Bill Text: CA AB2756 | 2015-2016 | Regular Session | Chaptered

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Bill Title: Oil and gas operations: enforcement actions.

Spectrum: Partisan Bill (Democrat 2-0)

Status: (Passed) 2016-09-09 - Chaptered by Secretary of State - Chapter 274, Statutes of 2016. [AB2756 Detail]

Download: California-2015-AB2756-Chaptered.html

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BILL NUMBER: AB 2756	CHAPTERED
	BILL TEXT

	CHAPTER  274
	FILED WITH SECRETARY OF STATE  SEPTEMBER 9, 2016
	APPROVED BY GOVERNOR  SEPTEMBER 9, 2016
	PASSED THE SENATE  AUGUST 16, 2016
	PASSED THE ASSEMBLY  JUNE 2, 2016
	AMENDED IN ASSEMBLY  JUNE 1, 2016
	AMENDED IN ASSEMBLY  MAY 11, 2016
	AMENDED IN ASSEMBLY  APRIL 7, 2016

INTRODUCED BY   Assembly Members Thurmond and Williams

                        FEBRUARY 19, 2016

   An act to amend Sections 3236.5, 3350, 3351, 3352, 3356, and 3357
of, and to repeal, add, and repeal Article 4.3 (commencing with
Section 3260) of Chapter 1 of Division 3 of, the Public Resources
Code, relating to oil and gas.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 2756, Thurmond. Oil and gas operations: enforcement actions.
   (1) Under existing law, the Division of Oil, Gas, and Geothermal
Resources in the Department of Conservation regulates the drilling,
operation, maintenance, and abandonment of oil and gas wells in the
state. Existing law provides that a person who violates certain
requirements related to the regulation of oil and gas is subject to a
civil penalty not to exceed $25,000 for each violation. Existing law
requires the State Oil and Gas Supervisor to consider specified
circumstances when establishing the amount of the civil penalty.
   This bill would require the supervisor to consider specified
additional circumstances when establishing the amount of the civil
penalty. The bill would set ranges of civil penalty amounts depending
on whether the violation is a well stimulation violation, a major
violation, or a minor violation, as defined. The bill would authorize
the supervisor, in his or her discretion, to treat each day a major
or minor violation continues or is not cured as a separate violation.
The bill would authorize the supervisor to allow a supplemental
environmental project, as defined, in lieu of a portion of the civil
penalty amount, not to exceed 50% of the civil penalty amount, as
specified. The bill would, until January 1, 2021, require that the
civil penalties assessed under these provisions be deposited in the
Oil and Gas Environmental Remediation Account. The bill would, until
January 1, 2021, establish that account in the Oil, Gas, and
Geothermal Administrative Fund to be administered and managed by the
division, and would require that the moneys in the account be used,
upon appropriation by the Legislature, to plug and abandon oil and
gas wells, decommission attendant facilities, or otherwise remediate
sites that the supervisor determines could pose a danger to life,
health, water quality, wildlife, or natural resources if there is no
operator determined by the supervisor to be responsible for
remediation or who is able to respond. The bill would authorize the
division to adopt regulations to implement these provisions, and
would repeal obsolete provisions related to the Acute Orphan Well
Account.
   (2) Existing law establishes procedures for an operator of a well
or production facility to appeal to the Director of Conservation from
an order of the supervisor or a district deputy. Existing law
requires a notice of appeal to be filed with supervisor or with the
district deputy who issued the order.
   This bill would make numerous changes to the appeal process and
procedures. The bill would, among other things, require the notice of
appeal to be filed with the director, revise exceptions for when the
notice of appeal operates as a stay of the order, revise what costs
will be refunded if an emergency order is set aside or modified on
appeal, and revise the circumstances in which appeals are to be heard
in a formal hearing process before an administrative law judge,
instead of in an informal hearing before the director.
   This bill would make numerous changes to the process and
