Global Traditional Energy Resources

The Monterey shale play is found mostly in southern California, including areas surrounding Los Angeles, Santa Barbara, and Bakersfield.¹ Estimates of resources in the Monterey shale formation have varied widely over the years, and have generally decreased over time. In 2003, the United States Geological Survey (“USGS”) estimated that the Monterey shale held approximately 121 million barrels of oil.² In 2011, the U.S. Energy Information Administration (“EIA”) estimated that the Monterey shale covered 1,750 square miles and contained 13.7 billion barrels of technically recoverable shale oil, but, in May 2014, EIA informally announced that it had reduced its estimate by 96 percent to only 600 million barrels.³ Most recently, the USGS estimated in October 2015 that the Monterey formation contains an estimated 21 million barrels of oil and 27 billion cubic feet of natural gas.⁴ The USGS has explained that oil in the formations seeps out of the basins over time due to poor retention and natural processes.⁵

Statutory and Regulatory Framework

The primary regulatory authority over California oil and gas development is the Division of Oil, Gas and Geothermal Resources (DOGGR) within the State Department of Conservation.⁶ The DOGGR issues rules for the drilling, operation, maintenance, and abandonment of oil and natural gas wells.⁷

In September 2013, Governor Jerry Brown signed Senate Bill 4 into law, which regulates hydraulic fracturing and other well stimulation treatments, such as acid well stimulation.⁸ DOGGR promulgated final regulations implementing S.B. 4 on December 30, 2014.⁹ The final regulations became effective on July 1, 2015.¹⁰

S.B. 4 and its implementing regulations require that within 60 days of concluding the treatment, the operator must post on FracFocus.org well stimulation fluid information, such as whether the base fluid is water suitable for irrigation or domestic purposes; the source, volume, and disposition of all water used; the disposition of all well stimulation treatment fluids other than water; whether any radiological components or tracers were injected into the well; the radioactivity of the recovered well stimulation fluids; and the location of the portion of the well subject to the well stimulation treatment and the extent of fracturing or other modification surrounding the well induced by the treatment.¹¹ While the law allows suppliers to claim a trade secret privilege for the chemical composition of additives used in a well stimulation treatment, the supplier must disclose the composition to the DOGGR.¹² Additionally, operators must provide a copy of the approved well stimulation permit to tenants and property owners residing within 1,500 feet of a wellhead or 500 feet of the subsurface horizontal path of the well at least 30 days prior to commencing well stimulation activities.¹³ Those notified may request water quality testing on any existing water well or surface water located on their parcel that is suitable for drinking or irrigation purposes.¹⁴ Operators must also provide notice to the DOGGR at least 72 hours before starting a well stimulation treatment in order allow DOGGR to witness the treatment.¹⁵ Furthermore, operators must conduct baseline and subsequent water sampling and testing of water wells or surface wells that are suitable for drinking or irrigation purposes upon request from notified property owners.¹⁶

On July 7, 2015, the State Water Resources Board approved Model Criteria for groundwater monitoring.¹⁷ The Model Criteria require operators to install monitoring wells within half a mile of a hydraulic fracturing wellhead that will penetrate an aquifer containing “protected waters.”¹⁸ Protected waters are waters with less than 10,000 milligrams per liter of total dissolved solids that are also outside of an exempt aquifer.¹⁹ The operator must collect samples before it begins well stimulation and semi-annually thereafter, and the sampling parameters must include pH, temperature, electrical conductivity, hydrogen sulfide, dissolved oxygen, and oxidation-reduction potential.²⁰ The operator must then submit a semi-annual groundwater monitoring report to the Water Resources Board with this and other information.²¹ In addition, the Model Criteria require operators to prepare and submit detailed information regarding the well, the geological features surrounding it, and a complete list of the names, CAS numbers, and estimated concentrations of each chemical constituent the operator anticipates using in the well stimulation operation.²² The Model Criteria do not provide a trade secret exemption from this requirement.²³

