HYDRAULIC FRACTURING:

Oil lobbyists seek CEQA exemption ahead of Calif. frack bill vote

Oil industry lobbyists sought to gain an exemption from the leading California environmental law as they pushed back against legislation mandating oversight of hydraulic fracturing, multiple people familiar with the activities said.

The Western States Petroleum Association (WSPA) last week offered language that would have given oil companies conducting fracking on wells a release from requirements of the California Environmental Quality Act, or CEQA, legislative aides and green groups said.

The trade group that represents BP PLC, ConocoPhillips Co., Exxon Mobil Corp. and Royal Dutch Shell PLC as part of its lobbying warned lawmakers that S.B. 4 would necessitate environmental clearances for many of the state's roughly 50,000 existing oil and natural gas wells. Lawmakers were told that the hurdle would enact a default moratorium on the industry, said those familiar with the lobbying pitch.

"The oil industry wants a free pass from environmental review for any fracking or acid jobs at existing wells, seeking preferential treatment for fracking over how any other large industrial projects are reviewed in the state," said Damon Nagami, director of the Natural Resources Defense Council's Southern California Ecosystems Project.

NRDC, the Environmental Working Group and Clean Water Action pushed back against the WSPA effort in an oil versus green lobbying battle.

WSPA accused the green group of spreading incorrect information.

"The environmental groups claiming WSPA is attempting to exempt hydraulic fracturing from CEQA review are misstating the facts," WSPA President Catherine Reheis-Boyd said in a statement. "Hydraulic fracturing and other well stimulation processes and technologies have not been subject to CEQA and its guiding statute.

"Some of the organizations that are on record opposing hydraulic fracturing have attempted to expand CEQA application to include those technologies, something WSPA opposes," Reheis-Boyd added.

CEQA requires projects in California to produce an environmental impact report (EIR) addressing how the development will affect land, water, species and other factors. It is similar to but considered more far-reaching than the National Environmental Policy Act, or NEPA.

Green groups said one of the points of S.B. 4 is to require for the first time that oil and natural gas companies obtain permits ahead of hydraulic fracturing and other well stimulation activities. The process of securing that permit from the California Department of Conservation's Division of Oil, Gas and Geothermal Resources (DOGGR) would include CEQA, they said.

The fight came days before a key vote on S.B. 4, from Sen. Fran Pavley (D). The measure has passed the Senate and is expected to be up for a vote on the Assembly floor as early as tomorrow. If approved, it would go back to the Senate for agreement on amendments and after that would head to Gov. Jerry Brown (D)'s desk.

The bill would require some disclosure on chemicals used and notification of residents before drilling starts and would create a system for testing groundwater. It includes language that makes it apply to well stimulation and not just fracking. Industry has opposed that wording.

Some oil companies consider acid stimulation a possible key to opening the Monterey Shale. The swath of land stretching from the middle of the state south to Los Angeles County is believed to hold 15.5 billion barrels of recoverable petroleum.

Sen. Dianne Feinstein (D-Calif.) last week urged passage of the bill, in part citing potential development of the Monterey Shale.

"The discovery that fracking and acidization could produce approximately 23.9 billion barrels of petroleum in the continental United States -- 64 percent of which is estimated to lie within the Monterey Shale formation ... points to the need for action to ensure protection of the state's natural resources," Feinstein said.

Amendments to gain exemption

EnergyWire obtained paperwork that green groups said represented amendments WSPA sought to have put into S.B. 4., which would have secured a CEQA exemption.

EnergyWire gave WSPA the document and asked it to verify or reject that it was from the trade group. WSPA did not respond to the request. Legislative aides, however, confirmed that the document was the oil industry's pitch and that it would have secured a CEQA exemption.

In the document, every instance of the word "permit" was struck out and replaced with the word "notice." By deleting "permit," legislative aides said, WSPA would gain a CEQA exemption because the permit requirement is what triggers CEQA and the need for an EIR. Notice could be considered more discretionary, one aide said.

"We're concerned that it's a play to get them fully exempted from CEQA," said Bill Allayaud, California director of government affairs for the Environmental Working Group.

Asked what WSPA was arguing on EIRs, trade group spokesman Tupper Hull in an email said that "what WSPA was telling lawmakers -- accurately -- was expanding CEQA to include specific well stimulation activities like hydraulic fracturing -- something CEQA does not currently cover -- would subject each of those projects to CEQA review and EIRs."

Both the oil industry and green groups in their lobbying were presenting worst-case scenarios that were possible but very unlikely, said legislative aides familiar with S.B. 4.

The bill does require permits for new and existing wells that are using fracking or other well stimulation activities, the aides said. But in most cases, developers obtain EIRs that cover large projects with many wells, as opposed to seeking the report for each well.

Moreover, S.B. 4 requires DOGGR to conduct an EIR on how fracking and well stimulation activities will affect the entire state. It would look at factors including air pollution and impacts on greenhouse gas emissions. After it's finalized, it would mean that oil companies would need an EIR only if their project fell outside the scope of California's analysis, one legislative aide explained. Even then, they might be able to go through a more limited scope analysis, a legislative aide said.

Delay before CEQA kicks in

The WSPA push on striking the word "permit" failed, but the trade group did win enhancements to an amendment that would largely prevent oil companies from having to secure EIRs for fracking operations until Jan. 1, 2015.

Some language to that effect already was in the bill, but it was expanded in the amendment approved Friday by the Assembly. The provision says that most parts of S.B. 4 go into effect immediately after passage, including requirements on chemical disclosure, notification of residents before drilling starts and testing of groundwater.

If oil companies comply with those rules, they won't need to go through CEQA on wells until 2015, legislative aides said. It's intended to both give industry some leeway and also ensure that protections are put in place, they said. Right now, DOGGR does not regulate fracking.

Language added Friday says that any executive or judicial order that comes in prior to Jan. 1, 2015, can still trump the interim S.B. 4 permitting structure. There are multiple lawsuits pending on fracking in the state.

In a key case, the Center for Biological Diversity, Environmental Working Group and Sierra Club filed a claim against DOGGR, saying that the state has failed to follow existing state regulations under CEQA that require the agency to track hydraulic fracturing. The oil industry asserts that CEQA doesn't currently cover fracking.

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