Amended in Senate March 25, 2014

Senate Bill No. 1371

Introduced by Senator Leno

(Principal coauthor: Assembly Member Mullin)

(Coauthor: Senator Hill)

February 21, 2014

An act to add Article 3 (commencing with Section 975) to Chapter 4.5 of Part 1 of Division 1 of the Public Utilities Code, relating to natural gas.

LEGISLATIVE COUNSEL’S DIGEST

SB 1371, as amended, Leno. Natural gas: leakage abatement.

The California Constitution establishes the Public Utilities Commission with regulatory authority over public utilities, authorizes the commission to establish its own procedures, subject to statutory limitations or directions and constitutional requirements of due process, and authorizes the commission to fix rates and establish rules for all public utilities, subject to control by the Legislature.

The Natural Gas Pipeline Safety Act of 2011, within the Public Utilities Act, designates the 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 would require the commission to adopt rules and procedures governing the operation, maintenance, repair, and replacement of commission-regulated gas pipeline facilities to minimize leaks as a hazard to be mitigated pursuant to the Natural Gas Pipeline Safety Act of 2011 and to eliminate uncontrolled emissions of natural gas from commission-regulated gas pipeline facilities to the maximum extent feasible begin insert with the goal of cutting total emission in end insert begin insert 1⁄2 end insert begin insert by January 1, 2020 end insert . The bill would require the commission to commence a proceeding by January 15, 2015, and to adopt rules and procedures not later than December 31, 2015. begin insert The bill would require the commission to end insert begin insert consult with the State Air Resources Board and those other state and federal entities that the commission determines have regulatory roles of relevance to the rules and procedures under consideration. end insert The bill would require that the rules and procedures provide for begin delete repair end delete begin insert the elimination end insert of leaks in commission-regulated gas pipeline facilities within a reasonable time after discovery, but require that leaks discovered in close proximity to residential and commercial buildings be begin delete repaired upon discovery so that the emission of leaking gas that can result in injury or loss of life will be substantially eliminated end delete begin insert eliminated as soon as reasonably possible after discovery, consistent with the goal of reducing the risk of injury or loss of life end insert . The bill would begin delete additionally end delete require that the rules and procedures establish begin insert and require the use of end insert best practices for leak surveys, patrols, leak survey technology, and metrics for evaluating and comparing leaks so that operators, the commission, and the public have accurate information about the number and severity of leaks and about the quantity of gas that is emitted to the atmosphere over time. begin insert The bill would require that the rules and procedures, to the extent feasible, provide for the establishment of a baseline systemwide leak rate, a periodic updating of systemwide leak rate quantifications, and an annual reporting structure of the measures that will be taken in the following year to reduce the systemwide leak rate to achieve the goals of the bill for each commission-regulated pipeline. end insert The bill would require that the commission consider begin insert whether end insert the costs of compliance with the begin insert adopted end insert rules and procedures begin insert are end insert begin insert commensurate with the short- and long-term benefits resulting from reducing leaks and emissions end insert and provide for cost recovery in rates charged to their customers by a gas corporation, consistent with the commission’s existing ratemaking procedures and authority to establish just and reasonable rates.

Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because the provisions of this bill would be a part of the act and because a violation of an order or decision of the commission implementing its requirements would be a crime, the bill would impose a state-mandated local program by creating a new crime.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

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

begin delete

SECTION 1.  

The Legislature finds and declares all of the
following:

(a) The Legislature has established that safety of the natural gas
pipeline infrastructure in California is a priority for the Public
Utilities Commission and gas corporations.

(b) The incidence of natural gas leaks and their repair is
considered by the industry and regulators to be a significant
indicator of pipeline integrity and safety.

(c) The Legislature has established a policy goal to significantly
reduce emissions of greenhouse gases in California.

(d) There is a growing awareness of the potency of methane,
the primary component of natural gas, as a greenhouse gas. The
Intergovernmental Panel on Climate Change estimates that the
global warming potential of methane is 84 times that of carbon
dioxide over a 20-year time horizon.

