Amended in Senate May 7, 2014

Amended in Senate April 10, 2014

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.

The California Global begin insert Warming end insert Solutions Act of 2006 requires the State Air Resources Board to adopt regulations to require the reporting and verification of emissions of greenhouse gases and to monitor and enforce compliance with the reporting and verification program, and requires the state board to adopt a statewide greenhouse gas emissions limit equivalent to the statewide greenhouse gas emissions level in 1990, to be achieved by 2020.

This bill would require the commission to adopt rules and procedures governing the operation, maintenance, repair, and replacement of begin insert those end insert commission-regulated gas pipeline facilities begin insert that are intrastate transmission and distribution end insert begin insert lines end insert to minimize leaks as a hazard to be mitigated pursuant to the Natural Gas Pipeline Safety Act of 2011 and to reduce emissions of natural gas from begin delete commission-regulated gas pipeline end delete begin insert those end insert facilities to the maximum extent feasible in order to advance the state’s goals in reducing emissions of greenhouse gases pursuant to the California Global Warming Solutions Act of 2006. 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. The bill would require the commission to consult with the state board and those other state and federal entities that the commission determines have regulatory roles of relevance to the rules and procedures under consideration. The bill would require that the rules and procedures provide for the begin insert maximum technologically feasible and end insert cost-effective avoidance, reduction, and repair of leaks in begin insert those end insert commission-regulated gas pipeline facilities begin insert that are intrastate transmission and distribution end insert begin insert lines end insert within a reasonable time after begin delete discovery, but require that leaks discovered in close proximity to residential and commercial buildings be repaired as soon as reasonably possible after discovery, consistent with the goals of reducing the risk of injury, loss of life, property damage, and air pollution. end delete begin insert discovery. end insert The bill would require the rules and procedures to provide for the ranking, by volume, of leaks recorded by each commission-regulated gas pipeline facility begin insert that is an intrastate transmission or distribution line end insert and require the implementation of programs that provide for the ongoing repair of leaks that are in the top 20% of gas volumes leaked on an annual basis. The bill would require that the rules and procedures evaluate the operations, maintenance, and repair practices of begin delete commission-regulated gas pipeline end delete begin insert those end insert facilities to determine whether existing practices are effective at achieving the goals of the bill and to determine whether alternative practices may be more effective at achieving the goals of the bill. The bill would require that the rules and procedures establish and require the use of best practices for leak surveys, patrols, leak survey technology, leak prevention, and leak reduction. The bill would require the rules and procedures to establish protocols and procedures for the development and use of metrics to quantify the volume of emissions from leaking components, and for evaluating and tracking leaks, both geographically and over time, 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. The bill would require that the rules and procedures, to the extent feasible, require the owner of each commission-regulated gas pipeline facility begin insert that is an intrastate transmission or distribution line end insert to calculate and report to the commission a baseline systemwide leak rate, to periodically update that systemwide leak rate calculation, and to annually report measures that will be taken in the following year to reduce the systemwide leak rate to achieve the goals of the bill. The bill would require that the commission consider begin delete whether the costs of compliance with the adopted rules and procedures are commensurate with the short- and long-term benefits resulting from reducing leaks and emissions and provide for cost recovery in rates charged to their customers by a gas corporation, end delete begin insert specified topics in a manner end insert 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:

SECTION 1.  

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

 

975.  

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, and nothing in this
article shall compromise or deprioritize safety as a top
consideration.

(b) It is undisputed that natural gas pipelines and infrastructure
in California leak natural gas. 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 begin insert 28 times that of carbon
dioxide over a 100-year time horizon and end insert 84 times that of carbon
dioxide over a 20-year time horizon. There is also a growing
awareness that climate change impacts impose high social costs,
including impacts upon the public health and economy.

(e) Reducing 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.

(f) Existing federal and state rules and regulations pertaining to
the natural gas transmission and distribution system and associated
infrastructure were not developed for the purpose of preventing
the climate change impacts from leaks of natural gas.

(g) Examining the methods used by gas corporations under
existing federal and state rules to conduct and schedule leak repair
and prevention based on the implications of these practices with
respect to emissions of greenhouse gases will enable a more
thorough evaluation of whether existing practices are
commensurate with California’s goals for reducing emissions of
greenhouse gases.

(h) Reducing leaks and repairing 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 repair leaks promptly when
discovered, including employing an adequate workforce, is in the
public interest, and promotes the interests of customers and the
public.

976.  

