DEPARTMENT OF PETROLEUM AND GAS.

Chapter 718.

An act establishing and creating a department of the state mining bureau for the protection of the natural resources of petroleum and gas from waste and destruction through improper operations in production; providing for the appointment of a state oil and gas supervisor; prescribing his duties and powers; fixing his compensation; providing for the appointment of deputies and employees; providing for their duties and compensation; providing for the inspection of petroleum and gas wells; requiring all persons operating petroleum and gas wells to make certain reports; providing procedure for arbitration of departmental rulings; creating a fund for the purposes of the act; providing for assessment of charges to be paid by operators and providing for the collection thereof; and making an appropriation for the purposes of this act.

[Approved June 10, 1915.]

The people of the State of California do enact as follows:

SECTION 1. A separate department of the state mining bureau is hereby established and created to be known as the department of petroleum and gas. Such department shall be under the general jurisdiction of the state mineralogist. He shall appoint a supervisor who shall be a competent engineer or geologist experienced in the development and production of petroleum and who shall be designated the "state oil and gas supervisor," and whose term of office shall be four years from and after the date of his appointment.

SEC. 2. For his services in the general supervision of said department the state mineralogist shall receive as compensation one thousand four hundred dollars annually which shall be in addition to his compensation fixed in section two of the act of June 16, 1913, relating to the state mining bureau. The supervisor shall receive an annual salary of four thousand five hundred dollars, and shall be allowed his necessary traveling expenses. The state mineralogist may appoint necessary clerks, stenographers, and assistants, and prescribe their duties and fix their compensation, within the amount limited in section forty-six hereof and subject to the civil service laws of the state.

The additional salary herein authorized to be paid to the state mineralogist and the salaries of the supervisor and of the deputies, clerks, stenographers, assistants and other employees shall be paid out of the funds hereinafter provided for at the times and in the manner that salaries of other state officers and employees are paid. SEC. 3. It shall be the duty of the state oil and gas supervisor so to supervise the drilling, operation and maintenance and abandonment of petroleum or gas wells in the State of California, as to prevent, as far as possible, damage to underground petroleum and gas deposits from infiltrating water and other causes and loss of petroleum and natural gas.

SEC. 4. It shall be the duty of the state oil and gas supervisor to appoint not more than four deputies and prescribe their duties, and fix their compensation. Such deputies shall serve during the pleasure of the supervisor. He may also employ an attorney and fix his compensation. The supervisor, the deputies, and the attorney shall not be subject to the civil service act.

SEC. 5. Each deputy appointed by the supervisor shall be a competent engineer or geologist experienced in the development and production of petroleum. Each deputy shall be assigned certain districts or territory, and shall maintain an office in the district, convenient of access to the petroleum or gas operators therein. The office shall be open and the deputy shall be present at certain specified times which shall be posted at such office.

SEC. 6. It shall be the duty of each deputy, to collect all necessary information regarding the oil wells in the district, with a view to determining the presence and source of water in the oil sand, and to make all maps and other accessories necessary

to determine the presence and source of water in the oil sands. This work shall be done with the view to advising the operators as to the best means of protecting the oil and gas sands, and with a view to aiding the supervisor in ordering tests or repair work at wells. All such data shall be kept on file in the office of the deputy oil and gas supervisor of the respective district.

SEC. 7. The records of any and all operators, when filed with the deputy supervisor as hereinafter provided, shall be open to inspection to those authorized in writing by such operators, to the state officers, and to the board of arbitration hereinafter provided for. Such records shall in no case be available as evidence in court proceedings and no officer or employee or member of any board of arbitration shall be allowed to give testimony as to the contents of said records, except at such court proceedings as are hereinafter provided for in the review of the decision of the state oil and gas supervisor, or a board of arbitration, and in criminal proceedings arising out of such records, or the statements upon which they are based.

SEC. 8. It shall be the duty of the supervisor to order such tests or remedial work as is in his judgment necessary to protect the petroleum and gas deposits from damage by underground water, to the best interest of the neighboring property owners and the public at large. The order shall be in written form, signed by the supervisor, and served upon the owner of the well or his local agent, in the manner provided in section eleven hereof. The order shall specify the work necessary to protect such deposits from damage from underground waters. For this purpose each operator or owner shall designate an agent, giving his post office address, who resides within the county where the well or wells are located, upon whom all orders and notices provided for in this act may be served.

