $1,000,000 to $3,000,000 in any one fiscal year, for the 2018–19 fiscal year to the 2021–22 fiscal year, inclusive. The bill would require these moneys to be used exclusively for plugging and abandoning hazardous or idle-deserted wells and decommissioning hazardous or deserted facilities and would prohibit the moneys from being used for nonwell or nonproduction facility-related activities and payments. The bill would require the division to develop criteria for determining the priority of plugging and abandoning hazardous or idle-deserted wells and decommissioning hazardous or deserted facilities to be remediated pursuant to these provisions, and would exempt the development of those criteria from the Administrative Procedure Act.
This bill would require the department to report on October 1, 2020, to the Legislature on the estimated number of 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, and, as part of that report, provide recommendations to the Legislature for improving and optimizing the involvement of local agencies in the process of plugging and abandoning wells and decommissioning facilities. The bill would require the department to provide the Legislature with an update to this report on October 1, 2023, containing specified information.
(7) 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: YES   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 24 months of receipt of the notice, the notice shall be deemed canceled, the notice shall not be extended, and the cancellation shall be noted in the division’s records. 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 of the Public Resources Code, as added by Section 4 of Chapter 272 of the Statutes of 2016, is amended to read:

3206.
 (a) The operator of any idle well shall do either of the following:
(1) No later than January 31 of each year, for each idle well that was an idle well at any time in the last calendar year, file with the supervisor an annual fee equal to the sum of the following amounts:
(A) One hundred fifty dollars ($150) for each idle well that has been an idle well for three years or longer, but less than eight years.
(B) Three hundred dollars ($300) for each idle well that has been an idle well for eight years or longer, but less than 15 years.
(C) Seven hundred fifty dollars ($750) for each idle well that has been an idle well for 15 years or longer, but less than 20 years.
(D) One thousand five hundred dollars ($1,500) for each idle well that has been an idle well for 20 years or longer.
(2) File a plan with the supervisor to provide for the management and elimination of all long-term idle wells.
(A) For the purposes of the plan required by this paragraph, elimination of an idle well shall be accomplished when the well has been properly abandoned in accordance with Section 3208, or it has been shown to the division’s satisfaction that, since the well became an idle well, the well has maintained production of oil or gas or been used for injection for a continuous six-month period.
(B) A plan filed pursuant to this paragraph shall meet all of the following requirements and conditions:
(i) The plan shall specify the time period that it covers. The plan and any renewal of the plan shall cover a time period of no more than five years and shall be subject to approval by the supervisor who may prioritize the order in which idle wells are addressed.
(ii) The plan shall be reviewed for performance annually by the supervisor, and be subject to amendment by the supervisor, or by the operator with the approval of the supervisor.
(iii) The required rate of long-term idle well elimination shall be based upon the number of idle wells under the control of an operator on January 1 of each year, as specified in clause (iv). If the operator has eliminated more wells than required in the prior two years, the supervisor may deduct from the new requirement the net total of long-term idle wells eliminated in excess of those previously required. In addition, the supervisor may require additional well testing requirements as part of the plan.
(iv) Unless and until the operator has no long-term idle wells, the plan shall require that operators with 250 or fewer idle wells eliminate at least 4 percent of their long-term idle wells each year, and, in no case, less than one long-term idle well; operators with 251 to 1,250, inclusive, idle wells eliminate at least 5 percent of their long-term idle wells each year, and, in no case, less than one long-term idle well; and operators with more than 1,250 idle wells eliminate at least 6 percent of their long-term idle wells each year, and, in no case, less than one long-term idle well.
(v) An operator who fails to comply with the plan, as determined by the supervisor after the annual performance review, is not eligible to use the requirements of this paragraph, for purposes of compliance with this section, for any of its idle wells. That operator may not propose a new idle well plan for the next five years. An operator may appeal to the director pursuant to Article 6 (commencing with Section 3350) regarding the supervisor’s rejection of a plan and plan amendments and the supervisor’s determination of the operator’s failure to comply with a plan. If the supervisor’s determination that the operator failed to comply with the plan is not timely appealed, or if the director upholds the supervisor’s determination upon appeal, then the operator shall immediately file the fees required under paragraph (1) for each year that the operator failed to comply with the plan.
(b) All fees received under this section shall be deposited in the Hazardous and Idle-Deserted Well Abatement Fund, which is hereby created in the State Treasury. Notwithstanding Section 13340 of the Government Code, the moneys in the Hazardous and Idle-Deserted Well Abatement Fund are hereby continuously appropriated to the department for expenditure without regard to fiscal year, to mitigate a hazardous or potentially hazardous condition, by well plugging and abandonment, decommissioning the production facilities, or both, at a well of an operator subject to the requirements of this section.
(c) Failure to file, for any well, the fee required under this section shall be conclusive evidence of desertion of the well, permitting the supervisor to order the well abandoned pursuant to Section 3237.
(d) Nothing in this section prohibits a local agency from collecting a fee for regulation of wells.
(e) This section shall become operative on January 1, 2018.