procedures for an informal hearing before the director. The bill
would, among other things, authorize the director to extend the date
of the hearing for good cause upon his or her own motion, revise the
authorization for the hearing to be electronically recorded by either
party, revise the timeline in which the director is required to
grant or deny a petition to order the testimony of a witness at the
hearing, and provide that obtaining subpoenas may be considered good
cause to extend the date of the hearing.
   (3) Existing law sets forth numerous provisions governing
discovery in the context of an informal hearing before the director.
Existing law authorizes the supervisor or the director, upon
application to a judge of the superior court of the county within
which the proceeding or investigation is pending, to obtain a
subpoena compelling the attendance of witnesses and the production of
records, surveys, documents, books, or accounts at such places as
the judge may designate within the limits prescribed in these
provisions.
   This bill would make numerous changes to these discovery
provisions. The bill would, among other things, require a judge of
the superior court, upon application by the supervisor or director,
to assign a case number for the proceeding or investigation, to issue
an order prescribing the nature and scope of the proceeding or
investigation, and to retain jurisdiction for the limited purpose of
enforcing subpoenas issued in the proceeding or investigation;
authorize the attorney of record for the supervisor or director, upon
the assigning of a case number, to issue subpoenas compelling the
attendance of witnesses and the production of records, surveys,
documents, books, or accounts for certain pending proceedings or
investigations in the manner specified; authorize the supervisor or
director, or his or her inspector, to inspect the well site or
production facilities of any owner or operator to ascertain whether
the owner or operator is complying with the certain requirements;
authorize the supervisor or director to require any owner or operator
to furnish, under penalty of perjury, technical or monitoring
reports that the supervisor or director require; and prohibit the
division and the department from making available to the public for
inspection portions of a report that might disclose trade secrets,
well data granted confidential status, or other confidential or
privileged information, when requested by the owner or operator
furnishing the report. Because the bill would expand the crime of
perjury, it would impose a state-mandated local program.
   (4) Existing law provides, if the operator does not appeal an
order, seek judicial review of a decision affirming or modifying an
order within the time provided in law, or if the court has affirmed
the decision, then any charge, including penalty and interest, that
the decision permits the supervisor to impose constitutes a state tax
lien against the real and personal property of the operator.
   This bill additionally would include any civil penalties imposed
by the supervisor for violations of certain requirements related to
the regulation of oil and gas in these provisions. The bill would
authorize the supervisor to apply to the appropriate superior court
for a clerk's judgment, in addition to the state tax lien, and would
provide provisions related to obtaining the clerk's judgment.
   (5) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 3236.5 of the Public Resources Code is amended
to read:
   3236.5.  (a) A person who violates this chapter or a regulation
implementing this chapter is, at the supervisor's discretion, subject
to a civil penalty as described in subdivision (b) for each
violation. An act of God and an act of vandalism beyond the
reasonable control of the operator shall not be considered a
violation. The civil penalty shall be imposed by an order of the
supervisor pursuant to Section 3225 upon a determination that a
violation has been committed by the person charged. The imposition of
a civil penalty under this section shall be in addition to any other
penalty provided by law for the violation. When establishing the