(e) Fugitive methane volumes from pipelines in California may
exceed 35 billion cubic feet annually and may exceed 500 billion
cubic feet nationwide.

(f) Reducing these fugitive emissions by repairing pipeline leaks
promptly and effectively advances both policy goals of natural gas
pipeline safety and integrity and reducing emissions of greenhouse
gases.

(g) Reducing leaks and promoting pipeline integrity in California
provides significant employment opportunities for California
residents and for domestic fabricators of high quality pipeline
materials.

(h) Providing just and reasonable rate revenues for gas
corporations to reduce leaks and repair them promptly when
discovered, including employing an adequate workforce, is in the
public interest, and promotes the interests of customers and the
public.

end delete

begin delete SEC. 2. end delete
begin insert SECTION 1. end insert   

Article 3 (commencing with Section 975) is added
to Chapter 4.5 of Part 1 of Division 1 of the Public Utilities Code,
to read:

 

Article 3.  Methane Leakage Abatement

 

begin insert

begin insert 975. end insert   

The Legislature finds and declares all of the following:

(a) The Legislature has established that safety of the natural
gas pipeline infrastructure in California is a priority for the Public
Utilities Commission and gas corporations.

(b) The incidence of natural gas leaks and their repair is
considered by the industry and regulators to be a significant
indicator of pipeline integrity and safety.

(c) The Legislature has established a policy goal to significantly
reduce emissions of greenhouse gases in California.

(d) There is a growing awareness of the potency of methane,
the primary component of natural gas, as a greenhouse gas. The
Intergovernmental Panel on Climate Change estimates that the
global warming potential of methane is approximately 80 times
that of carbon dioxide over a 20-year time horizon.

(e) It is undisputed that natural gas pipelines and infrastructure
in California leak substantial volumes of natural gas, estimated
in 2011 to exceed 35 billion cubic feet annually.

(f) Reducing these fugitive methane emissions by promptly and
effectively repairing or replacing the pipes and associated
infrastructure that is responsible for these leaks advances both
policy goals of natural gas pipeline safety and integrity and
reducing emissions of greenhouse gases.

(g) Although there are existing federal and state rules and
regulations that pertain to the natural gas transmission and
distribution system and associated infrastructure, these rules and
regulations are insufficient to prevent the climate change impacts
from leaks of natural gas.

(h) Reducing leaks and promoting the integrity of pipelines and
associated infrastructure in California provides significant
employment opportunities for California residents and for domestic
fabricators of high quality pipeline materials and other equipment
associated with finding and fixing leaks.

(i) Providing just and reasonable rate revenues for gas
corporations to find, categorize, and eliminate leaks promptly
when discovered, including employing an adequate workforce, is
in the public interest, and promotes the interests of customers and
the public.

end insert

begin delete 975. end delete
begin insert 976. end insert   

(a) For purposes of this chapter, “commission-regulated
gas pipeline facility” has the same meaning as defined in Section
950.

(b) The commission shall adopt rules and procedures governing
the operation, maintenance, repair, and replacement of
commission-regulated gas pipeline facilities to achieve both of the
following:

(1) Minimize leaks as a hazard to be mitigated pursuant to
paragraph (1) of subdivision (d) of Section 961.

(2)  begin delete Eliminate end delete begin insert While giving due consideration to the cost
considerations of Section 977, eliminate end insert uncontrolled emissions
of natural gas from commission-regulated gas pipeline facilities
to the maximum extent feasible begin insert w end insert begin insert ith the goal of cutting total
emission in half by January 1, 2020 end insert , in order to advance the state’s
goals in reducing emissions of greenhouse gases pursuant to the
California Global Warming Solutions Act of 2006 (Division 25.5
(commencing with Section 38500) of the Health and Safety Code).

