An Analysis of the Formulation of California Senate Bill 4
This research has the ambitious goal of identifying the political process that took for the passing of SB 4. The subject is especially interesting because hydraulic fracturing (fracking) has taken place in California for several decades. In this chapter, data collected about the drilling style in California will be presented with an effort to include the variety of data available from viewpoints of different stakeholders. Fracking is a national as well as a state political issue. It has been assumed that both external and internal factors have impacted the policy process. Decisions made at federal government agencies have a direct or indirect on Californians perception on fracking as well as the public policy process. Regulations from the U.S. Environmental Protection Agency (EPA) have ripples across all public policy on the local level so some of the history of the EPA on fracking has been included below. The data has been offered so that in Chapter V the evidence can be addressed by discussing policy processes linked to the objectives of identifying
- What made fracking a policy issue for the general public, business and organizations which requires
- identifying the focusing that kept fracking in the limelight long enough to have legislative action taken;
- establishing the consensus dynamics,
- recognizing the greatest influencers of legislators and the perspectives of the influential,
- naming the stakeholders and which ones were highly involved in the CA SB 4 debate, and
- identifying the driving force the pushed through the passing of the CA SB 4.
Earlier in this paper another assumption was expressed that the election of Governor Jerry Brown could have been a focusing event. The public attitude to environmental issues and sustainability may also have had effects.
Oil and gas products have been drilled both onshore and offshore in California since at least 1994 according to the California Coastal Commission from the Energy, Ocean Resources and Federal Consistency division of the California Department of Conservation (Dettmer, 2014, pp. 7 & 12). Figure 2a shows sites of fracking in waters considered as belonging to California and figure 2b shows the federal waters, considered as belonging to the U.S. Forty seven percent of land in California is federally owned and managed by the Bureau of Land Management (BLM) (Freyman, 2014, p. 59). Therefore the BLM has a regulatory role in the state.
SB 4 is the first bill in California to address regulation of the fracking process and it is the first to address the issue of well stimulation processes. The CA Coastal Commission has been particularly involved in the treatments that come under the umbrella of the term well stimulation. The addition of the well stimulation regulations on SB 4 was not expected by some of the stakeholders, especially the petroleum companies and their supporters, as will be discussed later.
The definitions for the terms used in this chapter are reviewed here; the definitions are based on SB 4 and retrieved from the CA Department of Conservation (2014). ‘Well’ in these definitions does not apply to water wells, but to the fossil fuel exploratory or drilling well made by the petroleum company.
Well stimulation refers to the chemical compounds, other materials and the activities that enhance the ability to retrieve fossil fuel products from small reservoirs in shale rock. The purpose of stimulations is to make gas and oil easier to recover by increasing the permeability of the rock formation where the fossil fuel is located. SB 4 not only covers the stimulation treatments during hydraulic fracturing, but also acid matrix stimulation for acid fracturing.
Hydraulic fracturing uses fluid injected into the rock formation holding a reservoir of fossil fuel; the force of the fluid fractures the rock allowing the drill bit to enter the reservoir, gathering and moving the product through the horizontal drilling pipes, to the vertical pipes and finally to the surface. Acid matrix stimulation injects an acid solution at low pressure (with no rock fracturing) so the rock formation protecting the oil and gas reservoir will dissolve allowing the drill bit to cut into the reservoir. Acid fracturing refers to combining using acid as the injection fluid and using high pressures to fracture the rock.
California fracked wells
Fracked wells are oil and gas wells created by oil and gas companies to gather fossil fuel product. The CA Department of Conservation refers to them as ‘fracked wells.’ Figure 1a depicts 195 fracked wells in the Long Beach Unit, eight fracked wells in the Belmont Field and nine fracked wells on the Platform Ester (Dettmer, 2014, p.7). The map on the right (1b) shows the fracked wells located in federal waters. The well on the right was drilled in 1997; it is called the Platform Hidalgo. The top right balloon with writing in purple lists nine fracks and eight fracking wells which were made between the years of 1994 to 2002 (Dettmer, 2014, p. 12). . Four new fracks are pending as of April 2012 (Dettmer, 2014, p. 12). The bottom balloon with light orange lettering depicts Platform Gail where one fracked well was made in 1992 and one fracked well was made in 2002 (Dettmer, 2012, p. 14).
Figure 1a & 1b Hydraulic fracturing in California (Source: http://www.coastal.ca.gov/)
The Monterey Shale and other rock formations
Less than 50 hydraulic fractured wells have been drilled in to the Monterey Shale formation which covers much of California (Freyman, 2014, p. 59). The shale formation makes up a large portion of California’s geology but making extractions is technically difficult in that type of rock (Freyman, 2014, p. 59). The amount of oil predicted as available in California Monterey Shale was stated to be approximately 15 billion barrels of oil, equal to about 66 percent of the shale oil reserves in the lower 48-states (Freyman, 2014, p. 59). Other California geology has been where the fracking has taken place and the wells lie in the water stressed areas of the state (Freyman, 2014, p. 59).
