* Water a top concern in dry state
* Baseline knowledge of water supplies incomplete
* Oil companies will be required to say where fracking water came from
By Braden Reddall and Rory Carroll
SAN FRANCISCO, Nov 15 (Reuters) - California regulators said on Friday an enhanced monitoring regime for oil and gas production that is part of the state's new fracking regulations would shore up groundwater protection, a top concern in the growing state.
The law, signed by Governor Jerry Brown in September, introduces stringent regulations of hydraulic fracturing as well as of acid injection in anticipation of greater industry efforts to develop the state's vast Monterey shale.
The law will require testing of groundwater around fracking sites starting on Jan. 1, 2014. It also allows property owners in the vicinity of a fracking site to request to have their drinking water independently tested at the well operator's expense.
Hydraulic fracturing, or "fracking," has revitalized U.S. oil and gas production in recent years but also prompted charges that it damages the environment, causes minor earthquakes and contaminates drinking water.
Fracking involves injecting water, chemicals and sand down a well at high pressure to crack the rock and prop the cracks open, releasing oil and gas. Among the chief concerns of environmentalists is that the process contaminates freshwater.
California's Department of Conservation published on Friday proposed regulatory language to implement the new law. One of the measure's key provisions is mandatory monitoring of groundwater in oilfields, said Jason Marshall, the department's chief deputy director.
Fracking is a particular concern in California, an arid state where a growing population and powerful agricultural industry make the politics surrounding water especially intense.
"It's important to note that our existing baseline of knowledge about groundwater quality is somewhat limited," Marshall told reporters on a conference call. "One of the successes in environmental protection is it's going to increase our baseline understanding of groundwater."
Marshall explained that the monitoring would build on the existing protections for California groundwater, which he said were already among the most stringent in the United States.
Tom Howard, executive director of the state's water board, said it was putting together an expert panel to implement the new oilfield monitoring program by 2015. All the information ultimately collected would be posted online, he added.
As for the new well stimulation regulations, they will also eventually require oil and gas producers to report where they obtain their water, officials said. The Department of Conservation will host five public hearings to discuss all the new rules at cities around the state in January.
Enforcement of the rules would inevitably lead to higher costs for the department, officials acknowledged, adding that they would submit a request next June for a budget to reflect that. Current funding comes from an assessment of 14.06 cents for every barrel of oil or 10,000 cubic feet of natural gas produced.
Even before regulations are in place, producers must ensure they are compliant with the new law, and continue to disclose when they inject chemicals for fracking - as they have done voluntarily about 1,000 times in the past year, officials said.