August, 2013

By Mike Flores and Olman J. Valverde, Esq.

Legislative Update. Hydraulic fracturing (“fracking”) continues to be on the forefront of legislative activity pertaining to the oil and gas industry. Early in the session there were eight fracking-related bills in front of the Legislature. As the summer recess begins, the only bill left is SB 4 by Senator Fran Pavley, which made it out of committee on a party line vote.

As amended, the bill would require oil companies to furnish a comprehensive list of the chemicals used in hydraulic fracturing, the concentration of the chemicals, how much water was used, and how the mixture was disposed of upon completion.

SB 4 would order the Secretary of the Natural Resources Agency to conduct a scientific study on hydraulic fracturing by January 2015.

The bill would also impose random governmental inspections on hydraulic fracturing facilities.

Also, a division will be formed which, in consultation with various government environmental regulation departments and local boards, will adopt rules and regulations specific to hydraulic fracturing.

A previous version of the bill would have imposed a moratorium on hydraulic fracturing until an independent study on the effects of hydraulic fracturing was conducted. The proposed moratorium was removed from the current amended version.

SB 4 is now in the Assembly Appropriations Committee and will not be heard until after the summer recess.

Regulatory Update. The California Department of Conservation’s Division of Oil, Gas, and Geothermal Resources (“DOGGR”), conducted five workshops during 2013 to hear public comments on the “discussion draft” of hydraulic fracturing regulations prior to the start of the formal rulemaking process.

The next steps in the rulemaking process, expected to take several months, will involve DOGGR’s review of comments provided orally or in writing at the workshops, review of comments sent electronically via links on the DOGGR website, and the release of revised draft regulations.In the interim, members of the public can continue to submit comments during this time via the online links. There also will be an opportunity for additional public input during the formal rulemaking process.

Assessment Rate. DOGGR announced the new Oil and Gas Assessment Rate for fiscal year 2013-2014. The rate is 14.26683 cents per barrel of oil or 10 Mcf of natural gas produced. This is a 0.0020476 cent (1.456 percent) increase and so is not significantly different from the previous fiscal year.

DOGGR Online Mapping Application. DOGGR has developed a new online mapping application called California Notices Received (CalNR). CalNR shows the locations of drill, rework and plugging and abandonment notices received by the Division in the last 365 days. More information is available at the DOGGR website, http://www.conservation.ca.gov/dog.

Leasing at Vandenberg Air Force Base. The U.S. Air Force is considering leasing land on Vandenberg Air Force Base for private companies to extract offshore oil and gas from the central California coast.The proposal would allow oil companies to use onshore equipment with new extended-reach horizontal drilling technology to access deposits several miles offshore.Sunset Exploration and Exxon Mobil recently asked the Air Force to revisit their proposal to use the technology to build an oil and gas drilling project on the base near Lompoc.

Over the next several months, the military will study whether the new type of drilling is compatible with the base’s space and satellite-launching missions, and will determine if it is “economically, environmentally and politically feasible,” the Air Force said in a statement.

U.S. law allows the military to lease land for oil development. Vandenberg currently has five active oil wells.

Seminars and Conferences. Upcoming educational events include the West Coast Landman’s Institute, September 4-6 at the Marriot Marquis in San Diego. For more information go to www.laapl.com.

The 2013 Western States Petroleum Association (WSPA) Issues Conference will be held Tuesday and Wednesday, October 1-2, at the Rancho Bernardo Inn in San Diego. Information is at www.wspa.org

Mike Flores, a legislative affairs specialist with Luna & Glushon, serves on the National Board of Directors of the American Association of Professional Landmen (AAPL), where he is a member of AAPL’s Legislative Affairs Committee and the Public Lands Committee. He is a member of Independent Petroleum Association of America (IPAA), the Western States Petroleum Association (WSPA), and the Los Angeles Association of Professional Landmen (LAAPL), where he is the Legislative Affairs Co-Chair, and is a member of the Bakersfield Association of Professional Landmen (BAPL) where he is the Legislative Affairs Chair.

Olman J. Valverde is an attorney in the oil and gas, corporate and business law practices of Luna & Glushon. His work includes representing oil companies in connection with transactions for the purchase and sale of oil and gas leases, title examination related to oil and gas rights, project finance transactions related to exploration and development projects, and litigation related to mineral rights and production activities.