This is the third update on environmental regulatory and legal developments in Los Angeles and adjacent counties, as well as the Southern San Joaquin Valley.  We welcome your comments and updates.

South Coast Air Quality Management District

*Governing Board Shift:  New Governing Board Member Sheila Kuehl replaced Mike Antonovich, returning the Board to a Democratic Majority.  Ms. Kuehl calls upon the South Coast Air Quality Management District (District) to use its full regulatory power, and she has strong ties with the California Legislature.  New emphases now include further regulations of stationary facilities, such as warehouses and shopping malls that are considered “indirect sources” of air emissions because they attract emissions from cars and trucks, as well as a termination of the RECLAIM Program.  Questions on the latter include when (2025, 2023, 2031?), treatment of credits from shutdowns, and how companies that invested in long-term credits will be dealt with.  In addition, the District wants to achieve the NOx shave under RECLAIM and at the same time sunset the Program.  Collaterally, the District is pushing the California Air Resources Board (CARB) and US EPA to do their “fair share” to regulate mobile sources so that further efforts to improve air quality will not be piled on the backs of stationary businesses.

*SCAQMD’s 2016 Air Quality Management Plan (AQMP):  After approval by the AQMD Governing Board on February 3, 2017, with substantial tightening amendments proposed by Members Kuehl and Mitchell, the Plan was approved in March by the CARB and is on its way to US EPA.  Despite the District’s calculation that 88 percent of ozone (smog)-forming emissions come from mobile sources, the push continues to be tougher on stationary source industries.  The Plan has been described as an effort to cut smog by 50 percent in 7 years.  Under the AQMP process, the District commits every 4 years to reducing certain tons of emissions per day for identified business sectors.  After approval by the CARB and the US EPA, these commitments become binding on those business sectors.  Over many years, stationary businesses have been squeezed again and again.  The proposed plan relies heavily on a large amount of financial incentives to achieve reductions.

*Communities for a Better Environment (CBE), et al. v. SCAQMD, Los Angeles County Superior Court Case No. BS161399 (filed March 9, 2016).  CBE and the Center for Biological Diversity (CBD) challenge SCAQMD Governing Board’s December 4, 2015 adoption of RECLAIM amendments (12 ton NOx shave instead of 14 tons).  The hearing on the Writ of Mandate is set for June 7 , 2017 in Department 96 at 111 N. Hill Street (90012).

*Rule 219 (Equipment Not Requiring a Permit) & Rule 222 (Filing Requirements for Equipment Not Requiring a Permit) These rule amendment proposals follow on the heels of the March 23, 2017 CARB adoption of its Methane Rule.  The District’s proposed amendments are set for hearing on May 5, 2017 and amendments to Rule 219 are expected to remove exemptions from permits for certain small and other emitting equipment.

* Proposed Rule 1148.3 (Requirements for Oil and Gas Wells and Commercial Suppliers) is set for Governing Board hearing on May 5.  The current version is limited to underground storage of natural gas, which is a response to the Aliso Canyon leak.

*Additional AQMD Rulemaking Activity is substantial, including: Proposed Amended Rule 301 (fees) would increase permit and other fees by 4% CPI this year plus an additional 4% for non-Title V facilities and 16% for Title V facilities for each of the next 2 years.  Proposed Rule 1118.1 would extend controls on refinery flares to oil and gas production flares.

California Air Resources Board:

*CARB Methane Rule:  Adopted March 23, 2017, the rule will require reporting of methane emissions from smaller greenhouse gas (GHG) sources, i.e., those over 10,000 metric tons of CO2 equivalent emissions (toward compliance with AB32 GHG reduction targets of 40% by 2030) and impose a more rigorous leak detection and repair (LDAR) regimen on regulated facilities.  The rule does not clarify whether compliance with an SCAQMD or other LDAR program will suffice for compliance, and to date CARB has not provided guidance on this question. The Rule also includes regulation of idle oil and gas wells.  Deadline for compliance is January 1, 2018.

