BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                   SB 879|
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                                 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.

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           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. 


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          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 

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          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 

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          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   

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          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

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