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California Launches Review of Drilling Rules

California regulators on Friday launched a formal rulemaking process to ready implementation of unconventional drilling rules following mandates from state law (SB 4) to begin January 2015 (see Shale Daily, Sept. 23). Interim "emergency" rules will be in effect next year.

The rulemaking process begins with a 60-day public comment period followed by a series of five public hearings in January. The proposed rules reflect stakeholder input to an earlier working draft by the Division of Oil, Gas and Geothermal Resources (DOGGR) (see Shale Daily, Nov. 30, 2012).

SB 4 defined well stimulation to include hydraulic fracturing, acid stimulation and acid matrix stimulation.

State Conservation Department Director Mark Nechodom called the proposed rules "the strongest and most comprehensive environmental public health protection of any oil and gas producing state in the nation," adding that "at the same time these regulations are designed to ensure that the oil and gas industry in California, which is a key part of the state's economy, will remain productive and competitive."

Western States Petroleum Association (WSPA) President Catherine Reheis-Boyd said the oil/gas producers group is pleased with the draft rules, noting that they "are extensive but strike the right balance that will result in an environmental platform which will ensure that the potential energy resources contained in the Monterey Shale formation can be responsibly developed.

"SB 4 provides for responsible development of a much needed resource for California. WSPA and our members look forward to engaging with the state and other stakeholders on how best to implement these new requirements in the coming months and years."

DOGGR is required to certify an environmental analysis of the rules by July 1, 2015, and the Conservation Department is to commission an independent scientific study of fracturing practices by Jan. 1, 2015. An independent panel is to be named next month and the study eventually submitted to the state legislature.

Nechodom said the interim rules mainly would rely on self-testing, monitoring and reporting by the industry on an individual well basis. "They will provide the basis by which well stimulation will be certified by the operators as being compliant with SB 4," he said. "This basically provides certainty and comfort that reporting [on fracking] will begin immediately."

Jason Marshall, chief deputy director at the Conservation Department, said there is little difference in the interim or permanent rules now set for 2015.

"They are still going to have to identify the well involved, the depth, the list of chemicals; a fundamental difference is that the operators will certify to DOGGR they have done everything required and that will be reviewed, but in 2015 specific permitting will be required," Marshall said.

On a conference call, California officials emphasized that the rules don't deal with well construction and operation standards generally but establish new testing, monitoring and reporting requirements.

Nechodom said there will be added cost that will be paid by oil/gas operators, and there will be added engineering staff needed at DOGGR, but he did not give any specific figures on how much the new regulations will cost or how many new state jobs will be needed.

Among the proposed new rules are requirements to obtain permits to stimulate wells and to complete an analysis ahead of time for nearby wells and to check earthquake faults. Those affected by drilling would have to be notified 30 days before stimulation practices begin.

A separate proceeding to be conducted by the California Water Quality Control Board would determine groundwater testing and reporting requirements for well stimulations, but those rules may not be in place before 2015. However, there will still be some groundwater protection requirements in the interim rules, according to water board officials.

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