Oil

Friday, Mar 28 2014 12:16 PM

New fracking rules lead to confusion, layoffs

BY JOHN COX Californian staff writer jcox@bakersfield.com

Permitting delays related to California's new hydraulic fracturing law are taking a toll on Kern County oil field employment.

Oil services giant Baker Hughes Inc. said Friday it is laying off or reassigning 110 workers in Bakersfield, Shafter and the Los Angeles Basin -- a modest but significant share of its California workforce, a company manager said -- because of delays its customers face in getting approval to "frack" wells under Senate Bill 4.

Halliburton, another large national company offering fracking services locally, said it will redeploy about 70 California employees to other states but not cut its Kern County workforce. It did not directly blame the move on permitting delays, but said customers' ability to obtain permits is among the main variables affecting its business.

Industry representatives worry the new permitting problems could have a domino effect as delayed frack jobs reduce demand for other services, such as well drilling, that employ thousands of people in Kern.

An environmental group that collaborated on SB 4 was unsympathetic. Andrew Grinberg, oil and gas program manager at environmental activist nonprofit Clean Water Action, said the permitting slowdown indicates regulators are "doing their job."

Though skeptical Baker Hughes' layoffs result from SB 4, Grinberg said meeting the new groundwater protection requirements "should be a cost of doing business in California." He also said companies' inability to comply with the law shows the need for a statewide fracking moratorium.

"Until companies are able to ensure (groundwater) protection, and until our state agencies are able to ensure protection, it doesn't make sense to move forward and put our waterways at risk," he said.

Fracking has been used for decades in Kern County. It injects water, sand and often toxic chemicals underground at high pressure to free up otherwise inaccessible oil and gas deposits. Local oil companies consider it an invaluable tool that carries minimal risk if done properly.

Some grace period for adjusting to the new fracking rules might have been expected as California works to carry out what industry calls the nation's most comprehensive regulations on fracking and other oil and gas well stimulation techniques. Interim rules for complying with SB 4 were introduced late last year; a final version is due by 2015.

"With any new regulatory structure there can be challenges and growing pains associated with it," said Nick Ortiz, production regions manager for the Western States Petroleum Association trade group.

Even so, the recent permitting problems have come as something of a surprise. The state's oil industry generally welcomed SB 4 as a way to provide regulatory certainty on a contentious issue. Not until this week have industry representatives voiced specific concerns about the law or the way its provisions are being carried out.

At least one local politician is getting involved. Assemblyman Rudy Salas, D-Bakersfield, said in a written statement that the permitting trouble bears out his reservations about SB 4.

He sent a letter Friday asking John Laird, secretary of the state Natural Resources Agency, for a meeting to discuss how to resolve the paperwork delays.

"I am interested in learning what criteria the (state) is using and how we can work together to ensure these permits are processed in a timely manner," he wrote.

Under SB 4, oil companies have two options for showing state regulators their proposed frack jobs won't pollute groundwater. They can demonstrate there is no underground water in need of protection near the oil well, or they can outline a plan for monitoring groundwater before and after a fracking job.

But the State Water Resources Control Board, charged with developing groundwater monitoring criteria mandated by SB 4, has not yet done so. It has until July 1, 2015, to finalize the new groundwater monitoring model criteria, and until Jan. 1, 2016, to implement a regional program for such monitoring.

Since SB 4 went into effect Jan. 1, some local oil field operators have had little or no trouble securing fracking permits, while others have not been so fortunate.

The state's top oil regulatory agency says 125 frack job applications, or 33 percent submitted by mostly Kern County oilfield operators since Jan. 1, have been sent back to applicants because they were deemed incomplete.

There was no comparing this number of permits with past years. Until Jan. 1, oil companies could frack in California without having to apply for permission first.

California's Division of Oil, Gas and Geothermal Resources said the 258 approved applications "adequately demonstrated" their fracking plans would not impact protected groundwater. Fifteen of those applications were later withdrawn by the operator, it added.

"In the case of the incomplete notices, the operator either couldn't demonstrate the absence of protected water or lacked a sufficient groundwater monitoring plan," Jason Marshall, chief deputy director of DOGGR's parent agency, the Department of Conservation, wrote in a statement.

He noted that SB 4 calls for groundwater monitoring plans submitted by oil companies wishing to frack to include at least a baseline sampling of the protected groundwater, a sample from that same water source after the fracking or other well stimulation, and a test for certain chemicals listed in SB 4.

"The regulations are clear regarding requirements designed to safeguard public health and safety," Marshall wrote."Submittals that fail to meet such standards cannot be approved. We are in ongoing conversations with operators to identify methods of performing those tasks."

Industry representatives contend, however, that oil field operators still have too little guidance on what constitutes an adequate groundwater monitoring plan.

"A lot of people are just holding off and not submitting applications at all," said Rock Zierman, CEO of the trade group California Independent Petroleum Association.

"They call me and ask, 'What should I submit?' and I say, 'I have no idea, because there's no criteria,'" Zierman said.

DOGGR is the lead agency on the fracking permits but it receives some assistance from the water board. A spokesman for the water board said it has reviewed more than six but fewer than 10 applications, and that it has had more of an advisory role.

Jack Cook, an independent petroleum consultant in Bakersfield, said some of California's larger oil companies have been able to meet SB 4's requirements by drilling large geological core samples that have demonstrated a lack of nearby groundwater needing protection.

He said smaller oil producers don't have the resources to pay for that kind of work.

Grinberg, from Clean Water Action, said expense is no excuse for noncompliance.

"That's a cost that industry should bear," he said.

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