An update as the Idaho legislature winds to a close ...

An update on several bills tracked this session by Idaho Council on Industry and the Environment:

H 379:  OIL  AND GAS  The oil and gas severance tax is currently collected and audited by the Oil and Gas Commission while a similar tax is collected by the State Tax Commission. The current tax will not cover the administrative expenses of the oil and gas program.  This bill will allow the State Tax Commission to collect both portion of the severance tax and eliminate the redundant tax collection and enforcement.  It also redirects the general fund portion collected by the State Tax Commission to the Oil and Gas Commission.  The intent is to fund the oil and gas program exclusively from dedicated funds generated by production and permit fees.  Excess funds would be transferred to the general fund.

Passed the House 65-2-3 on 2/14/12; passed the Senate 32-0-3 on 3/8/12; delivered to the Governor on 3/14/12

H460:  OIL ANDGAS WELLS  This bill amends existing code to increase the permit fee for drill permit applications from $100 to $2,000 to cover the additional costs of permitting since there is no production yet to pay for the program.   A fee increase is necessary for the program to become self sufficient and reduce the burden on the general fund.  Fees would be placed into an existing dedicated account for the use of the Commission.

Passed the House 64-3-3 on 2/15/12; passed the Senate 32-0-3 on 3/8/12; delivered to the Governor on 3/14/12

H462: PUBLIC UTILITY REGULATION  The legislation puts the Idaho Public Utilities Commission (IPUC) in charge of safety inspections for the gathering pipelines.  Gathering lines are pipelines and other fixtures used to transport, deliver, or distribute natural gas or crude oil from a well-head to a transmission line or mainline.  IPUC has the program and inspectors because they do safety inspections on main transmission lines. 

Passed the House 67-0-3 on2/15/12; passed the Senate  32-0-3 on 3/8/12; delivered to the Governor on 3/14/12.

H463:  OIL ANDGAS CONSERVATION COMMISSION  The definitions provided in statute are not listed alphabetically and some definitions need revision to be more consistent with current industry standards. The confidentiality of oil and gas well logs currently has no time limit. By changing the confidentiality limitation to one year, other oil and gas operators are can access recent well log data. These changes are consistent with the standards of other states, and are meant to encourage, and promote the development and production of oil and gas in Idaho.  In addition the bill updates the enforcement provisions of the Commission  to give it sufficient authority to conserve oil and gas, protect corrective rights, and prevent the pollution of fresh water supplies more effectively.

Passed the House 64-3-3 on 2/15/12; passed the Senate 32-0-3 on 3/8/12; delivered to the Governor on 3/14/12

H464:  OIL ANDGAS  This legislation updates Idaho’s statutes for oil and gas exploration and production. The changes update the law to align it with currently regulatory standards, protect Idaho’s citizens and clarify the authority of the Oil and Gas Conservation Commission.

This legislation clarifies existing law as follows:

• Provide uniformity and consistency in regulation of oil and gas production in Idaho;

•Clarify the Oil and Gas Conservation Commission’s authority over oil and gas exploration and production;

•Clarify local governments’ role in oversight of the oil and gas industry;

•Provide for mitigation of negative impacts to existing water rights or usable water resources;

•Align the definition of injection wells with the Federal2006 Energy Policy Act.

This was the most controversial of all the measures dealing with the development of natural gas in Idaho.   Those testifying against the bill in committee cited loss of local control as their biggest concern. Under the bill,county ordinances and planning and zoning decisions would be superseded by state control. It passed the House on 2/17/12 and moved on to the Senate.  It survived an attempt in Senate Resource and Environment Committee to send it to the amending order.  The committee sent it to floor with a do pass recommendation.  On 3/9 the Senate voted to send it to the amending order instead. On 3/12 it was returned to the third reading calendar where it passed by a vote of 24-10-1 on 3/14/12.

Following two days of testimony, committee sends oil and gas bill to the Senate

This week, the Senate Resources and Environment Committee’s agenda included five pieces of legislation to regulate Idaho’s nascent oil and gas industry.  These bills passed the House on a 54-13 vote on February 27^th.  As with the hearings on the regulations and inthe House, there was a crowd prepared to testify, many in opposition to the legislation. The hearing began on Wednesday, and continued to Friday to accommodate all those who wanted to speak.

The first bill on the agenda, H464, is meant to clarify existing law to:

• Provide uniformity and consistency in regulation of oil and gas production in Idaho;

•Clarify the Oil and Gas Conservation Commission’s authority over oil and gas exploration and production;

•Clarify local governments’ role in oversight of the oil and gas industry;

•Provide for mitigation of negative impacts to existingwater rights or usable water resources;

•Align the definition of injection wells with the Federal2006 Energy Policy Act.

