BILL ANALYSIS Ó
SB 1371
Page A
SENATE THIRD READING
SB 1371 (Leno)
As Amended July 1, 2014
Majority vote
SENATE VOTE :25-10
UTILITIES & COMMERCE 10-3
APPROPRIATIONS 13-4
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|Ayes:|Bonilla, Buchanan, |Ayes:|Gatto, Bocanegra, |
| |Chávez, Fong, Garcia, | |Bradford, |
| |Roger Hernández, Mullin, | |Ian Calderon, Campos, |
| |Quirk, Rendon, Skinner | |Eggman, Gomez, Holden, |
| | | |Linder, Pan, Quirk, |
| | | |Ridley-Thomas, Weber |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Patterson, Beth Gaines, |Nays:|Bigelow, Donnelly, Jones, |
| |Jones | |Wagner |
| | | | |
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SUMMARY : Requires the California Public Utilities Commission
(PUC) to open a proceeding to adopt rules and procedures that
minimize natural gas leaks from PUC-regulated gas pipeline
facilities, with the goal of reducing greenhouse gas emissions.
Specifically, this bill :
1)Requires the PUC, when considering the rules and procedures,
to give priority to safety, reliability, and affordability of
service.
2)Requires the PUC to collaborate on the rules and procedures
with the State Air Resources Board (ARB), gas corporations,
and other relevant state and federal regulatory entities.
3)Provides that rules and procedures apply to PUC-regulated
intrastate transmission and distribution natural gas
pipelines.
4)Requires adopted rules and procedures to:
a) Provide for the most technologically feasible and
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cost-effective avoidance, reduction, and repair of leaks
and leaking components in PUC-regulated pipeline facilities
within a reasonable time after discovery.
b) Provide for the repair of leaks as soon as reasonably
possible after discovery, consistent with established
safety requirements and the goals of reducing air pollution
and the climate change impacts of methane emissions.
c) Evaluate the operations, maintenance, and repair
practices for PUC-regulated gas pipeline facilities to
determine whether existing practices are effective at
minimizing leaks.
d) Establish and require the use of best practices for leak
surveys, patrols, leak survey technology, leak prevention,
and leak reduction, and provide that collected leak data
remains the property of the utility and is available to the
PUC and parties in commission proceedings as determined by
the PUC.
e) Establish protocols and procedures for the development
and use of metrics to quantify the volume of emissions from
leaking components, not inconsistent with existing
protocols and procedures, and for evaluating and tracking
leaks, both geographically and over time.
f) Establish reporting requirements for the owner of each
PUC-regulated gas pipeline facility on the baseline
system-wide leak rate.
g) Allow for the rules and procedures to be incorporated
into required safety plans.
h) Facilitate participation in all aspects of the
proceeding by the workforce of gas corporations and state
and federal entities with regulatory roles.
5)Requires the PUC, in order to achieve transparency and
accountability for rate revenues and best value for
ratepayers, and consistent with its existing ratemaking
procedures, to consider all of the following concerning
natural gas leaks and emissions:
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a) Provision of a sufficient workforce to reduce hazards
and emissions from leaks, including leak avoidance,
reduction, and repair.
b) Provision of revenue for all leak activities, including
any adjustment of allowance for "lost or unaccounted for"
natural gas related to actual leakage volumes.
c) Guidance regarding treatment of expenditures as being
either an item of expense or a capital investment.
d) Impacts on gas service affordability related to costs of
compliance with the adopted rules and procedures.
6)States that except as expressly so provided, this article does
not expand or in any manner alter PUC jurisdiction over the
regulation of emissions of greenhouse gases.
7)Makes various findings and declarations related to natural gas
pipeline safety, leakage, and methane emissions.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)One-time costs to the PUC of approximately $400,000 from the
Public Utilities Reimbursement Account (special fund) for the
required proceeding.
2)Ongoing costs to the PUC of approximately $160,000 from the
Public Utilities Reimbursement Account (fund) to perform
ongoing evaluations, audits and enforcement.