(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 begin insert those end insert
commission-regulated gas pipeline facilities begin insert that are intrastate
transmission and distribution lines, as described in paragraphs
(1) and (2) of subdivision (a) of Section 950, end insert 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) While giving due consideration to the cost considerations
of Section 977, reduce emissions of natural gas from begin insert those end insert
commission-regulated gas pipeline facilities begin insert that are intrastate
transmission and distribution lines end insert to the maximum extent feasible
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 begin delete intrastate
distribution lines and intrastate transmission lines end delete begin insert those
commission-regulated pipeline facilities that are intrastate
transmission and distribution lines end insert , as respectively described in
paragraphs (1) and (2) of subdivision (a) of Section 950, to achieve
the goals of subdivision (b). 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. The
commission shall adopt rules and procedures not later than
December 31, 2015.

(d) The rules and procedures adopted pursuant to subdivision
(c) shall accomplish all of the following:

(1) Provide for the begin insert maximum technologically feasible and end insert
cost-effective avoidance, reduction, and repair of leaks in begin insert those end insert
commission-regulated gas pipeline facilities begin insert that are intrastate
transmission and distribution end insert begin insert lines end insert within a reasonable time after
discovery, consistent with begin delete eliminating hazards and reducing
emissions end delete begin insert the California Global Warming Solutions Act of 2006
(Division 25.5 (commencing with Section 38500) of the Health
and Safety Code) end insert to achieve the goals in subdivision (b).
begin delete Cost-effectiveness criteria used to determine leak avoidance,
reduction, and repair requirements pursuant to this paragraph shall
take into account societal and public costs associated with climate
change and air pollution, including peer-reviewed estimates of the
social costs of emissions of greenhouse gases. end delete

begin delete

(2) As determined by the commission, provide for the repair of
any leaks discovered in close proximity to residential and
commercial buildings as soon as reasonably possible after
discovery, consistent with the goals of reducing the risk of injury,
loss of life, property damage, and air pollution, including the
climate change potential associated with methane emissions.

end delete begin insert

(2) Provide for the repair of leaks as soon as reasonably
possible after discovery, consistent with the goals of reducing air
pollution and the climate change impacts of methane emissions.

end insert

(3) Commensurate with a goal of reducing systemwide emissions
of methane, provide for a ranking, by volume, of leaks recorded
by each commission-regulated gas pipeline facility begin insert that is an
intrastate transmission or distribution line end insert and require the
implementation of programs that, at a minimum, provide for the
ongoing repair of leaks that are in the top 20 percent of gas volumes
leaked on an annual basis.

(4) Evaluate the operations, maintenance, and repair practices
of begin insert those end insert commission-regulated gas pipeline facilities begin insert that are
intrastate transmission and distribution lines end insert to determine whether
existing practices are effective at achieving the goals of subdivision
(b) and determine whether alternative practices may be more
effective at achieving the goals of subdivision (b).

(5) Establish and require the use of best practices for leak
surveys, patrols, leak survey technology, leak prevention, and leak
reduction. Best practices shall include evaluation of the quality of
materials and equipment from various sources, including foreign
and domestic third-party suppliers.

(6) Establish protocols and procedures for the development and
use of metrics to quantify the volume of emissions from leaking
components, and for evaluating and tracking leaks, both
geographically and over time, 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 into the atmosphere over time.

(7) To the extent feasible, require the owner of each
commission-regulated gas pipeline facility begin insert that is an intrastate
transmission or distribution line end insert to calculate and report to the
commission a baseline systemwide leak rate, along with any data
and computer models used in making that calculation, to
periodically update that systemwide leak rate calculation, and to
annually report on measures that will be taken in the following
year to reduce the systemwide leak rate to achieve the goals of
subdivision (b).

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

(f) Consistent with subdivision (e) of Section 961, the
commission shall facilitate robust ongoing participation of the
workforce of gas corporations and those state and federal entities
that have regulatory roles of relevance in all aspects of the
proceeding. begin insert Nothing in this section affects the commission’s
authority to determine eligibility for intervenor compensation. end insert

977.  

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

(a) Providing an adequate workforce to achieve the objectives
of reducing hazards and emissions from leaks, including leak
avoidance, reduction, and repair.

(b) Directing the revenues from any allowance for lost or
unaccounted for natural gas to leak avoidance, reduction, and
repair.

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

(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.

begin insert

(e) The social and public costs associated with climate change
and air pollution, including peer-reviewed estimates of the social
costs of emissions of greenhouse gases.

end insert

SEC. 2.  

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.