California Governor Jerry Brown signed SB 4 on Friday, September 20, 2013, establishing a permitting system for fracking of oil and gas wells. (See September 23, 2013 post.) The state, through the Department of Conservation, Division of Oil, Gas and Geothermal Resources (“DOGGR”), will be developing regulations to implement SB 4’s requirements. Despite its recent adoption, there may be legal challenges to SB 4 by both the oil and gas industry and environmentalists.
One major issue for the oil and gas industry and environmentalists alike is that it is not clear whether SB 4 requires DOGGR to conduct California Environmental Quality Act (“CEQA”) review for individual fracking permits. Although the law requires DOGGR to conduct a statewide CEQA environmental impact review to provide the public with information about the environmental effects of fracking, it appears to allow fracking to continue while this review is being conducted. Environmentalists may challenge this aspect of SB 4 by arguing that companies that are currently fracking in California are avoiding CEQA review of their projects.
Further, SB 4 contains provisions regarding public disclosure of chemical information, requiring oil and gas companies to provide the names of the chemical constituents of their fracking fluids when applying for well permits and to list the chemicals they used when fracking is finished. The legislation specifically states that the chemical constituents of additives, concentrations of additives in well stimulation treatment fluids, and the chemical composition of flowback fluids will not be protected as trade secrets. Oil and gas companies may challenge these provisions and argue that they should be protected as trade secrets.
The California Legislature may make amendments to SB 4, and Governor Brown indicated that he would like to see the law amended, though he did not specify the types of amendments he had in mind.