We’ve moved! Check out our new website at www.lbbizjournal.com


Interim Regulations For New Fracking
And Well Stimulation Law Begin January 1

By Samantha Mehlinger - Publisher

December 17, 2013 – Beginning January 1, interim regulations by the California Division of Oil, Gas and Geothermal Resources (DOGGR) for compliance with the recently passed Senate Bill 4 (SB 4) go into effect until permanent regulations are implemented in January 2015.

Authored by Sen. Fran Pavley, SB 4 was passed in September, creating reporting and notification requirements for oil and gas well operators using well stimulation treatments. Well stimulation typically refers to hydraulic fracturing, a process by which water, sand and other chemicals are pumped into rock at a high pressure to crack the rock formation, allowing easier access to oil and gas. The term also refers to acid well stimulations, in which chemicals are poured into wells to loosen up gas or oil resources.

Last week, DOGGR released the interim mandates, which it refers to as “emergency regulations.” According to Tim Kustic, DOGGR’s state oil and gas supervisor, while permanent regulations will require oil and gas well operators to apply for a permit for well stimulations, in the interim operators are only required to “self certify” that they have met emergency regulation standards by providing information to DOGGR.

Many interim regulations “are current best practices for well stimulation” in the industry, Kustic said. “For example, if you are going to hydraulically fracture a well, you would always pressure test the well and the surface equipment before you would actually perform the hydraulic fracturing operation, just to make sure you have good mechanical integrity for the well and for your equipment,” he explained.

SB 4 requires the industry to publicly disclose information about all well stimulations performed, detailing the well’s location, the time it was stimulated and any chemicals used, among other information. The emergency regulations require that this information be uploaded to an online Chemical Disclosure Registry. Many oil and gas well operators already do this at a website called FracFocus.org.

Some regulations go beyond what Kustic calls “industry best practices,” however. For example, “The industry is not notifying property owners within 1,500 feet of a well head and 500 feet of a horizontally drilled well of their intent to do well stimulation, so that is clearly beyond what is industry best practice now,” he said.

Industry representatives have expressed concern to DOGGR that notifying landowners and tenants may prove difficult, Kustic said. “For example, in your neck of the woods, there are wells that are directionally drilled under Downtown Long Beach. Obviously, notifying property owners and tenants in that area would be a large logistical challenge,” Kustic said.

When a well is directionally drilled, one hole is dug vertically, and pipes branch out horizontally from it to other well locations underground. This prevents surface blight. Both interim and proposed permanent regulations require oil and gas industry operators to hire an outside party to conduct neighbor notifications. Because one month’s notice must be given prior to well stimulation, oil and gas companies had to hire contractors for this purpose by December 2 to begin well stimulation on the first of the year.

Kustic said the industry would have been aware of this in September when SB 4 passed. Beginning in January, DOGGR is holding workshops to inform the industry about the proposed permanent regulations for compliance with SB 4 and to receive public comments. One of these workshops takes place from 3-7 p.m. on January 6 at the California State University, Long Beach auditorium.

“We have to be responsive to all of those comments. With the complexity of these regulations, without a doubt, there will be changes after the public comment period,” Kustic said.

DOGGR conducted an economic impact analysis to determine how the proposed permanent regulations may impact the oil and gas industries. Using data from FracFocus.org, DOGGR developed a profile of a “representative” well operator and compared all of the proposed regulations to the standard practices of such an operator.

According to its analysis, that representative operator would only incur costs associated with one new regulation, because that operator would already be implementing industry best practices made law by SB 4. Costs for meeting that regulation range from $216,000 to $504,000 per year.

Statewide industry costs, however, could range from $4,384,000 to $8,728,000 annually. The proposed and interim mandates are detailed on DOGGR’s website at http://www.conservation.ca.gov/dog/Pages/WellStimulation.aspx.