California’s Top Oil Regulator on Fracking, Climate Change, and Fossil Fuels

Concerns about fracking, including in this oil field in the Southwestern Los Angeles neighborhood of Baldwin Hills, triggered the state to pass a law regulating the practice last month.
National Journal
Amy Harder
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Amy Harder
Oct. 16, 2013, 8:27 a.m.

Gov. Jerry Brown, a Demo­crat, leads the eighth-largest eco­nomy in the world, and this power­house is wad­ing in­to the na­tion­al de­bate over hy­draul­ic frac­tur­ing, the oil and nat­ur­al gas boom, and what it means for the eco­nomy and en­vir­on­ment. Mark Necho­dom, who as the state’s De­part­ment of Con­ser­va­tion dir­ect­or is Brown’s top oil and nat­ur­al gas reg­u­lat­or, re­cently spoke with Na­tion­al Journ­al about the state of the en­ergy play in the Golden State. Ed­ited ex­cerpts of the in­ter­view fol­low.

What was the im­petus be­hind the re­cently en­acted law reg­u­lat­ing hy­draul­ic-frac­tur­ing activ­it­ies?

The broad­er pic­ture all across the coun­try as you’ve now seen is that there is great in­terest, which starts with frack­ing, but it broadens out to how oil and gas ac­tu­ally work and the po­ten­tial en­vir­on­ment­al im­pact.

In Cali­for­nia it has been used for 60 years, and act­ively used for 40 years, and in Cali­for­nia there has been not one re­cord of re­por­ted dam­age dir­ectly to the use of hy­draul­ic frac­tur­ing. But des­pite that, giv­en the great na­tion­wide wave of con­cern, we at the De­part­ment of Con­ser­va­tion are treat­ing this as an op­por­tun­ity to again em­brace pub­lic de­mand for know­ledge and trans­par­ency, and this is an op­por­tun­ity for people to learn where their oil comes from, just the same way we want to teach people where their milk and wa­ter come from.

It is in­ac­cur­ate to say “¦ that hy­draul­ic frac­tur­ing stim­u­la­tion is not mon­itored or not reg­u­lated. That’s simply just not true.

It is a reg­u­lated activ­ity in the sense we reg­u­late all activ­it­ies that are done in the drilling and com­ple­tion of an oil and gas well. From the reg­u­lat­or per­spect­ive, hy­draul­ic frac­tur­ing stim­u­la­tion is one of sev­er­al activ­it­ies that take place in the op­er­a­tion of a well or in­creas­ing the pro­ductiv­ity of a well.

But we are not dis­missive about this. In the year and a half or year and three quar­ters in this po­s­i­tion after be­ing ap­poin­ted in Janu­ary 2012, I’ve learned an enorm­ous amount about the oil and gas in­dustry and have been in­tim­ately edu­cated about their prac­tices in the field. And from my per­spect­ive, it is something that is done safely.

People don’t even real­ize Cali­for­nia is an oil pro­du­cer, let alone that it’s the fourth largest oil and gas pro­du­cer in the coun­try. Most people know noth­ing about Cali­for­nia’s oil and gas in­dustry. To sud­denly get all con­cerned about one par­tic­u­lar activ­ity is a little out of pro­por­tion. I’m not be­ing dis­missive about this. Let’s treat this as an op­por­tun­ity.

How do you re­spond to the cri­ti­cism the law faces from en­vir­on­ment­al­ists who say it’s watered down and doesn’t even start re­quir­ing dis­clos­ure of frack­ing activ­it­ies un­til 2015?

I simply dis­agree. It’s not been watered down. It was the best they could do.

How com­mon is frack­ing now in Cali­for­nia? I’ve got­ten a wide range of an­swers on this ques­tion. Does the fact that the prac­tice isn’t reg­u­lated make that ques­tion dif­fi­cult to an­swer?

By our count, be­cause of the vol­un­tary re­port­ing re­quire­ment that we put in place over a year ago, we might see around 650 hy­draul­ic frac­tur­ing jobs a year. We is­sue between 2,000 and 3,000 drilling per­mits a year. Not every well is fracked when it’s drilled and com­pleted. Some of the hy­draul­ic frac­tur­ing jobs are done on wells 10-20 years old. As we get the emer­gency reg­u­la­tions or wheth­er we use emer­gency reg­u­la­tions or com­pli­ance with S.B. 4 [the frack­ing law] as of Janu­ary 1 this com­ing year, we will have really be­gun ac­cu­mu­lat­ing data on well stim­u­la­tion. That data will give us a lot more ac­cur­ate pic­ture of how much is go­ing on.

Tell me more about the vol­un­tary re­port­ing.