SEC. 9. The well owner, or his local agent, may within ten days from date of service of order from the supervisor, file with the supervisor, or his deputy in the district where the property is located, a statement that the supervisor's order is not acceptable and that arbitration of the subject is demanded.

SEC. 10. Arbitration of a question which has been the subject of an order by the supervisor shall be accomplished by a board of three members, as follows: (1) The owner of the well or his local agent shall name one member who shall not be directly or indirectly interested in the property, nor employed in its operation. (2) The owners, or their local agents, of wells within a radius of one mile from the affected well, shall name one member of the arbitration board, who shall not be directly or indirectly interested in the property nor employed in its operation. For this purpose the supervisor shall give written notice to each of the said owners or agents. The notice shall specify the time and place of meeting and the fact that it is for the purpose of choosing an arbitrator. The notice shall be published once in a newspaper of general circulation, published in the county where the meeting is to be held, and posted in a conspicuous place at the office of the deputy supervisor at least five days before the time of meeting, and a copy thereof mailed to each of such owners, or their local agents, at the address given, at least five days before the time of meeting. A majority of those attending such meeting shall be sufficient to choose such arbitrator. (3) The third member of the arbitration board shall be chosen by the other members, but if they fail to choose a third member within ten days after the selection of the first two members then such third member shall be chosen by the state mineralogist, and shall not be directly or indirectly interested in the property, nor employed in its operation. The arbitrators chosen as above specified shall each be paid ten dollars per day for each day of actual service, not to exceed thirty dollars each for any one case, upon warrants drawn upon the repair fund hereinafter created, and approved by the state mineralogist. One-half of the cost of arbitration shall be paid by the person demanding it and the board of arbitration may, at its discretion, order that the entire cost of such arbitration shall be paid by such person if it finds that such arbitration has been demanded needlessly or not in good faith.

SEC. 11. Upon receipt by the supervisor or deputy supervisor of a written complaint, signed by one-third of the individuals or corporations owning land or operating wells within a radius of one mile of any well, or group of wells, the supervisor

must make an investigation of said well or wells and render a written order stating the work required to repair the damage complained of, or stating that no work is required. A copy of such order must be delivered to each of the complainants and, if the supervisor order the damage repaired, a copy of such order shall be delivered to each of the owners, or agents, having in charge the wells upon which the work is to be done. Service of such copies shall be by mailing to such persons at the post office address given. Within ten days after the date of mailing of such order any of such complainants may demand arbitration of the matter as provided in section 10 of this act. When said complaint is made by a single party against a well or wells, of which there is no financially responsible owner, the supervisor may order the necessary repair work, the expense of which shall be a charge against the complainant collectible as provided in section fourteen.

SEC. 12. In any proceedings before the board of arbitration herein provided for, the supervisor shall have the power to subpoena witnesses and to administer oaths; provided, however, that no person shall be required to attend upon such subpoenas, either with or without books, papers, documents or accounts, unless residing within the same county or within thirty miles of the place of attendance, but the supervisor may in such a case cause the deposition of witnesses residing within or without the state, to be taken in the manner prescribed by law for like depositions in civil actions in the superior courts of this state, and to that end may compel the attendance of witnesses and the production of books, papers, and documents at such places as he may designate within the limits herein before prescribed. Witnesses shall be entitled to receive the fees and mileage fixed by law in civil cases. In case of failure on the part of any person to comply with any order of the supervisor, or any subpoena, or upon the refusal of any witness to testify to any matter regarding which he may lawfully be interrogated before the board, it shall be the duty of the superior court or the judge thereof, on application of the supervisor, to compel obedience in the same manner, by contempt proceedings or otherwise, that such obedience would be compelled in a proceeding pending before the court.

