California Field Report – January 2015

By Olman Valverde and Mike Flores, of Luna & Glushon

Statement from Department of Conservation on EIR

On January 14th, the Department of Conservation, through its Division of Oil, Gas and Geothermal Resources, published a Draft Environmental Impact Report (EIR) titled “Analysis of Oil and Gas Well Stimulation Treatments in California.”

Senate Bill 4 requires the Division to prepare an Environmental Impact Report (EIR) pursuant to the California Environmental Quality Act (CEQA), to provide the public with detailed information regarding potential environmental impacts associated with well stimulation treatments in California.

The public review period for this Draft EIR begins on January 14, 2015 and will end on March 16, 2015. The Department and the Division will conduct six public comment meetings throughout the State during the comment period to receive verbal and written comments on the Draft EIR.

To access the Draft EIR see the Department of Conservation’s webpage.

Independent Science Study on Well Stimulation Released

Pursuant to Senate Bill 4, the California Natural Resources Agency (CNRA) commissioned the California Council on Science and Technology (CCST) and Lawrence Berkeley National Laboratory (LBNL) to conduct an independent scientific assessment of well stimulation, including hydraulic fracturing, in California. CCST released Volume I of the assessment on January 14, 2015.

Volume I, which is titled “An Independent Scientific Assessment of Well Stimulation Technologies in California: Well Stimulation Technologies and their Past, Present, and Potential Future Use in California”, provides the factual basis describing what well stimulation treatments (WST) are, how they are conducted in general and practiced in California, and where they have been and are being used for oil and gas production in the state.

The report can be viewed or downloaded from the CCST website.

The full independent scientific assessment will be issued in three volumes. Volumes II and III will be released in July 2015. Volume II will assess the potential impacts of WST with respect to water, air quality, and greenhouse gas emissions, as well as induced seismicity, ecology, traffic and noise. Volume III will present case studies to assess environmental issues and qualitative hazards for specific geographic regions, based on findings in Volume I and Volume II.

State to Examine Potential of Monterey Shale

The oil and gas potential of the vast Monterey shale formation will be the focus of an upcoming study by an independent panel of scientists operating under direction of the state Legislature. “We’re going to look at what it would really take to get a good estimate,” said Jane Long, who is spearheading the study for the California Council on Science and Technology.

The Monterey shale underlies the San Joaquin Valley and parts of Monterey County. In 2011, the U.S. Energy Information Agency estimated it held 15.4 billion barrels of untapped oil — more than any place in the U.S. — but lowered its estimate by 96% in 2014 to 600 million barrels.

The Legislature directed the California Council on Science and Technology to lead the study, which is the focus of intense scrutiny by lawmakers, oil and gas interests and environmentalists.

In a statement, Western States Petroleum Association President Catherine Reheis-Boyd said her organization was still reviewing the details and would continue participating in the process.

Some environmentalists blasted the study and the concurrent release by the state Department of Conservation of a draft environmental impact report on potential fracking regulations. The report found that banning future well stimulation techniques is not “environmentally superior overall,” in part because it would force the state to import oil from elsewhere.

Some 96% of fracturing operations in the state happen in the lower San Joaquin Valley. The technique has been responsible for 20% of the state’s oil and gas production since 2001.

State Issues New Interim Hydraulic Fracturing Regulations

California’s Division of Oil, Gas, and Geothermal Resources had issued final interim regulations, effective January 1, 2014, to implement California’s new fracking statute (SB 4), with permanent rules to follow by January 2015.

The Division’s interim regulations are supported by a narrative description that provides the Division’s view of fracking, including the differences between hydraulic fracking, acid fracking and acid matrix stimulation, a brief summary of pre-SB 4 requirements and summarizes the SB 4 interim operator requirements. The interim regulations distinguish well stimulation (which is subject to the regulations) from mere underground injection.

These regulations overlay an existing regulatory framework in California on oil and gas wells that is not specific to fracking and which contains requirements not included in the interim regulations.

The interim requirements include a definition of well stimulation (“treatment of a well designed to enhance oil and gas production or recovery by increasing the permeability of the formation”) and description of it as a short term and non-continual process for the purposes of opening and stipulating channels for the flow of hydrocarbons. The interim regulations specify certain actions as not well stimulation, including routine well cleanout work and underground injection projects.

There is no requirement that an operator obtain Division approval, but the operator cannot undertake the well stimulation unless it has submitted a written Treatment Notice form 10 days in advance, which the Division must certify as complete. The operator must also give notice to the Division of well stimulation at least 72 hours in advance.

Operators are obliged to retain a third party to identify and give notice to nearby property owners and tenants (within 1500 foot radius of the wellhead or within 500 feet of the horizontal projection of the subsurface parts of the well); and to sample groundwater if requested by the neighboring property owner. Nearby property owners are entitled to demand water quality testing.

Operators must disclose information regarding the composition and disposition of well stimulation within 60 days following the end of well stimulation treatment of fluids.

Operators are required to prepare spill contingency plans to address the handling of well stimulation fluid and additives.

