1. Hydraulic Fracturing under Senate Bill 4

2. Senate Bill 4 - Approved September 20, 2013. - Requires a permit to conduct a well stimulation treatment, such as hydraulic fracturing, acid fracturing, or acid matrix stimulation. 2

3. Senate Bill 4 - Interim provisions effective on January 1, 2014. - Permanent Regulations effective on July 1, 2015. - Requires completion of Statewide EIR and Independent Scientific Study on Well Stimulation activities. 3

4. Senate Bill 4 SB 4 includes regulations on: - Well Construction and Casing Integrity - Geologic and Hydrologic Isolation - Neighbor Notification & Sampling Plans - Groundwater Monitoring Plans - Water Management Plans - Public Disclosures - List of Constituent & Trade Secrets 4

5. Enhanced Oil Recovery Techniques - Regulated under the UIC program – part of the federal SDWA. - UIC Program requires detailed engineering study, geologic study and injection plan. - UIC Program is predicated on confinement of injection fluid to the intended zone or zones of injection. 5

6. Comprehensive Regulation The Public Resources Code address operational issues in detail, including notices of intent to drill and abandon (§ 3202, 3229); bonding (§§ 3204-3207); abandonment (§ 3208); recordkeeping (§§ 3210-3216); blowout prevention (§ 3219); casing (§ 3220); protection of water supplies (§§ 3222, 3228); repairs (§ 3225); regulation of production facilities (§ 3270); waste of gas (§§ 3300- 3314); subsidence (§ 3315); well spacing (§§ 3600-3609); unit operations (§§ 3635-3690); and regulation of oil sumps (§§ 3780- 3787) 6

7. Hydraulic Fracturing in California - 96% of hydraulic fracturing operations were in the San Joaquin Basin of Kern County in 2012 through 2013. - 85% of these operations were in just the four fields of South and North Belridge, Lost Hills, and Elk Hills. Cal. Council on Science and Technology, January 2015, An Independent Scientific Assessment of Well Stimulation in Cal. 7

8. Hydraulic Fracturing in California - Shallower wells that are vertical or near vertical as opposed to horizontal. - Shorter treatment intervals than the long-reach wells in other states. - Fracturing operation require much less water per well Cal. Council on Science and Technology, January 2015, An Independent Scientific Assessment of Well Stimulation in Cal. 8

9. No Risk of Induced Seismicity “Hydraulic fracturing rarely involves large enough volumes of fluids injected at sufficient rate to cause induced seismicity of concern. Current hydraulic fracturing for oil and gas production in California is not considered to pose a significant seismic hazard.” - Cal. Council on Science and Technology, Aug. 28, 2014, Advanced Well Stimulation Technologies in Cal. 9

10. No Risk of Groundwater Impacts 10 - Sept. 15 study by the Department of Energy: no migration to groundwater - Duke study published on Sept. 15 in the Proc. of Nat’l Academy of Science: well construction not fracking - A Sept. 2014 study in the Journal of Unconventional Oil & Gas Resources: no risk to groundwater from wastewater injected from drilling operations

11. Pitfalls of Municipal Prohibitions On Stimulation Activities - Preemption - Unconstitutional Taking - Overbreadth 11

12. Preemption - Interference with comprehensive, carefully calibrated regulatory scheme (field) - Prohibitions or moratoria ban an activity expressly permitted by the State (conflict) 12

13. Exclusive State Authority “ Where the statutory scheme or Supervisor specifies a particular method, material or procedure by a general rule or regulation or gives approval to a plan of action with respect to a particular well or field or approves a transaction at a specified well or field, it is difficult to see how there can be any room for local regulation.... We observe that these statutory and administrative provisions appear to occupy fully the underground phases of oil and gas activity.” 59 Ops. Cal. Atty. Gen. 461, 478 (1976) 13

14. Unconstitutional Taking “[N]or shall private property be taken for public use without just compensation.” U.S. Constitution, Amend. 5. 14

15. Unconstitutional Taking Just compensation must be paid where the regulation interferes with the property owner’s “primary expectation” and whether it “permit[s the property owner] to profit [and]... to obtain a ‘reasonable return’ on... investment.” Penn Central Transp. Co. v. New York City, 438 U.S. 104, 125, 136 (1978). 15

16. Unconstitutional Taking “Unlike other nonconforming uses of property which operate within an existing structure or boundary, mining uses anticipate extension of mining into areas of the property that were not being exploited[.] [T]his extension is [not] a prohibited expansion of a nonconforming use... under the ‘diminishing asset’ doctrine, an exception to the rule banning expansion of a nonconforming use....” Hansen Bros. Enters. v. Bd. of Supervisors, 12 Cal.4th 533, 551–52 (1996). 16

17. Overbreadth - Municipal ordinances prohibiting well stimulation treatments such as fracking are subject to a facial challenge for overbreadth. - Operators have a right to certainty as to the legal status of their operations. - City Council is not suitable to adjudicate constitutional issues. - City has the obligation to defend Measure A against litigation and other challenges. 17