In the first 60 days [of my ten­ure], it was quite clear the le­gis­lature had a much dif­fer­ent pic­ture in their minds of the im­port­ance of reg­u­la­tions of hy­draul­ic frac­tur­ing. So lit­er­ally with­in 90 days of my ten­ure we put out a no­tice to op­er­at­ors re­quest­ing that they vol­un­tar­ily re­port hy­draul­ic frac­tur­ing jobs on [the in­dustry-run web­site] Frac­Fo­cus. The reas­on it was vol­un­tary is we can­not or­der people to do something without go­ing through the rule­mak­ing pro­cess. There was no sense in do­ing a form­al rule-mak­ing to do re­port­ing. So we asked to vol­un­tar­ily re­port, and the in­dustry stepped up. They star­ted to re­port and went back in his­tory and re­cor­ded all of their frac­ture jobs back to 2007.

Was there any re­port­ing be­fore this?

No. There didn’t ap­pear to be any need to.

From reg­u­lat­ors’ point of view, en­gin­eers in the field ask them­selves: “Is there an activ­ity go­ing on that rises to the level of risk that war­rants a level of mon­it­or­ing?” And quite frankly, for 40 years the di­vi­sion didn’t see hy­draul­ic frac­tur­ing as something that was a spe­cif­ic event of high risk, like for ex­ample every blo­wout pre­ven­tion equip­ment test will be wit­nessed by one of our en­gin­eers be­cause a fail­ure from our point of view is a very cata­stroph­ic event.

So we do re­port all of that, and it’s all in there in [the] elec­tron­ic well. It’s risk-based. Since we had not seen hy­draul­ic frac­tur­ing as a high-risk activ­ity com­pared to oth­er things done in the oil patch, it was not re­por­ted.

Do you think the per­cep­tion people have on frack­ing has out­grown the spe­cif­ics of the ac­tu­al drilling tech­nique it­self?

I do. I think it’s le­git­im­ate for us as the reg­u­lat­ors to ap­ply sci­ence and risk man­age­ment to the per­cep­tion, and we’ll sort it out. Look at it 10 years down the road, after strong re­port­ing re­quire­ments, and I think my sus­pis­cion will be that we dis­cov­er we have been do­ing pretty well. Right now that’s a work­ing hy­po­thes­is. I can’t tell you based on data.

How do you re­spond to the en­vir­on­ment­al and pub­lic-health con­cerns about an­oth­er well-stim­u­la­tion prac­tice called acid­iz­ing, which puts large amounts of hy­dro­fluor­ic or hy­dro­chlor­ic acid down wells?

We must be care­ful with some of the terms here. Acid­iz­ing is a term that’s gen­er­ated from the en­vir­on­ment­al com­munity con­cern; it’s not ne­ces­sar­ily an in­dustry term. We’re us­ing hy­dro­fluor­ic or hy­dro­chlor­ic acid at some per­cent­age, about 15 per­cent con­cen­tra­tion.

There are dif­fer­ent ways of us­ing acids. Most of the use of acid in the oil patch is for routine main­ten­ance, like dis­solv­ing min­er­als around the well bore.

We’re now by reg­u­la­tion go­ing to set the line so you’re not go­ing to reg­u­late stand­ard main­ten­ance and cleanup, but we will reg­u­late any time a treat­ment is to change that per­meab­il­ity of the rock form­a­tion, geo­logy around the well.

You re­cently said, without hes­it­a­tion, that Gov­ernor Brown un­equi­voc­ally sup­ports frack­ing. Why such an easy, clear-cut an­swer amid the en­vir­on­ment­al con­cerns?

What the gov­ernor has said is here we have tech­nique — wheth­er it’s frack­ing or well-stim­u­la­tion of any kind — and we have two-thirds of the known re­serves of oil shale de­pos­its in the United States, and we should sens­ibly be pro­du­cing that. It’s an enorm­ous op­por­tun­ity for the state to de­vel­op eco­nom­ic­ally, and he [Brown] has said it needs to be well reg­u­lated.

He placed his trust in me, my di­vi­sion, to get this stuff right. And I come from a sci­entif­ic back­ground: Ph.D. in en­vir­on­ment­al policy and polit­ic­al sci­ence, done hard sci­ence for years in the fed gov­ern­ment. I have a pretty good sci­ence nose, and I am com­mit­ted to us­ing good sol­id sci­ence and evid­ence-based rule­mak­ing. That’s why I’m not par­tic­u­larly wor­ried, be­cause I’m not go­ing to let some sloppy work go by so the in­dustry can make a lot of money.

What can Cali­for­nia teach the rest of the coun­try about oil and nat­ur­al gas reg­u­la­tions?

