Three Bills Pending in California Address Water Use Reporting; Oil Spills and Rail Transportation

Three bills pending in the California legislature have the potential to significantly impact oil and gas operations in the State. SB 1281 would impose water use limitations and reporting requirements on production operations. Two additional bills, SB 1319 and AB 2678, address oil spill response and oversight, and rail transportation. If passed, these bills would impose new restrictions on California oil and gas operations.

SB 1281 (Pavley): Oil & Gas Production; Water Use Reporting

In the wake of California’s ongoing drought, Senator Fran Pavley’s SB 1281 is designed to reduce the use of fresh water in oil and gas production activities. The bill proposes to accomplish that objective by:

  • • Declaring a state policy that oil and gas field exploration, development, and production (“oil field operations”) shall use recycled water to the extent feasible.
  • • Requiring new oil field operations to use only recycled water during “state of emergency” drought conditions.
  • • Prohibiting new oil field operations from using water from groundwater basins or high priority sub-basins under certain circumstances.
  • • Requiring oil and gas well owners to provide additional information on their water use in monthly statements submitted to the Division of Oil, Gas, and Geothermal Resources (DOGGR).
  • •Requiring DOGGR to annually provide an inventory of all unlined oil and gas field sumps to the State and regional water boards.

Senator Pavley maintains that existing water use reporting requirements do not provide enough information for regulators to understand the sources and uses of water in oil field operations. SB 1281 could increase administrative burdens and, in some circumstances, limit access to water supplies for oil and gas producers. Such limitations could have a significant adverse effect on oil field operations.

SB 1281 was passed by the Assembly Committee on Appropriations on August 14, 2014.

SB 1319 (Pavley): Oil Spills: Oil Spill Prevention and Response

Another bill authored by Senator Pavley, SB 1319, seeks to expand the State’s oil spill oversight and railroad inspection programs in light of a significant shift in the mode of transportation of oil from marine vessels to rail in recent years. According to the bill analysis, in 2011, California moved less than two million barrels of oil by rail. That number rose more than 300% to greater than six million barrels transported by rail in 2013, and the trends has continued in the first quarter of 2014 with crude-by-rail numbers up 104% compared to the first quarter of 2013 (1,414,418 barrels versus 693,457 barrels). SB 1319 would respond to perceived increased spill risks associated with the increased crude-by-rail traffic by:

  • • Authorizing the Office of Spill Prevention and Response (OSPR) to obtain confidential information from other oil industry regulators.
  • • Requiring OSPR to train local emergency responders and offer grants for response equipment to local governments.
  • • Expanding California Public Utilities Commission inspections on rail bridges, grade crossing, and oil unloading facilities.

If passed, SB 1319 could increase administrative burdens for oil and gas operators using rail transportation.

SB 1319 was read for the second time, and ordered to third reading on August 20, 2014.

AB 2678 (Ridley-Thomas): Oil Spills: Oil Spill Technical Advisory Committee

Assemblymember Sebastian Ridley-Thomas’ AB 2678 also responds to the increase in rail transport of petroleum. Existing law created a 14-member Technical Advisory Committee (TAC) that provides public input and independent judgment of the actions of OSPR. In light of perceived increased risks of inland oil spills associated with increased crude-by-rail traffic, AB 2678 proposes to augment the TAC’s inland oil spill expertise by:

  • • Substituting a faculty member of the Karen C. Drayer Wildlife Health Center at the University of California, Davis (WHC), or the Director of the Director of the Oiled Wildlife Care Network (OWCN), for the current member who is required to have worked in state government.
  • • Adding a new member who represents an environmental group with an interest in protecting inland natural resources from oil spills.
  • • Adding a new member who represents an environmental justice group concerned about the risk of oil spills from railroad tank cars traveling through disadvantaged communities.

The changes to the composition of the TAC will likely not be directly felt by the oil and gas industry in the short term.

On August 5, 2013, AB 2678 was ordered to a third reading and is currently in the Senate floor process.