SB 4 and the interim regulations also address the manner in which trade secrets are to be handled. Information regarding the chemical composition of well stimulation fluids must be submitted to the Division, although it can be marked as a trade secret.

There are provisions as to what will happen if the Division does not agree or there is third party demand for the information, including ensuring that a supplier can move for a preliminary injunction before the information is released.

To view the regulations, visit:

Gov. Brown:  Cut Petroleum Use by 50%

In his inaugural address on Jan. 5, Gov. Brown laid out carbon reduction goal that calls for a 50% reduction in petroleum use by cars and trucks by 2030, and for the state to obtain 50% of its electricity from renewable sources by 2030. He also proposed immediate increased investment in roads and bridges.

“Taking significant amounts of carbon out of our economy without harming its vibrancy is exactly the sort of challenge at which California excels,” Brown said.

“This is exciting, it is bold and it is absolutely necessary if we are to have any chance of stopping potentially catastrophic changes to our climate system. Equally important is having the roads, highways and bridges in good enough shape to get people and commerce to where they need to go,” Brown added.

The state has accumulated an estimated $59 billion worth of needed upkeep and maintenance, he said. “Each year, we fall further and further behind, and we must do something about it,” Brown added. “So I am calling on Republicans and Democrats alike to come together and tackle this challenge.”

Goleta City Council Votes to Shut Veneco Plant

Nearly two years ago, Veneco proposed to reopen an old well off Haskell’s Beach in Venoco’s Ellwood Onshore Facility (EOF), the processing plant between Sandpiper Golf Club and the Bacara Resort that the oil company took over in 1997. With the State Lands Commission expected to approve that project on Wednesday, the City of Goleta took preemptive steps in City Hall on December 16, 2014.

A split Goleta City Council called for a March 2015 hearing to consider shutting down the EOF for good.

The council also sent a strongly worded letter to the State Lands Commission, reiterating concerns over the “inadequate” environmental analysis of the project and errors made by State Lands’ staff. The March hearing will fall under the protocol of an updated ordinance.

A majority of the council determined those concerns were outweighed by what staff called an “archaic” ordinance that would have required quasi-judicial proceedings that could be triggered by any member of the public.

The updated ordinance, which still needs a second vote to be adopted in January, now puts City Council in charge of proposing such terminations. It also establishes a five-year shutdown timeline that can be appealed (there was no previous minimum), and turns the process into a more familiar public hearing, without the stenographers, lawyers, and cross-examinations the old ordinance required.

State Lands Approve Veneco Elwood Oil Well

Despite the City of Goleta’s move toward a possible shut down of Venoco’s Ellwood Onshore Facility (EOF), the State Lands Commission on Wednesday, December 17, 2014, essentially approved the reopening of an old well off Haskell’s Beach and directed the resulting oil be processed at the EOF.

The well is accessed through one of the two piers that extend from the bluffs below Sandpiper Golf Club. It has not been operational since it was turned off in 1994, when Mobil owned the well, due to a leak.

The unanimous vote in favor of the associated environmental report, nearly two years since the project was first proposed, came after a presentation explained that repressurization of the well was likely — and possibly dangerous, that moving the oil up the coast for processing at Las Flores Canyon would be more environmentally damaging, and that the additional oil would only amount to about 2% of what’s processed daily at the EOF, which mainly handles Platform Holly oil and gas.

Additionally, the PRC 421 Recommissioning Project, as it’s known, would last for about 20 years, while Venoco expects Platform Holly to pump for another 40-plus, so the new flow would not extend the life of the facility.

The City of Goleta and Santa Barbara environmentalists argued against many of those claims, and they pointed to what they said were errors in the environmental report prepared by State Lands staff.

Attorney Alison Krumbein of the Sohagi Law Group, which the city retained for this matter, referred to numerous points of “deferred analysis and deferred mitigation” that she said “permeates the project.”

Goleta Mayor Paula Perotte said those “critical errors” — including as miscalculation of backup capacity — were a “cause to pause,” and she added that processing the oil at the EOF is a “step backwards.

On Tuesday night, she and councilmembers Jim Farr and Michael Bennett voted instead to call a hearing in March 2015 to determine whether the EOF, which was deemed a nonconforming use in 1991, be shut down for good; councilmembers Roger Aceves and Tony Vallejo voted against that idea.

The vote by the State Lands Commission, which believes Venoco has a vested right to the oil field, was not unexpected.

City Attorney Tim Giles said the city could sue over the environmental report, or it could wait for Venoco to submit applications for the remaining permits needed from the city to move the project along.

A third option is negotiation, he said. “Ian Livett said Venoco is willing to discuss a path forward that would lead to termination of the EOF,” said Giles. “If they are willing to engage the discussion … there’s productive dialogue to be had.”

After the vote on Wednesday, Livett, a vice president at Venoco, said Venoco was “pleased” with the State Lands vote and “disappointed” with the city’s moves on Tuesday. But he said “Venoco is open to discussions with the city to see if we could find some sort of way through this situation that would be of benefit to all parties. We absolutely would like to sit down with the city.”