California Field Report – September, 2014

By Olman Valverde and Mike Flores, of Luna & Glushon

The California legislative session ends on September 30, 2014. Two bills perceived as potentially disruptive to oil and gas production, AB1132 (HF Moratorium) and SB 1071 (Oil Severance Tax) did not make it out of committee.

Multiple Water Bills Passed

Because of the state-wide drought, the use and conservation of water has become an even more important element of oil and gas development activities. On the last day the legislative session, the Legislature passed a series of bills related to a new paradigm for regulation of groundwater throughout the state.

Senate Bill 1281 (Pavley) increases transparency and water conservation in oil production by requiring that oil well operators disclose the amount and source of their water. During droughts, operators would be required to use recycled water in new oil and gas wells. Oil production consumed more than 80 billion gallons of water in 2013, the equivalent amount used by about 500,000 households.

Assembly Bill 1739 (Dickinson) and Senate Bill 1168 (Pavley) cleared both houses and have moved on to the Governor’s desk for his signature or veto. If the bills are signed into law, California would become the last state on the West coast to regulate groundwater.

AB 1739 seeks to achieve sustainable groundwater levels within twenty years of the plan’s adoption. This bill would improve local and regional groundwater management levels, especially in high and medium risk overdraft basins and sub-basins.

The California Farm Bureau Federation said Dickinson’s bill “severely threatens existing water rights” and could spur litigation. Opponents of the legislation point out that the bills will not “help advance sustainable groundwater management.”

Rail Transportation of Oil Bills on the Governor’s Desk

Senate Bill 1319 (Pavley) enhances the state’s oil spill prevention and response program in light of a projected surge in the volume of crude oil transported into California by rail. The bill helps update the state’s oil spill prevention and response program to address all modes of transport, including rail.

Assembly Bill 380 (Dickinson) would protect communities from rail accidents involving crude oil. The bill would require that rail carriers communicate information about the movement and characteristics of crude oil and other hazardous materials, in order to better prepare emergency response officials in the case of an accident.

Gas Prices will go up on January 1, 2015 according to CARB

Gasoline and diesel will be regulated for the first time under the state’s cap and trade program as of January 1, 2015. The new regulatory scheme is expected to cause an increase in gasoline and diesel prices at the pump.

According to economic analysis by the California Air Resources Board (CARB), this expansion of cap and trade will increase gasoline prices by as little as 4 percent and as much as 19 percent. With gasoline prices currently averaging around $4 a gallon, that is a price impact of 16 cents to 76 cents.

Bill to Assist San Joaquin Valley Energy Workforce Awaits Governor Signature

Assembly Bill 1910 (Gray) would establish the San Joaquin Valley Regional Economic Planning and Preparedness Council (SJVREPPC), a special committee within the California Workforce Investment Board (CWIB) that would identify the programs, policies, partnerships and workforce needs of the emerging energy economy in the region.

If the Governor signs AB 1910, the SJVREPPC would be able to invest in, train, and prepare workers for future oil recovery jobs throughout the Valley.

AB 1910 requires the CWIB to convene local public and private sector representatives to help create an oil and gas strategic initiative addressing the growing need for highly skilled, well-trained workers. The new SJVREPPC would identify funding, programs, policies, partnerships and opportunities that will help form recommendations and strategies to fill the skills gap, and provide policy guidance for job training programs to prepare at-risk youth, displaced workers, veterans and others facing employment barriers.