More recent legislative proposals have sought to address water use associated with hydraulic fracturing operations. On September 25, 2014, for example, Governor Brown signed into law S.B. 1281, which requires that well owner/operators report the source, volume, and use of freshwater, recycled water, and treated water used to develop and produce oil and gas, as well as the water’s disposition.²⁴ The owner/operator must provide this information to the DOGGR by the end of the month following the use of the water.²⁵

Recent News and Developments

Statewide and Local Bans

The passage and implementation of S.B. 4 has not stalled efforts in California to ban fracking at the state and local levels. For example, on February 20, 2014, State Senators Holly Mitchell and Mark Leno proposed legislation that would place a statewide moratorium on fracking until a multi-agency review of its environmental and public health impacts was completed.²⁶ The bill failed in the California Senate, as did similar legislation in 2013.²⁷ More recently, in 2015, Governor Brown rejected an “emergency petition” filed by Californians Against Fracking that sought a statewide moratorium on hydraulic fracturing.²⁸

At the local level, on February 28, 2014, the City Council of Los Angeles unanimously voted to place a moratorium on fracking within city limits until the city verifies that it will not compromise drinking water or harm public safety.²⁹ The future of the L.A. moratorium is unclear, however, as the city’s Planning Department, which the City Council had asked to develop fracking regulations, advised the City Council in November 2014 not to pursue the moratorium.³⁰ Thus, despite the City Council’s February 2014 vote, there is not yet a city ordinance in effect in Los Angeles to implement the called-for moratorium. Meanwhile, other cities, such as Beverly Hills,³¹ Carson,³² and Compton,³³ and several counties, including Butte,³⁴ Alameda,³⁵ Santa Cruz,³⁶ Mendocino, San Benito,³⁷ and Monterey³⁸ have implemented temporary or permanent bans on hydraulic fracturing. Nonetheless, such efforts remain controversial and subject to further challenge. For instance, oil and gas producers filed suit against the Compton ordinance.³⁹ However, that suit was dropped after local officials repealed the moratorium.⁴⁰ Similarly, Citadel Exploration challenged the San Benito measure, but later withdrew its action.⁴¹

The Monterey County ban was challenged by the oil and gas industry, and in December 2017, a Monterey County judge issued an intended decision that several aspects of Measure Z, the ballot initiative that enacted the county’s hydraulic fracturing ban in November 2016, were preempted by state law.⁴² Specifically, the court’s intended decision held that Measure Z’s bans on drilling new wells and wastewater injection activities were preempted by existing state and federal law and therefore invalid.⁴³ Because the plaintiffs in the challenge lacked standing—they did not currently conduct hydraulic fracturing operations in Monterey County—the court’s intended decision left Measure Z’s hydraulic fracturing ban in place, but observers noted that the hydraulic fracturing ban put in place by Measure Z could later be challenged again by a plaintiff with standing.⁴⁴ The December 2017 intended decision was later finalized, and a non-governmental organization later appealed the decision to the California Sixth District Court of Appeal.⁴⁵ A settlement agreement was reached in May 2018, concluding the current legal challenge to Measure Z.⁴⁶ Pursuant to the settlement, Measure Z’s hydraulic fracturing ban is effective in the inland area of Monterey County, except for the former Fort Ord area.⁴⁷ Moreover, the county remains able to defend Measure Z in any future legal challenge.⁴⁸

BLM to Review California Hydraulic Fracturing Impacts

The U.S. Bureau of Land Management (“BLM”) published a public notice in August 2018 that it intends to prepare a supplemental environmental impact statement to weigh the effects of hydraulic fracturing on public lands in central California.⁴⁹ BLM’s review stems from a May 2017 settlement with various non-governmental organizations that had challenged a BLM resource management plan for the area, arguing that the agency failed to undertake the necessary environmental review pursuant to the National Environmental Policy Act.⁵⁰ BLM also paused leasing activity in the area pursuant to the settlement.⁵¹ The supplemental environmental impact statement, which will be prepared by BLM’s Bakersfield Field Office, may lead to an amended resource management plan for the area.⁵²

^{Last updated September 2018.}