amount of the civil penalty pursuant to this section, the supervisor
shall consider, in addition to other relevant circumstances, all of
the following:
   (1) The extent of harm caused by the violation.
   (2) The persistence of the violation.
   (3) The pervasiveness of the violation.
   (4) The number of prior violations by the same violator.
   (5) The degree of culpability of the violator.
   (6) Any economic benefit to the violator resulting from the
violation.
   (7) The violator's ability to pay the civil penalty amount, as
determined based on information publicly available to the division.
   (8) The supervisor's prosecution costs.
   (b) (1) (A) A "well stimulation violation" is a violation of
Article 3 (commencing with Section 3150) or the regulations
implementing that article.
   (B) The civil penalty amount for a well stimulation violation
shall be not less than ten thousand dollars ($10,000) per day per
violation and not more than twenty-five thousand dollars ($25,000)
per day per violation.
   (2) (A) A "major violation" is a violation that is not a well
stimulation violation and that is one or more of the following:
   (i) A violation that results in harm to persons or property or
presents a significant threat to human health or the environment.
   (ii) A knowing, willful, or intentional violation.
   (iii) A chronic violation or one that is committed by a
recalcitrant violator. In determining whether a violation is chronic
or a violator is recalcitrant, the supervisor shall consider whether
there is evidence indicating that the violator has engaged in a
pattern of neglect or disregard with respect to applicable
requirements.
   (iv) A violation where the violator derived significant economic
benefit, either by significantly reduced costs or a significant
competitive advantage.
   (B) The civil penalty amount for a major violation shall be not
less than two thousand five hundred dollars ($2,500) per violation
and not more than twenty-five thousand dollars ($25,000) per
violation.
   (3) (A) A "minor violation" is a violation that is neither a well
stimulation violation nor a major violation.
   (B)  The civil penalty amount for a minor violation shall be not
more than two thousand five hundred dollars ($2,500) per violation.
   (4) At the supervisor's discretion, each day a major or minor
violation continues or is not cured may be treated as a separate
violation.
   (c) An order of the supervisor imposing a civil penalty shall be
reviewable pursuant to Article 6 (commencing with Section 3350). When
the order of the supervisor has become final and the penalty has not
been paid, the supervisor may apply to the appropriate superior
court for an order directing payment of the civil penalty. The
supervisor may also seek from the court an order directing that
production from the well or use of the production facility that is
the subject of the civil penalty order be discontinued until the
violation has been remedied to the satisfaction of the supervisor and
the civil penalty has been paid.
   (d) The supervisor may allow a supplemental environmental project
in lieu of a portion of the civil penalty amount. The supplemental
environmental project may not be more than 50 percent of the total
civil penalty amount. Any amount collected under this section that is
not allocated for a supplemental environmental project shall be
deposited in the Oil and Gas Environmental Remediation Account
established pursuant to Section 3261, until January 1, 2021.
Commencing January 1, 2021, any amount collected under this section
that is not allocated for a supplemental environmental project shall
be deposited into the Oil, Gas, and Geothermal Administrative Fund.
   (e) "Supplemental environmental project" means an environmentally
beneficial project that a person, subject to an order of the
supervisor imposing a civil penalty, voluntarily agrees to undertake
in settlement of the action and to offset a portion of a civil
penalty.
  SEC. 2.  Article 4.3 (commencing with Section 3260) of Chapter 1 of
Division 3 of the Public Resources Code is repealed.
  SEC. 3.  Article 4.3 (commencing with Section 3260) is added to
Chapter 1 of Division 3 of the Public Resources Code, to read:

      Article 4.3.  Oil and Gas Environmental Remediation Account


   3260.  For purposes of this article, "account" means the Oil and
Gas Environmental Remediation Account established under Section 3261.

   3261.  (a) Notwithstanding any other provision of this chapter,
including the expenditure limitations of Section 3258, the division
shall administer and manage the Oil and Gas Environmental Remediation
Account, which is hereby established in the Oil, Gas, and Geothermal
Administrative Fund.
   (b) Moneys in the account shall be used, upon appropriation by the
Legislature, to plug and abandon oil and gas wells, decommission
attendant facilities, or otherwise remediate sites that the
supervisor determines could pose a danger to life, health, water
quality, wildlife, or natural resources if there is no operator
determined by the supervisor to be responsible for remediation
pursuant to subdivision (c) of Section 3237 or who is able to
respond.
   3262.  The division may adopt regulations to implement this
article.
   3263.  This article shall remain in effect only until January 1,
2021, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2021, deletes or extends
that date.
  SEC. 4.  Section 3350 of the Public Resources Code is amended to
read:
   3350.  (a) The operator of a well or a production facility to whom
the supervisor or district deputy has issued an order pursuant to
this chapter may file a notice of appeal from that order. The notice
of appeal shall be in writing and shall be filed with the director.
The operator shall file the appeal within 10 days of the service of
the order, or within 10 days of the posting of a copy of an order
made pursuant to Section 3308. Failure of the operator to file an
appeal from the order within the 10-day period shall be a waiver by
the operator of its rights to challenge the order. If the order,
other than an order made pursuant to Section 3308, is served by mail,
the time for responding shall be determined as provided in Section
1013 of the Code of Civil Procedure.
   (b) (1) The filing of a written notice of appeal shall operate as
a stay of the order, except when an order is issued as an emergency
order pursuant to Section 3226. If the order is an emergency order,
the operator shall immediately perform whatever work is required by
the order to alleviate the emergency or shall permit the agents
appointed by the supervisor to perform that work. If the order is an
emergency order to cease injection, then the operator shall cease
injection as soon as it is safe to do so.
   (2) If an emergency order is set aside or modified on appeal, the
supervisor shall refund the reasonable costs incurred by the operator
for whatever work is not required by the set-aside or modified order
or shall not impose costs for work performed by the supervisor or
the supervisor's agents if the work is excluded from the modified
order or the order is set aside. Only the costs of work performed
shall be refunded, and there shall be no reimbursement for lost
profits or increased production costs.
   (3) (A) The costs to be refunded pursuant to paragraph (2) by the
supervisor shall be determined in a hearing before the director after
the exhaustion of appeals. The operator shall have the burden of
proving the amount of costs to be refunded.
   (B) A determination by the director as to the amount of costs to
be refunded pursuant to paragraph (2) may be appealed by the operator
pursuant to subdivision (a) of Section 3354.
   (4) If the operator believes that it will be irretrievably injured
by the performance of the work required to alleviate the emergency
pending the outcome of the appeal, the operator may seek an order
from the appropriate superior court restraining the enforcement of
the order pending the outcome of the appeal.
  SEC. 5.  Section 3351 of the Public Resources Code is amended to
read:
   3351.  (a) A hearing shall be provided in accordance with Chapter
5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2
of the Government Code only in an appeal from an order in the
following circumstances:
   (1) Issued pursuant to a Section 3237 finding that the operator's
wells are deserted and should be plugged and abandoned.
   (2) Imposing civil penalties totaling more than twenty-five
thousand dollars ($25,000).
   (3) Rescinding an entire injection project approval for a project
that has already commenced.
   (4) Imposing a life-of-well bond or a life-of-production facility
bond.
   (b) An order issued pursuant to Section 3225 shall satisfy the
substantive requirements of an accusation pursuant to Section 11503
of the Government Code and may be filed when scheduling a formal
hearing in accordance with this chapter and Chapter 5 (commencing
with Section 11500) of Part 1 of Division 3 of Title 2 of the
Government Code. All applicable formal hearing deadlines do not
commence until a formal hearing is scheduled. When scheduling a
formal hearing after an appeal from an order under this chapter, the
supervisor is not required to send a Notice of Defense statement and
the operator is not required to request a hearing.
   (c) For an appeal of an order that is not described in subdivision
(a), a hearing shall be conducted by the director in accordance with
Sections 3352 and 3353.
   (d) For an appeal of an order that is described in subdivision (a)