SEC. 13. Within ten days after hearing the evidence the arbitration board shall make a written decision ordering such tests or remedial work as is deemed necessary to protect the oil sands from damage by infiltrating water. This written decision shall be served upon the owner or his agent and shall supersede and nullify the previous order of the supervisor provided for in section eight hereof. In case no written decision is made by a board of arbitration within thirty days after the date of notice by the supervisor, as provided in section ten hereof, the order of the supervisor shall be effective and subject only to review by writ of certiorari from the superior court as provided in section fourteen hereof.

SEC. 14. On or before thirty days after the date of serving an order of the supervisor provided for in section eight hereof, or, in case of arbitration, on or before thirty days after date of serving the decision of the board, as provided in sections twelve and thirteen hereof, the owner shall commence in good faith the work ordered, and continue until completion. If the work has not been so commenced and continued to completion the supervisor shall appoint agents as he deems necessary, who shall enter the premises and perform the work. Accurate account of all such expenditures shall be kept and the amount paid from the fund hereinafter created upon the warrant of the state controller. Any amounts so expended shall constitute a lien against the property upon which the work is done. The decision of the board of arbitration or of the supervisor in such a case may be reviewed by writ of certiorari from the superior court of the county in which the district is situated, if taken within thirty days after the signing of the order. If no review is taken or, if taken, the decision of the board is affirmed, the lien upon the property shall be enforced in the same manner that other liens on real property are enforced and shall first be enforced against the owner of the well, against the operator and against the personal property and fixtures used in the construction or operation thereof, and then if there then be any deficiency, against the land upon which the work is done. SEC. 15. It shall be the duty of the owner of any well now drilled, or that may be drilled, in the State of California, on lands producing or reasonably presumed to contain petroleum or gas, to properly case such well or wells, with metal casing, in

accordance with methods approved by the supervisor, and to use every effort and endeavor in accordance with the most approved methods to effectually shut off all water overlying or underlying the oil or gas-bearing strata, and to effectually prevent any water from penetrating such oil or gas-bearing strata.

SEC. 16. It shall be the duty of the owner of any well referred to in this act, before abandoning the same, to use every effort and endeavor in accordance with methods approved by the supervisor, to shut off and exclude all water from entering oil-bearing strata encountered in the well. The owner shall give written notice to the supervisor, or his local deputy, of his intention to abandon any well and the date when such work of abandonment shall begin. The notice shall be given to the supervisor, or his local deputy, at least fifteen days before such proposed abandonment. The owner shall furnish the supervisor, or his deputy, with such information as he may request, showing the condition of the well and proposed method of abandonment. The supervisor, or his deputy, shall before the proposed date of abandonment furnish the owner with a written order of approval of his proposal or a written order stating what work will be necessary before approval, to abandon, will be given. If the supervisor shall fail within the specified time to give the owner a written order such failure shall be considered as an approval of the owner's proposal to abandon the well.

SEC. 17. The owner of any well referred to in this act shall, before commencing the work of drilling an oil or gas well, file with the supervisor, or his local deputy, a written notice of intention to commence drilling. Such notice shall also contain the following information: (1) Statement of location and elevation above sea level of proposed derrick and drill rig. (2) The number or other designation by which such well shall be known, which number or designation shall not be changed after filing notice provided for in this section, without the written consent of the supervisor being obtained therefor. (3) The owner's estimate of the depth of the point at which water shall be shut off. (4) The owner's estimate of the depth at which oil or gas producing sand or formation shall be encountered. The provisions of this section shall also apply, so far as may be, to the deepening or redrilling of any well. SEC. 18. It shall be the duty of the owner of any well referred to in this act, to keep a careful and accurate log of the drilling of such well, such log to show the character and depth of the formations passed through or encountered in the drilling of such well, and particularly to show the location and depth of the water-bearing strata, together with the character of the water encountered from time to time (so far as ascertained) and to show at what point such water was shut off, if at all, and if not, to so state in such log, and show completely the amounts, kinds and size of casing used, and show the depth at which oil-bearing strata is encountered, the depth and character of same, and whether all water overlying and underlying such oil-bearing strata was successfully and permanently shut off so as to prevent the percolation or penetration into such oil-bearing strata; such log shall be kept in the local office of the owner or operator and subject to the inspection of the supervisor or any of his deputies at any time during business hours, and a copy of said log shall be filed with the deputy supervisor immediately upon the completion of said well and also a complete copy shall be filed with the deputy supervisor upon the completion of any additional work upon the well. The owner of any well drilled previous to the enactment of this act shall furnish to the supervisor a complete and correct log of such well, so far as may be possible, together with a statement of the present condition of said well.