Fracked wells in water stressed areas
Figure 2 depicts one map where hydraulic fracking is taking place and where the water stressed areas are located. The oil drilling using the fracking method has been done in rock formations that surround the Monterey shale geology. (See fig. 2) The black dots on the map in eastern California represent the wells. The numbers of wells, represented by the black dots, are 19 gas wells and 829 wells under the control of eight petroleum operators (Freyman, 2014, p. 59). Occidental, Aera (Shell and Exxon), and XTO (Exxon) use the most water compared to the other five (Freyman, 2014, p. 59).
The dark red orange color represents the amount of area where wells have been made that are in severely water stressed regions; these wells have a 98 percent exposure to ‘water risks’ and are located in high or extreme water stress regions (Freyman, 2014, p. 59). The light orange color on the map (to the south of the severely stressed area) represents the proportion of wells that that are in medium to higher water stress region and a 100 percent exposure to water risk has been determined (Freyman, 2014, p. 59). (see figure 2) All of the information on figure 2 is from the California Data Summary for the duration between January 1, 2011 and May 31, 2013 (Freyman, 2014, p. 59). A large portion of the area is dedicated to agricultural land use and provides the U.S. with almost 50 percent of the fruit and vegetables consumed (Freyman, 2014, p. 59).
Figure 2 California fracking and water stress (Feyman, 2014, p. 59)
Looking only at the amount of water used in the drilling process, the amount seems small because of the use of acid matrix stimulation instead of water as the main hydraulic fluid. The risk of groundwater exposure to fracking chemicals and the droughts have made water a large issue associated with the wells even though the water demand for the fracking is not considered high. On the other hand, the combination of drought emergencies and the risk to groundwater is expected to cause a negative public reaction to any more fracking in the region (Freyman, 2014, p. 59). One hundred and thirteen million gallons of water were used in California from January 1, 2011 to May 31, 2013; less than one percent of the total gallons was used per well (Freyman, 2014, p. 59).
During the time from the 1960s until now the amount of groundwater depletion has equalled approximately 60 million acre-feet which is about equal to 19 trillion gallons of groundwater (Freyman, 2014, p. 59). Freyman (2012, p.60) explained that 19 trillion gallons of water is enough to supply all the Californian residents with an 8 year supply of water.
Gas prices and gas taxes
Figure 3 shows the raising trend of retail gas prices for three California cities Los Angeles, San Francisco, and San Jose over 72 months. The graph begins in the summer of 2008 when retail gas prices were between $4.42 and $4.72/gallon. (See fig. 2) The retail gas prices in California drop to the low of $1.69/gallon in November 2008. That was the lowest price of gas from November 2008 to summer of 2014. The trend for gas prices has been rising over time since the $1.69/gallon low. The $4.72/gallon high was reached again in October of 2012 and summer of 2014 shows an expected price range between $4.12 and about $4.22/gallon. The price was calculated as the average price of gas for the time units labeled on the horizontal axis.
Figure 4 shows the “current average gas price” charged in California, New York and Texas (McMahon, 2014). The prices range from $.089 (California), $3.862 (New York) and $3.444 (California). McMahon (2014) explained that the prices do not rely as much on the site of the wells but they rely mainly on shipping costs to the refineries. California has seventeen refineries compared to twenty eight refineries in Texas and none in New York state (McMahon, 2014). The amount of gas taxes highly influence the price as can be seen in figure 5. California charges the highest state tax 71.29 cents per gallon compared to 68.26 cents/gallon in New York and 38.40 cents/gallon in Texas. The federal excise tax is 18.40cents/gallon for the whole country so California has the highest gas taxes of the three states (See fig. 5).
Figure 3 Historical Gas Price Charts (source: inflationdata.com
Figure 4 The lowest prices for regular gas compared between CA, NY, and TX
Figure 5 Comparison of gas taxes between CA, NY, and Texas
The California Board of Equalization has been recorded the amount of resource surcharges revenue collected for every fiscal year (FY) from FY 1974-75 until the present day. Resources Surcharges: Energy resources surcharge and gas consumption surcharge revenue, FY 1974-75 to 2012-13. From FY 1974-75 to 1999-00 only an Electrical Energy Tax was charged but starting in FY 2000 – 01 the gas consumption surcharge was added. (See table 1) The revenues are proportional to the amount of electrical energy and gas consumption so a trend can be identified. In FY1974-75 the electrical energy tax revenue equaled approximately $1,885,000 and in a generally increasing trend has increased to $71,673,000 in FY 2012-13. In 2000-01 a gas consumption surcharge was initiated. The revenue from the first year equaled about $30,511,000. The next year the revenue from the gas consumption surcharge increased to $179,107,000 and has steadily increased to approximately $647,505,000 for FY 2012-13.
