By Glen C. Hansen

For decades, oil and gas producers in California have been engaged in the process of hydraulic fracturing, commonly called “fracking.” That process involves injecting a high pressure stream of water and chemicals deep underground to split rocks and release oil and natural gas. The technique is designed to free oil and natural gas trapped in shale rock. There is a significant amount of such rock in California. For example, the Monterey Shale, which lies under Central California and the southern San Joaquin Valley, could hold up to 15 billion barrels of oil, making it possibly the nation’s largest oil shale formation and almost half of the nation’s total shale oil resources.

In a news interview in October 2012, Tim Kustic, the State Oil & Gas Supervisor for the California Department of Conservation, Division of Oil, Gas and Geothermal Resources (“DOGGR”), stated that, despite the Legislature’s failure to pass bills to regulate fracking this year, DOGGR will move forward in adopting and implementing new administrative regulations. On December 18, 2012, DOGGR released a “discussion draft” of fracking regulations, which is the “starting point for discussion by key stakeholders” in preparation for the formal rulemaking process that will probably begin in early 2013. These “discussion draft” regulations include provisions for pre-fracturing well testing; advance notification; monitoring during and after fracturing operations; disclosure of materials used in fracturing fluid; trade secrets; and storage and handling of hydraulic fracturing fluids. Environmental groups quickly criticized the discussion draft regulations. For example, Kassie Siegel, the director of the Center for Biological Diversity’s Climate Law Institute, stated: “These draft regulations would keep California’s fracking shrouded in secrecy and do little to contain the many threats posed by fracking.”

It appears that DOGGR is preparing to coordinate its new regulations with the Federal Government. On October 16, 2012, the U.S. Bureau of Land Management and DOGGR updated the Memorandum of Understanding (MOU) between the entities regarding procedures for regulating oilfield operations where both entities have jurisdictional authority. That MOU includes the following provision regarding fracking:

Over the course of the next year the BLM and [DOGGR] will begin to develop specific plans that implement the goals listed below:

7.   Jointly explore adopting region-wide Best Management Practices specific to California. Coordinate the development and implementation of future hydraulic fracturing and cyclic steaming regulations.

Changes to DOGGR’s regulations and practices regarding fracking are also being sought in a new lawsuit filed on October 16, 2012, by the Center For Biological Diversity, Earthworks, Environmental Working Group and the Sierra Club. That action filed in Alameda County Superior Court against DOGGR seeks declaratory and injunctive relief

to challenge the pattern and practice of [DOGGR] in issuing permits for oil and gas wells within the state of California in violation of the California Environmental Quality Act (“CEQA”), Pub. Res. Code, §21000 et seq. In particular, DOGGR’s practice of approving permits for oil and gas wells after exempting such projects from environmental review or otherwise issuing boilerplate negative declarations finding no significant impacts from these activities undermines the fundamental review requirements of CEQA.

The complaint against DOGGR further alleges that there are “several significant environmental and public health impacts associated with hydraulic fracturing, including the contamination of domestic and agricultural water supplies, the use of massive amounts of water, the emission of hazardous air pollutants, and the potential for induced seismic activity.” Each of those claims is highly disputed by the oil and gas industry, both in California and across the nation.

Meanwhile, in August 2012, a 60-day notice of intent to sue letter was sent by the Center for Biological Diversity to the Federal Government, which letter threatened a citizen suit against the U.S. Bureau of Land Management under the federal Endangered Species Act over the BLM’s issuance of oil and gas leases in California due to the alleged threats that fracking at those lease sites could potentially have on endangered species. To date, no lawsuit has been filed by the Center against the BLM.

Glen Hansen is senior counsel at Abbott & Kindermann, LLP.  For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, LLP at (916) 456-9595.

The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, LLP, or the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.