SEC. 19. It shall be the duty of the owner of any well referred to in this act to notify the deputy supervisor of the time at which the owner shall test the shut-off of water in any such well. Such notice shall be given at least five days before such test. The deputy supervisor shall be present at such test and shall himself note in the log book the result thereof. If any test shall be unsatisfactory to him he shall notify the owner of that fact.

SEC. 20. It shall be the duty of every person, association or corporation, producing oil in the State of California, to file with the supervisor at his request but not oftener than once in each month a sworn statement of the amount of oil

produced, during the period indicated, its gravity and the number of wells drilling, producing, idle, or abandoned. This information shall be in such form as the supervisor may designate.

SEC. 21. Any owner or operator of a well referred to in this act, or employee thereof, who refuses to permit the supervisor, or his deputy, to inspect the same, or who wilfully hinders or delays the enforcement of this act, and every person, firm, or corporation, who violates any provision of this act, is guilty of a misdemeanor and shall be punishable by a fine of not less than one hundred dollars, or by imprisonment in the county jail for not less than thirty days, or by both such fine and imprisonment.

SEC. 22. Charges levied, assessed and collected as hereinafter provided upon the properties of every person, firm, corporation or association operating any oil well or wells for the production of petroleum in this state, or operating any well or wells for the production of natural gas in this state which gas wells are situate in counties having producing petroleum wells chargeable under this act, and on lands situate within two miles, as near as may be, of any petroleum or gas well the production of which is chargeable under this act, shall be used exclusively for the support and maintenance of the department of petroleum and gas herein before created, and shall be assessed and levied by the state mineralogist, and collected in the manner hereinafter provided.

SEC. 23. Every person, firm, corporation or association operating any petroleum well or wells in this state shall annually pay a charge to the state treasurer at a uniform rate per barrel of petroleum produced for the preceding calendar year at the time and in the manner hereinafter provided, based upon a verified report as herein provided.

SEC. 24. Every person, firm, corporation or association operating any gas well or wells in this state shall annually pay a charge to the state treasurer based upon the amount of gas sold in the preceding calendar year at a fixed rate per thousand cubic feet, which rate shall be based upon the proportionate benefits resulting to the property so assessed by reason of the expenditures made under this act, in the county, in which each such well is located. Said charge shall be based upon a verified report as herein provided; provided, further, that no charges shall be assessed, levied, or collected from any person, firm, corporation, or association operating a gas well or wells in any county in which there exist no producing petroleum wells to be assessed under the provisions of this act.

SEC. 25. Every person, firm, corporation or association owning any oil land, as determined by the supervisor, shall annually pay a charge to the state treasurer at the time and in the manner hereinafter provided, which charge shall be a uniform rate per acre. Said charge shall be based upon a verified report as provided herein; provided, however, that such lands so assessed shall not be called upon to pay more than one-tenth of the total charges or moneys proposed to be assessed, levied and collected under the provisions of this act for any one year.

SEC. 26. The charges assessed, levied and to be collected under the provisions of this act shall be in addition to any and all charges, taxes, assessments or licenses of any kind or nature paid by or upon the properties assessed hereunder.

SEC. 27. The state mineralogist shall annually, on or before the first Monday in March, acting in conjunction with the state board of control, make an estimate of the amount of moneys which shall be required to carry out the provisions of this act.

SEC. 28. The state mineralogist shall prescribe the form and contents of all reports for making the charge or other purposes to carry out the intent and provisions of this act, which form shall be mailed in duplicate to the person, firm, corporation or association owning property or assessed under the provisions of this act.

SEC. 29. Every person, firm, corporation or association chargeable under the provisions of this act, shall within ten days after the first Monday in March of each year, report to and file with the state mineralogist, a report in such form as said officer may prescribe, giving any and all items of information as may be demanded by said report, and necessary to carry out the provisions of this act, which