and is also an emergency order, a hearing shall be conducted by the
director in accordance with Sections 3352 and 3353 for the limited
purpose of considering the reasonableness of the supervisor's
determination that an emergency exists. All other penalties and
requirements imposed by the order shall be considered at a hearing
provided in accordance with Chapter 5 (commencing with Section 11500)
of Part 1 of Division 3 of Title 2 of the Government Code.
  SEC. 6.  Section 3352 of the Public Resources Code is amended to
read:
   3352.  (a) A hearing conducted by the director shall adhere to the
following:
   (1) When an order is not issued as an emergency order, within 30
days from the date of the service of the notice of appeal, the
director shall provide to the operator notice of the time and place
of the hearing. The hearing shall take place within 30 days after the
date of the director's notice. The notice shall inform the operator
that the director may extend the date of the hearing for up to 60
days for good cause upon his or her own motion, or an application of
the operator or the supervisor.
   (2) When an order has been issued as an emergency order, within 10
days from the date of the service of the notice of appeal, the
director shall provide to the operator notice of the time and place
of the hearing. The hearing shall take place within 20 days after the
date of the director's notice. The notice shall inform the operator
that the director may extend the date of the hearing for up to 30
days for good cause upon his or her own motion, or an application of
the operator or the supervisor.
   (b) The director shall conduct the hearing within the district
where the majority of the wells or production facilities that are the
subject of the order are located, or the hearing may be conducted at
a location outside of that district upon application of the
operator. The hearing shall be reported by a stenographic reporter.
   (c) The notice of hearing shall inform the operator of its right
to file a written answer to the charges no later than 10 days before
the date of the hearing. The notice also shall inform the operator
that it has the right to present oral and documentary evidence at the
hearing.
   (d) Upon a verified and timely petition of the operator, the
director may order the testimony of a witness at the hearing. The
petition shall be served upon the director and the other party within
five days after the filing of an appeal and shall set forth the name
and address of the witness whose testimony is requested, to the
extent known; a showing of the materiality of the testimony; and a
showing that the witness cannot be compelled to testify absent an
order of the director. The supervisor may file an opposition to the
petition within five days after the petition is served. The director
shall either deny or grant the petition within 10 days after receipt
of the petition. Upon granting a petition, the director shall issue a
subpoena pursuant to Section 3357 compelling the testimony of the
witness at the hearing. Obtaining subpoenas may be considered good
cause to extend the date of the hearing under paragraph (1) or (2) of
subdivision (a).
   (e) The director may convert a hearing pursuant to this section to
a formal hearing conducted in accordance with Chapter 5 (commencing
with Section 11500) of Part 1 of Division 3 of Title 2 of the
Government Code in any of the following circumstances:
   (1) The operator makes a showing satisfactory to the director that
the order being appealed is likely to result in termination of an
established oil or gas producing or injection operation.
   (2) It appears to the director that the hearing will involve
complex evidentiary or procedural issues that will cause more than
minimal delay or burdens.
   (3) The operator and the supervisor agree and stipulate to convert
the hearing to a formal hearing.
   (f) The conversion of a hearing pursuant to this section to a
formal hearing shall be conducted in accordance with Article 15
(commencing with Section 11470.10) of Chapter 4.5 of Part 1 of
Division 3 of Title 2 of the Government Code. If a hearing for an
appeal of an emergency order is converted to a formal hearing, the
supervisor shall endeavor to schedule and notice a formal emergency
hearing as soon as reasonably possible and, notwithstanding Section
11517 of the Government Code, the director shall only have 30 days
from receipt of the administrative law judge's proposed emergency
hearing decision to act as prescribed in subparagraphs (A) to (E),
inclusive, of paragraph (2) of subdivision (c) of Section 11517 of
the Government Code.
   (g) The director or his or her designee shall permit inconspicuous
personal recording devices to be used by persons during a hearing
pursuant to this section to make sound recordings as personal notes
of the proceedings. A person proposing to use a recording device
shall provide advance notice to the director or his or her designee.
The recordings may not be used for any purpose other than as personal
notes.
  SEC. 7.  Section 3356 of the Public Resources Code is amended to
read:
   3356.  (a) If the operator does not appeal an order, if the
operator does not timely seek judicial review of a decision affirming
or modifying an order within the time provided in Section 3354, or