The chairman cut off the questioning of the presenters infavor of taking input from the public, allowing those from out of town to testify first. Testimony tended to be lengthy, with several objecting to time limits.

Through both sessions of the hearing, those testifying against the bill cited loss of local control as their biggest concern. Underthe bill, county ordinances and planning and zoning decisions would be superseded by state control.  Industry representatives who testified maintained there is considerable local input—in fact, they asserted, more so than in many other states. There was also concern raised about geothermal wells and beneficial uses,and discussion about injection wells.

Another issue raised was that of air quality including references to downwinders, asbestos, birth defects and radon.  The testimony was often emotional even going as far as one person making the point that the residents cannot afford to make campaign contributions or have paid lobbyists as the industry representatives could.

After one of those testifying went to great length to demonstrate that a vote by the Idaho Association of Counties was not proper, an association representative read a letter to clarify the voting process the association used when decided to support the bill. 

After a motion was made to send the bill to the Senate floor with a do-pass, there was extensive discussion by the committee members—even proposing that the bill be held and changes be made to allay some of the concerns brought by those who currently oppose the bill.

At the end of the nearly 4-hour hearing on Friday, the committee voted 6-3 to send the bill to the House floor with a “do pass”recommendation after defeating a substitute motion to send the bill to the amending order.

House Committee Takes on Oil and Gas Legislation.

OnThursday afternoon, the House Resources & Conservation Committee took testimony on several bills dealing with oil and gas exploration.  H462 put the Idaho Public Utilities Commission (IPUC) in charge of safety inspections for the gathering pipelines.  Gathering lines are pipelines and other fixtures used to transport, deliver, or distribute natural gas or crude oil from a well-head to ultimately a transmission line or mainline.  IPUC has the program and inspectors because they do safety inspections on main transmission lines.  There was no one to offer testimony and the committee sent it to the House floor with a do-pass recommendation.

H460 amends existing code to increase the permit fee for drill permit applications from $100 to $2,000 to cover the additional costs of permitting since there is no production yet to pay for the program.   There was no testimony and it was also sent to the House floor with a do-pass.

The next two bills (H463, H379) which updated definitions listed in the code governing oil and gas production and proposed updated penalty amounts; and updated the tax code with applies to oil and gas production also passed by voice vote and without any testimony being offered.

Then came H464 which is meant to clarify existing law to:

• Provide uniformity and consistency in regulation of oil and gas production in Idaho;

•Clarify the Oil and Gas Conservation Commission’s authority over oil and gas exploration and production;

•Clarify local governments’ role in oversight of the oil and gas industry;

•Provide for mitigation of negative impacts to existing water rights or usable water resources;

•Align the definition of injection wells with the Federal 2006 Energy Policy Act.

Rep.Andrus opened questioning by the committee referring to hundreds of e-mails against injection wells and fracking which the committee has received and asked about the injection well issues.  Suzanne Budge with the Idaho Petroleum Council pointed out that Idaho has not been delegated by EPA to administer a Class 2 injection well program  These are regulated by the EPA as outlined in the federal Safe Drinking Water Act.    Committee members asked very specific questions about the legislation dealing with waste water disposal,clarifications of the role of the state and local government in the permitting process; protection of drinking water and then opened the floor to public testimony

Mostof the 25 people signed up to testify opposed to the bill.  Testimony against the bill revolved around lack of local control and short public comment periods under county administrative permitting procedures. The bill was seen as an attempt to short circuit a Washington county ordinance that has not been finalized.  Others felt the language of the bill was vague and set precedents that co-opted local control and local land use planning. 

Commissioners Larry Church and Marc Shigeta from Payette County supported the legislation because,they said, counties do not have the expertise to deal with gas and oil production.  They also pointed out that the bill required notification of county government and sharing of all documents concerned with permitting.  Two commissioners from Washington County opposed the bill.

Many of those who testified so passionately against the bill had also testified passionately against the rules that resulted from the negotiated rulemaking during the summer and fall.  Some had participated in the meetings but others objected that the rules were done without enough stakeholder input.

When one gentleman testified about a specific phase in the legislation as sounding like something that came from communist Russia, a legislator pointed out to him that that particular phrase was not new but has been in that section of Idaho Code for a number of years.

The testimony lasted until 5:00 pm at which time the committee voted unanimously with a voice vote to send the bill to the House floor with a “do pass”recommendation.  And industry pledged to bring legislation next year if corrections were needed.