SEC. 3.

 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 all idle wells, as defined in subdivision (d) of Section 3008, within its jurisdiction.
(b) After receiving the list from the supervisor, the city or county may identify idle wells identified pursuant to subdivision (a) 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. 4.

 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 or the decommissioning of a production facility that has been deserted whether or not any damage is occurring or threatened by reason of that deserted well or production facility. The supervisor or district deputy shall determine from credible evidence whether a well or production facility is deserted.
(2) For purposes of paragraph (1), “credible evidence” includes, but is not limited to, the operational history of the well or production facility, 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 or production facility.
(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 facilities 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 or production facility 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 or production facility 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 or production facility 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 a production facility 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 or the decommissioning of deserted production facilities. 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 or the decommissioning of deserted production facilities, the immediately preceding operator shall be responsible for the cost of plugging and abandoning the well or the decommissioning of deserted production facilities.
(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 or decommissioning deserted production facilities. 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 or decommissioning deserted production facilities by a subsequent operator if those costs are necessitated by the subsequent operator’s illegal operation of a well or production facility.
(5) If the supervisor is unable to determine that an operator who acquired ownership of a well after January 1, 1996, has the financial resources to fully cover the costs of plugging and abandonment of the well or decommissioning deserted production facilities, the supervisor may undertake plugging and abandonment of the well or decommissioning deserted production facilities 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 (2) of subdivision (a) of Section 3206 or is covered by an indemnity bond provided under Section 3204, subdivision (a) of Section 3205, or subdivision (a) of Section 3205.2.
(B) The well meets the relevant testing standards for idle wells required 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. 5.

 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. 6.

 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 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 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. 7.

 Section 3251 of the Public Resources Code is repealed.

SEC. 8.

 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 a production facility 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” has the same meaning and requirements, as applicable, as the definition established in Section 1760 of Title 14 of the California Code of Regulations.
(c) “Hazardous facility” means a production facility 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. 9.

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

3255.
 (a) Notwithstanding any other provision of this division, the supervisor may order to be carried out, or may undertake, any of the following 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 a hazardous well, an idle-deserted 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 the well.
(3) The reabandonment of 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 hazardous or deserted facilities.
(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 well, an idle-deserted well, a hazardous facility, or a deserted facility and 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 the property, substantially interfere with the enjoyment of the property, the supervisor may acquire, as provided in Section 3256, a minimal interest in the property as is necessary to carry out the operation. No 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 the acquisition, irrespective of the manner in which 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. 10.

 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 in any one fiscal year:
(1) Three million dollars ($3,000,000) commencing on July 1, 2018, for the 2018–19 fiscal year, and continuing for three fiscal years thereafter.
(2) One million dollars ($1,000,000), commencing with the 2022–23 fiscal year.
(b) Moneys expended pursuant to this article shall be used exclusively for plugging and abandoning hazardous or idle-deserted wells and decommissioning hazardous or deserted facilities and shall not be used for nonwell or nonproduction facility-related activities and payments.
(c) The division shall develop criteria for determining the priority of plugging and abandoning hazardous or idle-deserted wells and decommissioning hazardous or deserted facilities to be remediated pursuant to this article. The Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) does not apply to the development of criteria by the division pursuant to this subdivision.
(d) (1) (A) On October 1, 2020, the department shall report to the Legislature on the number of hazardous wells, idle-deserted wells, deserted facilities, and hazardous facilities remaining, the estimated costs of abandoning and decommissioning those wells and facilities, and a timeline for future abandonment and decommissioning of those wells and facilities with a specific schedule of goals.
(B) As part of the report required in subparagraph (A), the department shall provide recommendations to the Legislature for improving and optimizing the involvement of local agencies in the process of plugging and abandoning wells and decommissioning facilities. In drafting these recommendations, the department shall consider factors unique to each of the division’s districts, and shall consult with local agencies in developing recommendations.
(2) On October 1, 2023, 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, 2027, pursuant to Section 10231.5 of the Government Code.

SEC. 11.

 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.