if the operator has timely sought and obtained judicial review and
the court has affirmed the decision, then any charge, including
penalty and interest, that the decision permits the supervisor to
impose on the operator for work performed by the supervisor or the
supervisor's agents, and any civil penalties imposed under Section
3236.5 shall constitute a state tax lien against the real and
personal property of the operator pursuant to Section 3423.
   (b) In addition to a state tax lien, the supervisor may apply to
the appropriate superior court for a clerk's judgment. The
application, which shall include a certified copy of the final agency
order or decision, shall constitute a sufficient showing to warrant
the issuance of the judgment. The court clerk shall enter the
judgment immediately in conformity with the application. The judgment
so entered shall have the same force and effect as, and shall be
subject to all the provisions of law relating to, a judgment in a
civil action, and may be enforced in the same manner as any other
judgment of the court.
  SEC. 8.  Section 3357 of the Public Resources Code is amended to
read:
   3357.  (a) In any proceeding before the director, and in any
proceeding instituted by the supervisor for the purpose of enforcing
or carrying out the provisions of this division, or for the purpose
of holding an investigation to ascertain the condition of any well or
wells complained of, or which in the opinion of the supervisor may
reasonably be presumed to be improperly located, drilled, operated,
maintained, or conducted, the supervisor and the director shall have
the power to administer oaths and may apply to a judge of the
superior court of the county in which the proceeding or investigation
is pending for subpoenas for witnesses to attend the proceeding or
investigation. Upon the application of the supervisor or the
director, the judge of the superior court shall assign a case number
for the proceeding or investigation, shall issue an order prescribing
the nature and scope of the proceeding or investigation, and shall
retain jurisdiction for the limited purpose of enforcing subpoenas
issued in the proceeding or investigation. Upon the assigning of a
case number, the attorney of record for the supervisor or director
may issue subpoenas directing witnesses to attend the proceeding or
investigation, and those persons shall be required to produce, when
directed, all records, surveys, documents, books, or accounts in the
witness' custody or under the witness' control; except that no person
shall be required to attend upon the proceeding unless the person
resides within the same county or within 100 miles of the place of
attendance. The attorney of record for the supervisor or the director
may in that case cause the depositions of witnesses residing within
or without the state to be taken in the manner prescribed by law for
like depositions in civil actions in superior courts of this state
under Title 4 (commencing with Section 2016.010) of Part 4 of the
Code of Civil Procedure, and may issue subpoenas compelling the
attendance of witnesses and the production of records, surveys,
documents, books, or accounts at designated places within the limits
prescribed in this section.
   (b) (1) In conducting a proceeding or investigation specified in
subdivision (a), the supervisor or director may require an owner or
operator to furnish, under penalty of perjury, technical or
monitoring reports that the supervisor or director requires. The
burden, including costs, of any report shall bear a reasonable
relationship to the need for the report and the benefits to be
obtained from the report. In requiring a report, the supervisor or
director shall explain in writing to the owner or operator the need
for the report, and shall identify the rationale that supports
requiring that owner or operator to provide the report.
   (2) When requested by the owner or operator furnishing the report,
neither the division nor the department shall make available to the
public for inspection portions of a report that might disclose trade
secrets, well data granted confidential status pursuant to Section
3234, or other confidential or privileged information. The division
or department shall make that confidential or privileged information
available to other public agencies as needed for regulatory purposes
and in accordance with a written agreement with the other public
agency regarding the sharing of the information.
   (c) In conducting a proceeding or investigation pursuant to
subdivision (a), the supervisor or director, or his or her inspector,
may inspect the well site or production facilities of any owner or
operator to ascertain whether the owner or operator is complying with
the requirements of or authorized by this division. The inspection
shall be made with the consent of the owner or operator or, if
consent is withheld, with a warrant duly issued pursuant to the
procedure set forth in Title 13 (commencing with Section 1822.50) of
Part 3 of the Code of Civil Procedure. In the event of an emergency
affecting the public health or safety, an inspection may be performed
without consent or a warrant. This subdivision is in addition to any
other inspection authority granted or authorized by this division.
  SEC. 9.  No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.