Senate Resources and Conservation Committee carries over rules on oil and gas industry

Discussion on a pending Department of Lands rule governing the oil and gas extraction industries has been carried over until Monday as all those who signed up to testify at last week’s hearing still may not have had a chance to do so on Wednesday.

Those who were able to testify this week included a number of Idaho citizens who were residents of Payette County and Justin Hayes of the Idaho Conservation League.  Hayes says his organization has concerns about the rules on several levels:

-       Hayes said while appropriate amounts may have been set for an individual well bond, a blanket bonding procedures would allow for economy of scale, which would bring the per well cost down considerably.

-       Fracking fluids remain a concern, which Hayes says make the entire rule untenable.  ICL objects to what they say are fluids with cancer causing chemicals being injected into the ground, regardless of how safe the companies assert the system is.  Disclosure of the exact contents of the fluids is immaterial, Hayes says, as he’s less interested in hearing about exactly what’s being injected, than he is about knowing dangerous compounds don’t have the potential to enter the aquifer.  Merely disclosing a company is going to use them would not preclude them from using them.

"We are in a very interesting spot in Idaho, where we are creating rules from whole cloth since gas has just been discovered here,"   Hayes said.  "In other states the oil and gas industry had a tremendous amount of sway, because the industry has been established.  I don't think we need to be bound to the aspects of rules that aren't so great in other states.  These industries have prevailed in their toxic chemicals rules in other states.  I'd like to see them not prevail here."

Idaho Department of Lands decides on rules governing conservation of crude oil and natural Gas in Idaho.

In mid-May, the Oil and Gas Conservation Commission instructed the IdahoDepartment of Lands to start a negotiated rule making to update the existing rules for recovery of natural gas and oil deposits in Idaho. Those rules had been put in place twenty years ago before the current discovery of potentially economic reserves of gas and oil.  Industry, environmental groups, county governments, individuals and state agencies produced a draft rule which the Commission has accepted and which will be submitted to the 2012 session of the Idaho Legislature for final approval.

On November 15^th, the Commission met to take testimony on the proposed rule and vote on it.

The meeting opened with a presentation by Eric Wilson, Idaho Department of Lands Program Manager-Minerals at the meeting of the Commission, which is made up of the Governor, Secretary of State, Attorney General, Superintendent of Public Instruction, and Controller.

It was time to review the existing rules and the negotiated rulemaking process allowed many stakeholders to be heard.  These rules are useful and usable and will apply to the entire state.

Wilson outlined some of the changes made to the current regulation:

•  Adding a15 day public comment period on applications to drill
• Handling well treatments, called fracturing or fracking, in two sections: application and approval.  Use and disposalof volatile compounds is also regulated.
• Adding pit requirements and surface reclamation measures to protect fresh water;
• Requiring reports of actual amounts of fluids used intreatment of wells (fracturing) as well as notification of treatment anddisposal sites of fluids;
• Increasing bonding amounts and additionalbonding;
• Adding a 3-tiered system for blanket bonds.  Wells that have been inactive for 24 months must have individual bondsrather than be under a blanket bond;
• Adding a new section on surface owner protections that is based on case law throughout the states;
• Updating casing requirements, pit constructionstandards, short and long term standards;
• Class 2 injection wells will no longer beallowed.
• Adding very specific standards on improved wellplugging
• Including new reclamation standards were included.

Testimony included support for the new regulations, pointing out this willbe an economic benefit to the counties and the state.  Others said we need regulations on this activity butdon’t need to regulate the industry out of the state.

Others expressed concern that we were rushing to develop these fossil fueldeposits and needed to take care that we did not leave poisons behind thatwould last for a long time.  Anotherconcern was the issue of lining pits which needs to stay in the rule.  There was support for more work on theblanket bonding section and concern over the use of carcinogenic chemicals inthe fracturing fuels

The commissioners asked several questions about disclosure of ingredients inthe fluid; blanket bonding; the APAprocess and timeline and pointed out that these rules will not be in placeuntil after the Legislature has approved them. The current temporary ruleswould stay in place until then.

Lt. Governor Brad Little, acting as chairman in the absence of the Governor,recused himself because of a potential conflict of interest.  The rest of the commission voted to submitthe pending rule to the Idaho Legislature for approval.

For official rules, see this website: http://adm.idaho.gov/adminrules/rules/idapa20/0702.pdf

Idaho's Oil and Gas Conservation Commission approves temporary rule on fracturing

Some of us discovered that Idaho has an Oil and Gas Conservation Commission during an information hearing on natural gas drilling in Payette County before the Idaho House Environment, Energy & Technology Committee during the legislative session.