We ac­tu­ally have much more strin­gent stand­ards than many states. I’m al­ways very cau­tious, be­cause I cer­tainly don’t want to cri­ti­cize oth­er states and their reg­u­la­tions, and don’t want to do the stand­ard [talk] of Cali­for­nia ex­cep­tion­al­ism. It’s not my style.

Can you talk about Cali­for­nia’s par­al­lel tracks of oil and nat­ur­al gas paired with one of the largest and most am­bi­tious re­new­able-en­ergy mar­kets in the world? How can these two tracks co­ex­ist? Do you find them con­flict­ing or can they be com­ple­ment­ary?

They are cer­tainly not con­tra­dict­ory. The real­ity is 96 per­cent of en­ergy con­sump­tion in Cali­for­nia has something to do with hy­dro­car­bons. Re­new­ables, if you don’t count hy­dro power in Cali­for­nia, it’s still some­where between 2, 3, or 4 per­cent. Get­ting to 30 per­cent is just in­cred­ibly im­port­ant, and I my­self come from re­new­able en­ergy bio­mass/eco­sys­tems for many years.

I know it’s a cliché, but this gov­ernor is very much aligned with an all-of-the-above strategy. “The real­ity is, civil­iz­a­tion is about the con­cen­tra­tion of en­ergy, and right now hy­dro­car­bons are our most abund­ant and eco­nom­ic re­sources. But if we are not in the longer-term work­ing on the trans­ition to a lower car­bon in­tens­ity, what are we do­ing? I’ve had that po­s­i­tion for years, and that’s why I’ve worked act­ively on the fed­er­al cli­mate bill. We need to move to some oth­er way of power­ing our eco­nomy.”

What about tap­ping in­to the Monterey Shale and its po­ten­tial im­pact on cli­mate change? Will frack­ing un­lock this form­a­tion?

There is no reas­on to as­sume that frack­ing is the key to the Monterey shale. There’s a big as­sump­tion that some­how the Monterey is sud­denly go­ing to be avail­able be­cause of frack­ing. [The oil in­dustry is] ac­tu­ally less san­guine than the rest of the world be­cause they’re the ones that are go­ing to have to make the in­vest­ments.

But by pro­du­cing more fossil fuels, does this make com­batting cli­mate change harder?

You can’t blame the pet­ro­leum in­dustry for the eco­nomy’s de­pend­ence on hy­dro­car­bons. That’s like blam­ing the dairy in­dustry for kids be­ing de­pend­ent on milk for cal­ci­um. The de­mand is there, it’s an im­port­ant form of en­ergy, and we will do it with a lower en­vir­on­ment­al foot­print.

How has the Cali­for­nia oil in­dustry evolved over the years? Have you no­ticed an up­ward trend in pro­duc­tion in re­cent years? What is this be­ing fueled by?

The ab­so­lute num­bers we are pro­du­cing less in the state of Cali­for­nia than we were in the 1970s and ‘80s—that’s in sheer bar­rels of oil. Right now, last year’s pro­duc­tion was 196 bil­lion bar­rels. If someone finds keys to the Monterey Shale that very likely will go up.

Is oil pro­duc­tion in­creas­ing already in Cali­for­nia, ir­re­spect­ive of the Monterey Shale?

It is true. With the sweet spot in the in­dustry at about a hun­dred dol­lars a bar­rel — sweet spot mean­ing it’s enough to make a lot of re­serves eco­nom­ic­al to get at it — it’s enough to stim­u­late a fair amount of in­vest­ment for R&D for [en­hanced oil re­cov­ery tech­niques, in­clud­ing frack­ing and dir­ec­tion­al drilling].

With the like­li­hood of oil stay­ing at $100 a bar­rel or more, we will likely see an in­crease in both the re­search and de­vel­op­ment and the pro­duc­tion side.

Un­der cur­rent tech­no­lo­gies, the es­tim­ate is on av­er­age from a reg­u­lar oil-bear­ing reser­voir, that they [the oil com­pan­ies] will be able to tap 30 per­cent of the oil in that reser­voir. With EOR of vari­ous kinds, that can go to 50 per­cent or 70 per­cent. That’s great­er in­vest­ment, takes en­ergy for EOR, that is.

As reg­u­lat­ors, we want to watch trends and tech­no­logy in­vest­ments so we are aware of what we need to put un­der our pur­vey. Wheth­er it’s reg­u­lat­ing a new prac­tice or un­der­stand­ing bet­ter how it works in the oil patch. For the most part our en­gin­eers are ex­tremely well-trained, for the most part I think we have a pretty good handle.

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