Members of the California legislature have been extremely busy proposing ten (10) laws that would rein in hydraulic fracturing and possibly chill the development of the Monterey Shale formation. This play extends more than 1,700 miles and is believed to contain 15.4 billion barrels of oil, approximately two-thirds of the U.S. shale oil reserves. Legislation in the General Assembly (A.B. 1301) would block hydraulic fracturing until the legislature passes rules specifying under what conditions it could be done safely. A.B. 1323 imposes a moratorium on fracking until regulators examine its health and environmental impacts (a report which is due in 2019). Another Assembly bill (A.B. 649) would ban hydraulic fracturing near an aquifer until a determination is made that the drilling would not endanger health. S.B. 4 [Bill Text – SB-4 Oil and gas: hydraulic fracturing.] would regulate hydraulic fracturing operations, including the construction of wells and well casings and the disclosure of fracturing fluids. It would require an independent scientific study on hydraulic fracturing treatments, and it would prohibit the issuance of hydraulic fracturing permits until the report is completed and peer-reviewed (which would be January 1, 2015 or after).

Along with the proposed moratoriums, the California Department of Conservation proposed rules that would require oil and gas companies to reveal the locations of wells being hydraulically fractured and to disclose the chemicals used.

These potential delays and the required disclosures may have energy firms considering whether the Monterey Shale’s resources are worth the wait.

Additional pending legislation includes the following:

  • S.B. 395 would classify hydraulic fracturing wastewater as a hazardous substance.
  • S.B. 665 would amend bonding requirements for operators of natural gas wells.
  • A.B. 7 would require the disclosure of the chemicals used in hydraulic fracturing, while providing protection for trade secrets.
  • A.B. 288 would give the Division of Oil, Gas and Geothermal Resources 30 days to approve a new drilling permit application, extending the deadline from 10 days.
  • A.B. 669 would require the operator to get approval from the regional water quality control board for the method and location of wastewater disposal before starting to drill.
  • A.B. 982 would require groundwater monitoring before and after any hydraulic fracturing operation.

This article was prepared by Barclay Nicholson (bnicholson@fulbright.com or 713 651 3662) from Fulbright’s Energy Practice Group.