(c) Not later than January 15, 2015, the commission shall
commence a proceeding to adopt rules and procedures for intrastate
distribution lines and intrastate transmission lines, as respectively
described in paragraphs (1) and (2) of subdivision (a) of Section
950, to achieve the goals of subdivision (b). begin insert The commission shall
consult with the State Air Resources Board and those other state
and federal entities that the commission determines have regulatory
roles of relevance to the rules and procedures under consideration. end insert
The commission shall adopt rules and procedures not later than
December 31, 2015.

(d) The rules and procedures begin insert adopted pursuant to subdivision
(c) end insert shall begin delete provide end delete begin insert accomplish all of the following: end insert

begin insert (1) end insert begin insert   end insert begin insert Provide end insert for the begin delete repair end delete begin insert elimination end insert of leaks in
commission-regulated gas pipeline facilities within a reasonable
time after discovery, consistent with eliminating hazards and
reducing emissions to achieve the goals in subdivision (b). begin delete Leaks end delete

begin insert (2) end insert begin insert   end insert begin insert Provide for the elimination of any leaks end insert discovered in close
proximity to residential and commercial buildings begin delete shall be repaired
upon discovery so that the emission of leaking gas that can result
in injury or loss of life will be substantially eliminated. end delete begin insert as soon as
reasonably possible after discovery, consistent with the goal of
reducing the risk of injury or loss of life. end insert

begin delete

(e) The rules and procedures shall establish

end delete

begin insert (3) end insert begin insert   end insert begin insert Establish and require the use of end insert best practices for leak
surveys, patrols, leak survey technology, and metrics for evaluating
and comparing leaks so that operators, the commission, and the
public have accurate information about the number and severity
of leaks and about the quantity of natural gas that is emitted to the
atmosphere over time. Best practices shall include evaluation of
the quality of materials and equipment from various sources,
including foreign and domestic third-party suppliers.

begin insert

(4) To the extent feasible, provide for each
commission-regulated gas pipeline facility, the establishment of
a baseline systemwide leak rate, a periodic updating of systemwide
leak rate quantifications, and an annual reporting structure of the
measures that will be taken in the following year to reduce the
systemwide leak rate to achieve the goals of subdivision (b).

end insert begin delete

(f)

end delete

begin insert (e) end insert  The rules and procedures, including best practices and repair
standards, shall be incorporated into the safety plans required by
Section 961.

begin delete

(g)

end delete

begin insert (f) end insert  Consistent with subdivision (e) of Section 961, the
commission shall facilitate robust ongoing participation of the
workforce of gas corporations in all aspects of the proceeding.

begin delete 976. end delete
begin insert 977. end insert   

As an element of the proceeding required by Section begin delete 975, end delete
begin insert 976, end insert the commission shall consider begin insert whether end insert the costs of compliance
with the begin insert adopted end insert rules and procedures begin insert are commensurate with the
short- and long-term benefits resulting from reducing leaks and
emissions end insert and shall provide for cost recovery in rates charged to
their customers by a gas corporation, consistent with the
commission’s existing ratemaking procedures and authority to
establish just and reasonable rates. Cost considerations shall
include begin insert , but are not limited to, end insert all of the following:

(a) Providing an adequate workforce to achieve the objectives
of reducing hazards and emissions from leaks, including begin delete prompt
leak repair and end delete begin insert leak end insert elimination.

(b) Directing the revenues from any allowance for lost or
unaccounted for natural gas to leak begin delete repair and end delete elimination.

(c) Providing guidance for treatment of expenditures as being
either an item of expense or a capital investment.

begin insert

(d) The impact on affordability of gas service for vulnerable
customers as a result of the incremental costs of compliance with
the adopted rules and procedures.

end insert

begin delete SEC. 3. end delete
begin insert SEC. 2. end insert   

No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of
the Government Code, or changes the definition of a crime within
the meaning of Section 6 of Article XIII B of the California
Constitution.