Idaho Land Board members, including the Governor, Secretary of State, Attorney General, State Controller and Superintendent of Public Instruction also serve as the State Oil and Gas Conservation Commission. On April 19th they met first as the latter body to discuss issues related to drilling for natural gas in Payette County.

The duties of the Oil and Gas Commission are to prevent waste of natural gas, regulate drilling and review requests for directional drilling. If there are concerns about air quality, dusty roads or sage grouse, those are handled by other agencies such as the Office of Species Conservation, Department of Environmental Quality or the Idaho Public Utilities Commission. At this meeting, the Governor acting as Chairman of the Commission asked those who wished to testify to limit their remarks to the issues which can properly come before the commission, not roads, air quality or sage grouse.

The first order of business was the number of wells per acre that should be permitted. Bridge Energy had requested the spacing be based on one well per 160 acres instead of one well per 640 acres in order to properly capture all the natural gas being sought. After a contested case which required a public hearing, the hearing officer recommended approval of one well per 160 acres.

While there was no opposition stated during the contested case, Melinda Harper, a source water protection specialist with the Idaho Rural Water Association testified that there was no physical printout presented at the original hearing and no technical information for the March 31st meeting was available. She raised concern about the impact on drinking water and asked that the variance not be applied unless more information is presented to those who have concerns.

The Commission adopted the amended rule as recommended by the hearing officer.

The next topic on the agenda was consideration of temporary rules for hydraulic fracturing to establish consistent standards. The Idaho Department of Lands (IDL) modified draft rules to address concerns that had been raised about the process of fracturing or “fracing” as it is known in the industry. The hydraulic fracturing that is being proposed in Payette County is a common process that is generally considered safe. Problems that have been publicized have to do with fracing in large shale and coal methane drilling.

IDL believes this proposed temporary rule meets the state’s needs and that it goes beyond what other states currently have for this type of drilling and fracing. A request for a negotiated rulemaking will be presented at the May commission meeting.

Justin Hayes with Idaho Conservation League participated in the public meeting in Payette County and has visited with concerned members in the New Plymouth area. He presented friendly amendments to protect groundwater quality saying that the temporary rule needs to capture the need to protect ground water quality.

The amendments would prohibit the use of known carcinogens as well as the use of toxic substances that inhibit the human embryo growth and cause fetal mutations. A second amendment would prohibit fracturing that is more than 150 feet. Hayes suggested that we close the door on these items so that they can be discussed during negotiated rulemaking.

He also wanted to amend the temporary rule to require sufficient bonding. ICL wants bonding for each well, bonds for surface disturbances, and bonds for mitigation of ground water contamination. The attorney general questioned the timing of these proposals. ICL did submit proposals which were received and reviewed by IDL

IDL testified that it can use the permitting process to be vigilant until more formal rules are negotiated. How much bonding to require is limited by Idaho Code. Hayes pointed out the IDL is directed by statute to have reasonable performance bonds. Bonding for fracturing and well treatments is included in the bond required by IDL for drilling the wells (either per well or by a blanket bond). IDL responded that a statutory change would be needed to get authority for more bonding.

Diesel fuel is not allowed in fracturing and Bridge will continue to make all the compounds available to the public. Idaho does not allow use of any BTEX or volatile organic compounds

Steve West and Kim Parsons spoke for Bridge Energy. Parsons pointed out that definitions of carcinogenic and other such compounds are unclear. She mentioned that the temporary rule is one of the most restrictive there is at this time. With current rules, Bridge is required to make full disclosure of material used in fracing and the materials must be approved by IDL.

Parsons said Bridge uses the highest quality protection of ground water with liners and berms. The aquifer is protected by two to three layers of cement. The fracing is taking place 1000 fee below the aquifer. Bridge has invited the rest of the industry to come up to the levels of groundwater protection that its uses. Materials used are evaluated under Idaho’s groundwater rules and Bridge uses a number of safety measures and engineering redundancies.

IDL pointed out that the temporary rule was previously amended to answer the concerns of New Plymouth residents.

David Hawk who represents a competitor of Bridge is in favor of the draft temporary rule. From an operation and experience point of view, Bridge is very protective of groundwater. He urged the committee to support the temporary rule and not block the potential for other drilling that is currently held up by the BLM.

Melinda Harper testified again asking that the ingredients used in the fracing be food grade quality on the small chance that something not food grade enters the aquifer.

Justin Hayes said that ICL wants to create sideboards to protect groundwater and ensure that Bridge does what it needs to do to protect it as well.

“We can’t clean an aquifer once it is fouled,” he said.

After further questions of Bride Energy, the commission voted to adopt the temporary rule as recommended by IDL.