Oil & Gas Law Alert: SB 4 Well Stimulation Treatment Regulations - Second Revised Text of Proposed Regulations

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On Thursday, October 9, 2014, the California Department of Conservation ("Department") issued public notice of the Second Revised Proposed Regulations for SB 4 Well Stimulation Treatment Regulations ("Second Revised Regulations").  The public notice commences a 15-day public comment period, which ends on October 24, 2014 at 5:00 pm.  The draft proposed regulations were released on November 15, 2013, and the first revision of the regulations was issued on June 13, 2014.  Please see our blog post summarizing the first revision.

The Second Revised Regulations are slated to go into effect on July 1, 2015.  In the interim, the Emergency Regulations remain in effect.  The Emergency Regulations were released on December 13, 2013 and became effective on January 1, 2014.

The prominent theme of the Second Revised Regulations is the regulation of water use and quality and the involvement of the State Water Resources Control Board ("Water Board") and Regional Water Quality Control Boards ("Regional Water Boards") in implementing SB 4.  The revisions provide more clarification about the use of water in well stimulation, as well as the requirements for testing of groundwater.  The major revisions are summarized as follows.

Well stimulation treatment is not permitted until the operator has received written approval from the State Water Resources Control Board or Regional Water Quality Control Board, indicating that the well stimulation is covered under Water Code section 10783.  (Section 1783(a).)  The operator must identify the source of water to be used in treatment in the application for a well stimulation permit and in public disclosures.  (Section 1783.1(a)(23)(D); Section 1788(a)(12)(A).)  The Second Revised Regulations clarify that this water source includes water from wells, a water supplier, and diversion of surface water.  (Id.)  The operator must also provide documentation proving that the well stimulation treatment is covered by a regional groundwater monitoring program, or show that the operator is working with the Water Board to ensure that the well is covered by Water Code section 10783.  (Section 1783.1(a)(27).)  Water testing must be monitored by the Regional Water Board, and the Regional Water Board must be "notified at least two working days prior to collecting a sample" so that they may "witness the sampling."  (Section 1783.3(b)(7).)

Aside from water-related issues, other edits throughout the Second Revised Regulations clarify ambiguities found in the preceding version of the text.  The Department clarified the calculation of "acid volume threshold" by providing an equation, which considers the size of the drill bit and the wellbore volume of the treated zone.  (Section 1761(a)(1)(B)(3).)  The operator may propose an aggregation plan for a "specific type of repeated operation that involves emplacing fluid containing acid in the well" but that is not a well stimulation treatment.  (Section 1777.7(d).)   Neighbor notification requirements also have refined with the clarification that only surface property owners "other than the operator of the well" must be given notification.  (Section 1783.2(a)(1).)

The Second Revised Regulations allow for modification of the area analysis of the well stimulation treatment.  A review of all well bores is required, but the Division of Oil, Gas and Geothermal Resources ("Division") may allow for modification of the review area based on "analysis by the operator that demonstrates geologic and hydrologic isolation of the oil and gas formation."  (Section 1784(a)(2).)  The Department added the requirement of an analysis of the geologic feature’s potential to act as a migration pathway for treatment fluids, and an analysis of the risk that the well stimulation might "communicate with the geologic feature."  (Section1784(a)(3).) 

As "soon as reasonably possible" following the well stimulation treatment, the operator is required to perform testing to determine whether a breach, or well failure, has occurred.  (Section 1787(a).)  The operator must provide the testing results to the Division, and must immediately shut-in the well if a breach has occurred.  (Section 1787(a), (b).)  Following a breach, the operator must provide specified information to the Division, including a description of the chemical fluid mixture in the well, and may not continue operations until approved by the Division.  (Section 1787(b), (c).)  Finally, information that is provided to the Division but that is not publicly disclosed may be given to other state agencies as needed for regulatory purposes.  While this requirement seems intrusive, the disclosure must be accompanied by a written agreement with the state agency to ensure the confidentiality of the shared information.  (Section 1788(c).)

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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