BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 879| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: SB 879 Author: Padilla (D) Amended: 5/11/11 Vote: 21 SENATE ENERGY, UTIL. & COMM. COMMITTEE : 10-0, 5/3/11 AYES: Padilla, Fuller, Berryhill, Corbett, DeSaulnier, Pavley, Rubio, Simitian, Strickland, Wright NO VOTE RECORDED: De León SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8 SUBJECT : Natural gas pipelines: safety SOURCE : Author DIGEST : This bill designates the Public Utilities Commission as the state authority responsible for regulating and enforcing intrastate gas pipeline transportation and pipeline facilities pursuant to federal law, including the development, submission, and administration of a state pipeline safety program certification for natural gas pipelines. This bill requires that in any ratemaking proceeding in which the commission authorizes a gas corporation to recover expenses for the inspection, maintenance, or repair of transmission pipelines, that the commission require the gas corporation to establish and maintain a one-way balancing account for the recovery of those expenses. CONTINUED SB 879 Page 2 ANALYSIS : Existing Federal law and general orders of the California Public Utilities Commission (CPUC) require the commission to regulate gas transmission, distribution and gathering pipeline facilities which include investor-owned utilities, master-metered mobile home parks, storage facilities, and propane operators. Existing Federal law and general orders of the CPUC establish safety requirements pertaining to the design, construction, testing, operation, and maintenance of utility gas gathering, transmission, and distribution piping systems, and for the safe operation of such lines and equipment. Existing Federal law 1. Requires the United States Department of Transportation Pipeline and Hazardous Materials Safety Administration (PHMSA) to adopt minimum safety standards for pipeline transportation and for pipeline facilities, including an interstate gas pipeline facility and an intrastate gas pipeline facility, as defined. 2. Authorizes the United States Secretary of Transportation to prescribe or enforce safety standards and practices for an intrastate pipeline facility or intrastate pipeline transportation to the extent that the safety standards and practices are regulated by a state authority that annually submits to the secretary a certification for the facilities and transportation or, alternatively, authorizes the secretary to make an agreement with a state authority authorizing it to take necessary action to meet certain pipeline safety requirements. CONTINUED SB 879 Page 3 3. Prohibits a state authority from adopting or continuing in force safety standards for interstate pipeline facilities or interstate pipeline transportation, but permits a state authority that has submitted a specified certification to adopt additional or more stringent safety standards for intrastate pipeline facilities and intrastate pipeline transportation only if those standards are compatible with the minimum standards prescribed by PHMSA. Existing law vests regulatory authority over gas corporations to the CPUC and authorizes it to fix the rates and charges for service as well as standards and practices for services to be furnished. Background Natural Gas Regulation The CPUC regulates natural gas utility service for approximately 10.7 million customers that receive natural gas from Pacific Gas and Electric (PG&E), Southern California Gas, San Diego Gas & Electric, Southwest Gas, and several smaller natural gas utilities. The CPUC also regulates independent storage operators Lodi Gas Storage and Wild Goose Storage. The vast majority of California's natural gas customers are residential and small commercial customers, referred to as "core" customers, who accounted for approximately 40% of the natural gas delivered by California utilities in 2008. Large consumers, like electric generators and industrial customers, referred to as "noncore" customers, accounted for approximately 60% of the natural gas delivered by California utilities in 2008. The CPUC regulates the California utilities' natural gas rates and natural gas services, including in-state CONTINUED SB 879 Page 4 transportation over the utilities' transmission and distribution pipeline systems, storage, procurement, metering and billing. Most of the natural gas used in California comes from out-of-state natural gas basins. In 2008, California customers received 46% of their natural gas supply from basins located in the Southwest, 19% from Canada, 22% from the Rocky Mountains, and 13% from basins located within California. Natural gas from out-of-state production basins is delivered into California via the interstate natural gas pipeline system San Bruno Tragedy On the evening of September 9, 2010 a 30-inch natural gas transmission line ruptured in a residential neighborhood in the City of San Bruno. The rupture caused an explosion and fire which took the lives of eight people and injured dozens more; destroyed 37 homes and damaged dozens more. Gas service was also disrupted for 300 customers. The pipeline in question is owned and operated by PG&E and originally built in 1948. In 1956 it was relocated and rebuilt to accommodate new housing development. The National Transportation Safety Board (NTSB), in conjunction with the CPUC was on scene within 24 hours to investigate the cause of the explosion. Although preliminary elements of the investigation have been detailed, a final report on causation is not expected until at least the fall. The NTSB's examination of the ruptured pipe segment and review of PG&E records revealed that although those records marked the pipe as seamless the pipeline in the area of the rupture was constructed with longitudinal seam-welded pipe and was constructed of five sections of pipe, some of which were short pieces measuring about 4 feet long. These short pieces of pipe contained different seam welds of various types, including single- and double-sided welds that may not have been as strong as the seamless pipe listed in PG&E's records. The NTSB has not concluded that the faulty records or welds were the proximate cause of the rupture. However, the NTSB is concerned that there are other CONTINUED SB 879 Page 5 discrepancies between installed pipe and as-built drawings in PG&E's gas transmission system. It is critical to know all the characteristics of a pipeline in order to establish a valid operating pressure below which the pipeline can be safely operated. The NTSB is concerned that these inaccurate records may lead to incorrect operating pressures. Related legislation The following measures have been introduced in this session in response to the San Bruno tragedy: SB 44 (Corbett) requires the CPUC to commence a proceeding to establish emergency response standards, which include emergency response plans, to be followed by owners or operators of commission-regulated gas pipeline facilities. Status: Placed on Senate Appropriations Suspense file. SB 216 (Yee) directs the CPUC to adopt standards that require the installation of automatic shut-off or remote controlled sectionalized block valves on all commission-regulated pipelines that are located in a high consequence area or that traverse an active seismic earthquake fault unless the commission determines it is prohibited under federal law. Status: Placed on Senate Appropriations Suspense file. SB 705 (Leno) requires gas corporations to develop, adopt and implement a service and safety plan that places safety of the public and gas corporation employees as the top priority. Status: Placed on Senate Appropriations Suspense file. AB 56 (Hill) implements a number of public safety measures with regard to natural gas pipeline facilities, including requiring the owner or operator of a gas pipeline to develop a public safety program and a facilities modernization program, and requiring the CPUC to track proposed repairs to gas facilities to determine if the repairs were made. Status: Pending hearing in the Assembly Appropriations Committee. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes CONTINUED SB 879 Page 6 Local: Yes ARGUMENTS IN SUPPORT : According to the author's office, "In the aftermath of the San Bruno tragedy questions were raised as to whether PG&E had been redirecting funds authorized for pipeline maintenance and repair to non-safety uses or company profits. Investigation showed that as part of the PG&E's spending authorization they submit a list of potential safety work to be done and related locations to the CPUC. There was no evidence that PG&E redirected the funds from pipeline safety as approved by the CPUC but some of those funds were used for other repairs for other pipeline segments that at the time were deemed more critical. However, a shadow of doubt was cast on the budgeting of these critical needs. The purpose of this bill is to improve the transparency of that process." RM:rm 5/23/11 Senate Floor Analyses SUPPORT/OPPOSITION: NONE RECEIVED **** END **** CONTINUED