California has experienced periods of slowed employment growth that have been greater than the national employment. In 2007, the employment rate decreased dramatically. (See fig. 6) California was in better shape than the nation in terms of employment from 2006 to 2007 but the slowdown started in the second quarter and continued until the end of the year. In April 2009, the San Francisco Chronicle quoted Mike Bernick, employment attorney, saying “California jobless rate climbs to 10 percent” (sedgewicklaw, 2009). The Jose Mercury News and the Sacramento Bee reported an 11 percent unemployment rate equal to a net loss of 62,000 California jobs (sedgewicklaw, 2009).
Figure 6 Quarterly employment growth 2007
In December 1999 the civilian unemployment rate was 4.7 percent meaning 782,000 civilian unemployed. In December of 2000 the rate was 4.4 percent, by December of 2001 the rate was 6.2 percent and in December 2002 the rate was 6.7 percent representing 1,165,600 civilian unemployed. The table below lists the December unemployment rates from 2003 to 2011. (See table 2) The two highest rates in the time period were December 2009 and December 2010.
The largest increases in the rate of unemployed happened between December 2007, 5.8 percent and December 2008, 12.0 percent. That meant that approximately 598,900 more people were unemployed at the end of 2008 than had been employed at the end of the previous year. And then the trend continued with a increase in the unemployment rate to 12.0 percent in December 2009, meaning 519,600 more people were unemployed than at the end of the previous year. In December 2010 the unemployment rate was 12.1 percent and by December 2011, the rate had only dropped by one percent to 11 percent. December 2012 showed decrease to 9.6 percent and December 2013 another decrease had occurred to 7.9 percent. Seven is better than 12 percent but 7.8 percent unemployment rate means that 1,462,700 people were unemployed in California in December 2013.
Lawsuits against the fracking had been initiated earlier in other parts of the U.S. where fracking had been applied more obviously. The communities and the media started understanding the extent the strategy was used for oil drilling in California at the end of 2010. The risks to the environment, especially ground started to become better known at that time. Two high profile lawsuits were initiated by the Center for Biological Diversity and the Sierra Club against the BLM and Ken Salazar, Secretary, Department of the Interior and against Sally Jewell, Secretary of the Department of the Interior in 2013. In 2012, the Center for Biological Diversity sued the California Department of Conservation and others.
Michael J. Mishak (2012) reported in the Los Angeles Times that hydraulic fracking had been occurring in California with little to no oversight. State regulators told him that drinking water is protected by the EPA’s Safe Drinking Water Act and California environmental laws but said they were not aware of the degree of fracking or the risks (Mishak, 2012). Los Angeles County was sued by a health advocacy group, Community Health Councils, due to impacts from an oil extraction well in Baldwin Hills. The executive director of Community Health Councils, Lark Galloway-Gilliam was quoted in Mishak’s (2012) article, “We are looking to our regulatory agencies to protect us, and they are scratching their heads and turning a blind eye.” On the other hand Tupper Hull, Western States Petroleum Association claimed that the technology was a safe practice “It is a tested, proven technology” (Mishak, 2012).
Democrat, Fran Pavley, California state senator was chairwoman of the Committee on Natural Resources and Water when she questioned state regulators about where fracking is being done, how many times is it used and what are the risks. She did not find out very much because the regulators told her no reporting requirements existed in California for fracking. Senator Pavley authored SB 4; the history of the bill began in the Assembly, after that it was sent to the Senate. (See table A-1)
Corporate opinion has been the opposite of environmental organizations. The information on economic benefits are considered a legitimate reason for pursuing fracking in shale; but conflicts have grown due to the environmental concerns weighed against corporate profits and public revenues. “Energy independence and the profit motive is strongly entangled in (the fracking) debate” (Shapiro & Warner, 2014, p. 489)
California Board of Equalization (2014) “Table 34, Resources Surcharges: Energy resources surcharge and gas consumption surcharge revenue, FY 1974-75 to 2012-13.” Board of Equalization (BOA). Retrieved from http://www.boe.ca.gov/annual/2012-13/tables_13/table34_13.pdf
Dettmer, Alison. (2012 April 14). “Briefing on Offshore Fracking and Other Well Stimulation Treatments “ Item W7A, New and Notable, California Coastal Commission, the Energy, Ocean Resources and Federal Consistency division, California Department of Conservation. Retrieved from New and Notable at http://coastal.ca.gov/
Freyman, Monika. (2014 February). “Hydraulic Fracturing and Water Stress: Water demand by the numbers.” Shareholder, Lender & Operator Guide to Water Sourcing. A Ceres Report, CERES. Retrieved from www.ceres.org/shalemaps
Mishak, Michael J. (2012 March 14). “Oil extraction method widely used in California with little oversight” Los Angeles Times. Retrieved from http://sd27.senate.ca.gov/news/2012-03-15-oil-extraction-method-widely-used-california-little-oversight
McMahon, Tim. (2014). “Historical Gas Price Charts.” Inflation Data, retrieved from http://inflationdata.com/articles/historical-gas-price-comparison-chart/
Table A- 1 History of SB 4 (http://leginfo.legislature.ca.gov/faces/billTextClient.xhtml)