Bill Text: CA SB1125 | 2021-2022 | Regular Session | Amended


Bill Title: Oil and gas: alternative to bond requirement: financial accounts.

Spectrum: Partisan Bill (Republican 1-0)

Status: (Introduced - Dead) 2022-04-19 - April 19 set for first hearing. Failed passage in committee. (Ayes 3. Noes 6. Page 3439.) Reconsideration granted. [SB1125 Detail]

Download: California-2021-SB1125-Amended.html

Amended  IN  Senate  March 16, 2022

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Senate Bill
No. 1125


Introduced by Senator Grove

February 16, 2022


An act to amend Section 3152 of add Section 3204.5 to the Public Resources Code, relating to oil and gas.


LEGISLATIVE COUNSEL'S DIGEST


SB 1125, as amended, Grove. Oil and gas: well stimulation treatment: hydraulic fracturing. alternative to bond requirement: financial accounts.
Existing law establishes the Geologic Energy Management Division in the Department of Conservation, under the direction of the State Oil and Gas Supervisor, who is required to supervise the drilling, operation, maintenance, and abandonment of oil and gas wells, as provided. Among other requirements, existing law requires each operator, as defined, who engages in the drilling, redrilling, deepening, or in any operation permanently altering the casing, of a well, or who acquires a well, to file with the supervisor an indemnity bond, as specified. An operator who fails to comply with these requirements is guilty of a misdemeanor, as provided.
This bill would establish a program in the division to permit a small, independent oil producer to establish a separate, privately owned financial account for the purpose of financing the costs related to ceasing operations or plugging and abandoning a well in lieu of maintaining a bond. The bill would require the division to establish the criteria for participation in the program. The bill would require the participants to contribute at least 5% of the annual revenues from oil operations to the account and would require the division to verify that a producer has made the required contribution by conducting an annual audit of supporting financial information. The bill would prohibit a participant from using moneys in the account for any purpose other than the costs of ceasing operations or plugging and abandoning a well. The bill would remove from the program a participant who uses moneys in the account for any purpose other than the costs of ceasing operations or plugging and abandoning a well and make that producer ineligible for the exemption from maintaining a bond. The bill would provide that a violation of these requirements is not a crime.

Existing law authorizes the Geologic Energy Management Division in the Department of Conservation to regulate the drilling, operation, maintenance, and abandonment of oil and gas wells in the state. Existing law requires an operator proposing to perform a well stimulation treatment, as defined, to apply to the State Oil and Gas Supervisor or a district deputy for a permit to perform the well stimulation treatment and imposes other requirements and conditions on the use of well stimulation treatments.

Existing law also defines “hydraulic fracturing,” commonly known as fracking, to mean a well stimulation treatment that, in whole or in part, includes the pressurized injection of hydraulic fracturing fluid or fluids into an underground geologic formation in order to fracture, or with the intent to fracture, the formation, thereby causing or enhancing, for specified purposes, the production of oil or gas from a well.

This bill would make nonsubstantive changes to that definition.

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NOYES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 3204.5 is added to the Public Resources Code, to read:

3204.5.
 (a) There is hereby established in the division a program to permit a small, independent oil producer to establish a separate, privately owned financial account for the purpose of financing the costs related to ceasing operations or plugging and abandoning a well in lieu of maintaining a bond required pursuant to this article. A small, independent oil producer that is selected for the program is exempt from the requirement to maintain a bond pursuant to this article, except as otherwise provided in subdivision (b) or (c).
(b) The program established pursuant to subdivision (a) shall require the participants to contribute at least 5 percent of the annual revenues from oil operations to the account. The program shall prohibit a participant from using moneys in the account for any purpose other than the costs of ceasing operations or plugging and abandoning a well. A participant who uses moneys in the account for any purpose other than the costs of ceasing operations or plugging and abandoning a well shall be removed from the program and is ineligible for the exemption.
(c) The division shall establish the criteria for participation in the program established pursuant to subdivision (a). The division shall verify that a producer has made the contribution required pursuant to subdivision (b) to the financial account described in subdivision (a) by conducting an annual audit of supporting financial information. If the division determines that a participant in the program has used the funds in the account for any reason other than to pay for costs of ceasing operations or plugging or abandoning a well, the division shall remove the participant from the program and require the producer to maintain the applicable bond pursuant to this article.
(d) Notwithstanding Section 3236 or any other law, a violation of the requirements of this section or the program established pursuant to this section is a not a crime.

SECTION 1.Section 3152 of the Public Resources Code is amended to read:
3152.

“Hydraulic fracturing” means a well stimulation treatment that, in whole or in part, includes the pressurized injection of hydraulic fracturing fluid or fluids into an underground geologic formation in order to fracture, or with the intent to fracture, the formation, thereby causing or enhancing, for purposes of this division, the production of oil or gas from a well.

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