BILL ANALYSIS                                                                                                                                                                                                    Ó



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          SENATE THIRD READING
          SB 705 (Leno)
          As Amended  September 1, 2011
          Majority vote

           SENATE VOTE  :30-7  
           
           UTILITIES & COMMERCE             13-2               
          APPROPRIATIONS      17-0        
           
           ----------------------------------------------------------------- 
          |Ayes:|Bradford, Fletcher,       |Ayes:|Fuentes, Harkey,          |
          |     |Buchanan, Fong, Fuentes,  |     |Blumenfield, Bradford,    |
          |     |Furutani, Roger           |     |Charles Calderon, Campos, |
          |     |Hernández, Williams, Ma,  |     |Davis, Donnelly, Gatto,   |
          |     |Nestande, Skinner,        |     |Hall, Hill, Lara,         |
          |     |Swanson, Valadao          |     |Mitchell, Nielsen, Norby, |
          |     |                          |     |Solorio, Wagner           |
          |-----+--------------------------+-----+--------------------------|
          |Nays:|Beth Gaines, Knight       |     |                          |
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           SUMMARY  :  This bill requires natural gas utilities regulated by 
          the California Public Utilities Commission (PUC) to develop 
          service and safety plans.  Specifically,  this bill  :  

          1)Establishes PUC as the state authority responsible for 
            regulating and enforcing gas pipeline transportation and 
            pipeline facilities, including development and administration 
            of a state pipeline safety program.

          2)Establishes the State Fire Marshal as the exclusive safety 
            regulatory and enforcement authority over intrastate hazardous 
            liquid pipelines.

          3)Requires Pacific Gas and Electric and Sempra (San Diego Gas 
            and Electric and Southern California Gas) to develop and 
            implement service and safety plans.

          4)Specifies minimum requirements of the service and safety plans 
            in order to protect the public and gas corporation employees:

             a)   Identify and minimize hazards and risks;









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             b)   Identify safety systems to eliminate or minimize 
               hazards, including documentation;

             c)   Provide adequate storage and transportation capacity;

             d)   Provide patrol and inspection;

             e)   Provide systems controls with respect to both equipment 
               and personnel procedures;

             f)   Provide timely response to reported leaks or other 
               hazard conditions;

             g)   Provide protocols for determining maximum allowable 
               operating pressure on relevant pipeline segments, including 
               documentation;

             h)   Specifies that the term 'gas corporation workforce' 
               includes the employees of a gas corporation and the 
               employees of independent contractor while working under 
               contract with the gas corporation

             i)   Preparation to minimize damage and respond to 
               earthquakes and other major events;

             j)   Meet or exceed minimum standards for safe design, 
               construction, installation, and maintenance of gas 
               transmission and distribution facilities;

             aa)  Ensure adequate number of trained workforce to implement 
               the service and safety plan; and,

             bb)  Additional matters PUC determines should be included.

          1)Provides that meaningful participation by employees in 
            development and implementation of safety plans.

          2)Requires PUC to review and accept, modify, or reject the 
            service and safety plans by December 31, 2012, require 
            periodic updates to the plans, and provide additional reviews 
            at regular intervals.

          3)Reorganizes existing statute governing natural gas service.

          4)Allows just and reasonable cost recovery in rates.








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           EXISTING LAW  :  State (PUC and the Office of the State Fire 
          Marshal) and federal (U.S. Department of Transportation) 
          regulators are tasked with ensuring that pipeline and hazardous 
          materials operators have risk management programs in place, that 
          those programs are designed in conformance with state and 
          federal laws, that the programs are effective in achieving 
          safety for the public and the employees of the operator, and 
          that the entire system of achieving safety continues to improve 
          itself. 

          PUC enforces statutes and rules (General Order 112-E) which 
          establish, in addition to the Federal Pipeline Safety 
          Regulations, minimum requirements for the design, construction, 
          quality of materials, locations, testing, operations and 
          maintenance of facilities used in the gathering, transmission 
          and distribution of gas and in liquefied natural gas facilities 
          to safeguard life or limb, health, property and public welfare 
          and to provide that adequate service will be maintained by gas 
          utilities operating under the jurisdiction of the commission.

          PUC conducts compliance inspections, accident investigations, 
          reviews utilities' reports and records, conducts construction 
          inspections, conducts special studies, and takes action in 
          response to complaints and inquiries from the public on issues 
          regarding gas pipeline and electric safety. PUC also conducts 
          audits and inspections of gas facilities owned and operated by 
          mobile home parks, and audits and inspections of underground 
          propane gas distributions systems.

          PUC has responsibility to ensure compliance with federal 
          pipeline management standards for over 11,000 miles of 
          transmission pipeline and almost 2,350 miles of transmission 
          pipeline in high consequence areas.

          The Office of the State Fire Marshal (SFM) regulates the safety 
          of approximately 5,500 miles of intrastate hazardous liquid 
          transportation pipelines and acts as an agent of the federal 
          Office of Pipeline Safety concerning the inspection of more than 
          2,000 miles of interstate pipelines. Pipeline Safety staff 
          inspect, test, and investigate to ensure compliance with all 
          federal and state pipeline safety laws and regulations.  All 
          spills, ruptures, fires, or similar incidents are responded to 
          immediately; all such accidents are investigated for cause.  
          Hazardous liquid pipelines are also periodically tested for 








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          integrity using procedures approved by SFM.  The program has 
          been certified by the federal government since 1981.  SFM also 
          maintains Geographic Information Systems (GIS)-based maps of all 
          regulated pipelines and has been named as a state repository for 
          pipeline data by the National Pipeline Mapping System (NPMS).

           FISCAL EFFECT  :  According to the Assembly Appropriations 
          Committee, PUC will incur additional costs to review the safety 
          plans and to facilitate ongoing input from employees in the 
          development and implementation of the plans. Given the brief 
          timeframe to act on the initial plans and the ongoing nature of 
          these tasks, the commission will require three engineer 
          positions for the first year at a cost of $350,000, and two 
          positions annually thereafter at a cost of about $240,000. 

           COMMENTS  :  According to the author, this bill requires a safety 
          plan process for each utility overseen by and subject to the 
          approval of PUC and restricts the amount spent by utilities on 
          safety services that can be charged to ratepayers.

          On September 9, 2010, a portion of a 30-inch diameter 
          underground natural gas transmission system of Pacific Gas and 
          Electric Company (PG&E) suddenly ruptured.  The pipeline was 
          located under the asphalt paving at the intersection of Glenview 
          Drive and Earl Avenue in a residential area of San Bruno, 
          California.  An explosion ensued, fueled by blowing natural gas. 
          The explosion and fire resulted in the loss of eight lives and 
          the total destruction of 38 homes. Seventy homes sustained 
          damage and eighteen homes adjacent to the destroyed dwellings 
          were left uninhabitable.


          State and municipal authorities have safety agreements and/or 
          certifications with the U.S. Department of Transportation for 
          regulating intrastate and interstate pipelines.  Federal law 
          does not specifically name responsible agencies at the state and 
          local level for implementing federal law - it allows the 
          Department of Transportation to enter into agreements or receive 
          certifications from state and local authorities.  Several 
          publicly owned utilities own and operate pipelines, including 
          Palo Alto, Sacramento Municipal Utility District, and Los 
          Angeles Department of Water and Power.  These publicly owned 
          utilities are not subject to the provisions of this bill, 
          however their individual boards require they have safety plans.









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           Analysis Prepared by  :    Susan Kateley / U. & C. / (916) 
          319-2083 


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