*CARB Cap and Trade and Mandatory Reporting of Greenhouse Gas Emissions Regulations (MRR) go to the CARB in June.  MRR will require not only flash liberation testing but also bubble point testing.  Industry Assistance levels – Cap and Trade credits for existing businesses – remain a major issue.  The decision has been deferred on post-2020 industry assistance.  On April 6, 2017, the California Court of Appeal for the 3rd Appellate District (Sacramento) held that “the cap-and-trade auction program is not a tax because (1) the purchase of auction credits by businesses is voluntary, (2) the purchasing entities receive “a thing of value” in the nature of a commodity by their purchase, that is, the right to pollute the air and (3) we need not be concerned in this appeal about the use of the auction proceeds.”  (California Chamber of Commerce et al. v. State Air Resources Board, Case No. C075930.)  An attorney for Plaintiff Pacific Legal Foundation remarked, “It’s kind of like saying state income taxes are voluntary because you can always move out of the state,” referring also to the dissenting opinion of Justice Harry Hull.

Los Angeles City Council and County Board of Supervisors:

*Motion by Council Member Herb Wesson to increase setbacks for oil and gas production:  On April 19, Council President Wesson introduced a motion for study to eliminate oil and gas production near homes, schools and certain other facilities.  The motion does not specify the potential setbacks, but calls for a report to the Council within 90 days by the the Department of City Planning, with the assistance of the city attorney and the city’s petroleum administrator, with an analysis of possible changes to the city’s zoning code that drilling operations be located within “a certain setback proximity” of residential facilities.  Rock Zierman, CEO of the California Independent Petroleum Association, stated that this approach could impose substantial economic burdens on oil and gas producers in Los Angeles – including taking of private property – where environmental standards for drilling are already the toughest in the nation, if not the world.

*Los Angeles County Strike Team:  The LA County Board of Supervisors appointed a strike team one year ago for unincorporated LA County to initially review a full inventory of wells and governing regulations.  Recently, the Team released its second report, which found little environmental impact from oil and gas production in these areas. The Supervisors’ appointed advisory panel, substantially represented by environmental activists, expressed dismay at this conclusion and called for full time air monitoring, interviewing neighbors, setbacks and more.  The Strike Team’s final report will go to the Board of Supervisors in September or October 2017, with final recommendations.

*Clean Up Green Up: The LA City Council adopted the “CUGU” ordinance on April 12, 2016.  It imposes stringent requirements on siting or expanding businesses in Boyle Heights, Wilmington and Pacoima.  The Council may impose CUGU on other LA neighborhoods and the LA County Board of Supervisors is proposing to extend “CUGU” to the entire county, but not much activity if any has been heard in the past several months.

*City of LA hydraulic fracturing moratorium is still pending, but momentum toward its adoption has slowed down.  By its broad definition of hydraulic fracturing, the proposed ordinance would, in fact, shut down all oil and gas operations, not just hydraulic fracturing.

*City of LA Petroleum Administrator:  Uduak-Joe Ntuk has been appointed Petroleum Administrator for the City.  He has a broad background, including work in the petroleum industry, and also a very broad set of responsibilities.  He is a petroleum engineer with a Masters of Science in petroleum engineering from the University of Southern California.  It is expected that the City Council will continue to closely manage issues related to O&G production and will probably not grant Mr. Ntuk authority commensurate with his responsibility.

Water Issues:

*Aquifer Exemptions for the San Joaquin (Central) Valley:  Exemptions allowing injection of water produced from oil and gas production are delayed, yet faced a February 2017 deadline over which the regulators were resolutely firm.  The deadline passed yet no production has been shut-in because of an injunction issued by the Kern County Superior Court in the case brought by the California Independent Petroleum Association and the Western States Petroleum Association against the California Department of Conservation, Division of Oil, Gas and Geothermal Resources (Kern County Superior Court Case No. BCV-17-100128).  Exemptions are required for injection unless the aquifer has over 10,000 parts per million of TDS (total dissolved solids) or the aquifer has already been exempted.

*Surface Impoundments for Oil & Gas Production:  Both the Central Valley and the Los Angeles Regional Water Quality Control Boards issued directives in early 2016 requesting information about “surface impoundments” – discharges of produced water to land, including sumps whether operated or not.  The State Water Resources Control Board gave its approval on April 6, 2017 and a study, expected to show no impacts on the environment or agriculture was released this past week.