Oil & Gas Law Alert: SB 4 Interim Emergency Regulations Contain Significant Changes Following Public Comment Period

After a five-day comment period over the Christmas and New Year's Day holidays, the Division of Oil, Gas and Geothermal Resources' ("DOGGR") emergency regulations are final and now in effect. The revisions, while few, are significant—particularly as they relate to affirmative actions required of operators. These regulations will remain in effect during 2014, while DOGGR develops a permanent regulatory scheme for 2015 and beyond under a formal rulemaking process.

No portion of SB 4 has engendered more questions and analysis than the groundwater management and monitoring requirements. The draft emergency regulations included detailed requirements to guide operators through creating a compliant groundwater management plan pursuant to Pub. Res. Code § 3160(d)(1)(F) during 2014. The final emergency regulations include those same requirements and allow operators to determine that no protected groundwater exists in an area under evaluation. However, operators must also obtain concurrent written approval from the "Water Boards" stating that no protected waters exist on the property in order to omit a groundwater management plan from a Well Stimulation Treatment ("WST") Notice. The emergency regulations define the "Regional Water Boards" as "any Regional Water Quality Control Board ('RWQCB') with jurisdiction over the location of the well subject to well stimulation treatment." (Section 1781(k).) Therefore, it is the RWQCB from which the operator must seek concurrent written approval to omit a groundwater management plan from the Interim WST Notice.

In addition, the public comments drove DOGGR to further clarify that even if a water body contains less than 10,000 mg/l of total dissolved solids (which would give it protected status under SB 4), that water body will not be protected if it is considered an exempt aquifer pursuant to 40 C.F.R. § 146.4. Section 146.4 exempts certain aquifers from protected status—for the purposes of oil and gas recovery activities—if those aquifers do not meet certain drinkability or dissolved solids standards. As mentioned above, the operator would still be required to seek the written concurrence from the Water Boards. DOGGR also revamped its November 20, 2013 Notice to Operators, now requiring attachment of the groundwater management plan, not just certification of its existence.

Aside from water-related issues, the emergency regulations further clarify the operator's—and thereby, the energy services contractor's—duty to supply all relevant chemical disclosures in order to achieve a completeness designation for the operator's Interim WST Notice. Section 1783(1)(c) states that no claim of trade secret protection allows the operator to omit chemical information requirement pursuant to Pub. Res. Code § 3160(d)(1)(C).

Overall, the emergency regulations provide many clarifying details about operator compliance in 2014. Based on the few changes made, it appears that the water protection provisions and trade secret provisions are likely to undergo the most scrutiny as the permanent regulations go through public comment during 2014 (and are implemented in 2015). For now, operators may continue to conduct WST activities, so long as the operator submits full and complete Interim WST Notices to the appropriate government agencies and surface landowners and tenants.

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