California Issues Emergency Regulations Restricting Underground Injection in Connection with Oil and Gas Recovery

The California Department of Conservation (“Department”) proposes to adopt emergency regulations purported to bring California’s underground injection control program into compliance with the federal Safe Drinking Water Act (“Act”). These regulations will be submitted to the Office of Administrative Law on April 9, 2015, and are scheduled to go into effect on April 20, 2015. This is the next step in the systematic statewide review of oil and gas injection practices being conducted by the state Division of Oil, Gas, and Geothermal Resources (“DOGGR”) and the State Water Resources Control Board (“State Water Board”) at the behest of U.S. EPA.

Enacted in 1974, the Act requires that an underground source of drinking water (“USDW”) be protected from contamination by injection wells. In the early 1980s, through DOGGR, California applied for and received primacy to implement a Class II Underground Injection Control (“UIC”) program. The UIC Class II regulatory program extends to wells that inject fluid associated with oil and gas production.

On Thursday of last week, the Department made a finding of emergency stating that it had identified over 2,500 wells in California (including both enhanced oil recovery injection wells and disposal injection wells) that “may have been improperly approved for injection into non-exempt aquifers protected by the Act.” A corrective action plan formulated by U.S. EPA, DOGGR, and the State Water Board, calls for DOGGR to implement a compliance schedule for phasing out injections into USDWs, either by obtaining an aquifer exemption or by halting injection into the aquifer.

The following compliance deadlines have been established by U.S. EPA:

• October 15, 2015 is the shut-in deadline for wells injecting into non-exempt, non-hydrocarbon-bearing aquifers with less than 3,000 mg/L total dissolved solids (“TDS”) that do not have an aquifer exemption;
• December 31, 2016 is the shut-in deadline for wells injecting into 11 specific aquifers historically treated as exempt by U.S. EPA, unless U.S. EPA takes further action to affirm exemption of the pertinent aquifer(s) before that deadline; and
• February 15, 2017 is the shut-in deadline for all wells injecting into non-exempt aquifers with less than 10,000 mg/L TDS that do not have an aquifer exemption.

The proposed regulations would establish a civil penalty of $25,000 per day for each well in which injection occurs beyond the compliance deadline.

U.S. EPA’s mandates are significant in part because U.S. EPA may withdraw California’s primacy authorization under the Act if the State fails to comply with the terms of its Primacy Agreement and fails to take additional corrective actions.

- Kathryn Oehlschlager, Tom Boer, and Sherry Jackman

For more information, contact Kathryn Oehlschlager at klo@bcltlaw.com or (415) 228-5458, Tom Boer at jtb@bcltlaw.com or (415) 228-5413, or Sherry Jackman at sej@bcltlaw.com or (415) 228-5412.

Fracking Preemption Fight to Play Out in San Benito County

It appears that San Benito County will be the venue for the much-anticipated legal battle over whether local jurisdictions in California can ban hydraulic fracturing. In early November, San Benito County passed a voter-sponsored initiative banning fracking and related practices on a county-wide basis. Mendocino County also passed a ban, while a similar ordinance in Santa Barbara was soundly defeated.
 
On November 24, Citadel Exploration filed an administrative claim against the County seeking $1.2 billion in alleged damages caused by the ban, apparently based on the estimated 20-40 million barrels of oil Citadel says it could have extracted in the area over the next several decades. The claim is a prerequisite to a lawsuit against the County. County Supervisors have scheduled a press conference for Tuesday morning, November 25 at 9:30 a.m. to address the claim.

Whether local jurisdictions can ban fracking outright is not a simple question. It’s clear that the State Department of Oil, Gas, and Geothermal Resources (DOGGR) has exclusive authority to regulate subsurface activities relating to oil and gas extraction, and DOGGR takes the position that this authority extends to ancillary extraction activities on the surface.

Consistent with DOGGR’s position, the oil industry is expected to argue that: (1) a County-wide ban is not a proper exercise of police power, and (2) local fracking bans are preempted by the state’s passage of Senate Bill 4 and its comprehensive state regulatory scheme governing all aspects of hydraulic fracturing.

--Kathryn Oehlschlager

For more information, contact Kathryn Oehlschlager at (415) 228-5458 or klo@bcltlaw.com.