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California Drafts Frack Rules but Drilling Tepid

California oil and natural gas regulators are collecting stakeholder input on proposed rules for hydraulic fracturing (fracking) but at this point, drilling in the state has been somewhat tepid from a year ago, according to the state Division of Oil, Gas and Geothermal Resources (DOGGR).

Proposed fracking rules are scheduled to be issued before the end of this month, followed by three public hearings in January, a DOGGR spokesman told NGI.

California Independent Petroleum Association (CIPA) CEO Rock Zierman couldn't comment on the level of drilling/permitting activity. CIPA has not polled its membership on drilling or permit activity for a number of months, he said.

"The major thing happening in the state [DOGGR] in the next couple of weeks are the draft fracking regulations," Zierman said. "The division is basically going to do what the state legislature failed to do, which is define it and require disclosure among other items. When the new legislature is back is session in January, I think we will have draft regulations on the street, so the legislature will know at least where the [Gov. Jerry Brown] administration is going."

Similarly, the other major oil/gas industry organization, a spokesman for the Western States Petroleum Association's (WSPA) said he was not aware of the level of drilling/permit activity; WSPA has been providing input to DOGGR on the draft fracking regulations.

Unlike some of the legislative proposals that required a large amount of pre-notification to various interest groups, such as landowners, Zierman doesn't think the DOGGR staff draft rules would include a lot of that. "The division participated in a lot of the discussions on the bills, and they were only concerned with making sure the state was pre-notified as the regulators involved."

The DOGGR spokesperson said there would be disclosure requirements, but he cautioned that the draft rules initially released would change considerably through the public hearing process.

Last month East West Petroleum Corp. and Lani LLC agreed to jointly explore two prospective areas in Southern California's San Joaquin Basin, the Tejon Extension and Tejon Main. However, the DOGGR district official in Bakersfield discounted the new activity as insignificant.

"There has been no unusual or increased activity in the Tejon North or Tejon fields, according to our Bakersfield office," according to the DOGGR spokesperson. "Overall, District 4 [Kern County] drilling activity is down slightly as compared to this time last year.

Under a farm-in agreement and area of mutual interest with Lani, East West said the partners would develop 3,200 net (4,500 gross) acres in a leasehold between the Tejon North and Tejon fields. The formations together have produced more than 100 million boe, according to East West. Canada-based East West, which was formed two years ago, is contributing $2.5 million to Lani's exploration program to gain a 25% stake in the Tejon Extension and a 21.25% participation interest in Tejon Main. Two exploratory wells are planned. The partners also want to acquire at least another 7,000 gross acres.

Regarding increased drilling activity in the Monterey Shale, it's unclear how much activity the area is attracting -- even though the region is said to contain potentially huge amounts of hydrocarbons (see NGI, July 9). "Permits are slightly up in Los Angeles and Ventura [which don't include the Monterey] and slightly down elsewhere this year compared to last," said the DOGGR spokesperson. "There is no real evidence of a boom. For all the potential the Monterey Shale may have, no one appears to have had a 'eureka' moment there. Venoco is probably the biggest player in the Monterey at this point."

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