COMMENTS :
1)Author's statement: According to the author, "Leaky gas
pipelines have been recognized as a major safety problem in
the United States (U.S.) and in California. The significant
global warming impact of fugitive methane emissions from leaky
gas pipes is just now coming into focus, as new studies
demonstrate that methane emissions are much larger than
previously understood and the global warming potential (GWP)
of methane as a GHG relative to carbon dioxide (CO2) is
revised dramatically upward. Many global warming experts are
now concerned that the energy strategy that transitions away
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from coal to natural gas as a bridge fuel will fail if methane
emissions at all points are not curtailed. Fixing leaky gas
pipes thus provides a policy two-fer - improving safety and
reducing GHGs. The bill places a focus on this issue,
provides a policy framework that identifies best practices
including employing an adequate workforce, and imparts a sense
of urgency to addressing it. Fixing pipes employs California
workers and utilizes local materials and services, thus
providing an additional economic rationale for the bill."
2)Natural gas regulation. The PUC is responsible for ensuring
its regulated gas corporations comply with federal pipeline
standards for over 108,000 miles of transmission and
distribution pipeline. The commission reviews utility reports
and records, responds to public inquiries and complaints on
gas pipeline and electric safety, and investigates accidents.
The PUC focus is on safety and risk, rather than emission
reductions, as is the impetus of this bill.
3)California's greenhouse gas emissions policy. With Governor
Brown's signing of AB 32 (Núńez), Chapter 488, the Global
Warming Solutions Act of 2006, California is required to
reduce greenhouse gas emissions to 1990 levels by 2020. AB 32
established a comprehensive program to reduce greenhouse gas
emissions from all sources throughout the state and designated
ARB as the lead agency for implementation. The 2008 AB 32
Scoping Plan included a measure to reduce "fugitive emissions"
from natural gas transmission and distribution pipelines.
4)Sources and environmental impacts of methane. Natural gas is
about 95% to 98% methane. About 40% of global methane
emissions are from natural sources (wetlands, etc.), and the
other 60% of methane emissions are due to human activities.
Methane is the second most prevalent greenhouse gas emitted in
the U.S. from human activities (at 9%, behind carbon dioxide
at 82%). Major sources of human-related emissions are
agriculture; energy production, distribution, and use; and
waste management.
The U.S. EPA states that 2012 U.S. methane emissions totaled
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567 MMTCO2e<1> (million metric tons of carbon dioxide
equivalents, used to describe the magnitude of greenhouse gas
emissions or reductions<2>). Below is a table with the top
four human-related methane emissions for 2012, with natural
gas transmission/storage and distribution shown as a subset:
---------------------------------------------------------------
|Methane emission |MMTCO2e |% of total 2012 U.S. |
|source | |anthropogenic methane |
| | |emissions (567 MMTCO2e) |
|----------------------+---------+------------------------------|
|Enteric fermentation |141 |~25% |
|(livestock) | | |
|----------------------+---------+------------------------------|
|Natural gas systems |130 |~23% |
---------------------------------------------------------------
---------------------------------------------------------------
| |Transmission/stor| |43.5 | |~7.6% |
| |age | | | | |
|----+-----------------+---+-----+-----+------------------------|
| |Distribution | |26 | |~4.6% |
---------------------------------------------------------------
---------------------------------------------------------------
|Landfills |103 |~18% |
|----------------------+---------+------------------------------|
|Coal mining |56 |~10% |
---------------------------------------------------------------
Methane emissions have been shown to impact climate, air
quality, and public health. The Intergovernmental Panel on
Climate Change (IPCC) reports methane has a high global
warming potential, stating it is 28 times stronger than carbon
dioxide over a 100-year time horizon (i.e., methane will trap
28 times more heat than the carbon dioxide over the next 100
years).<3> Regarding air quality, methane emissions have been
associated with emissions of other air pollutants, and methane
can react with nitrous oxide in the atmosphere to form ozone.
--------------------------
<1>
http://www.epa.gov/climatechange/ghgemissions/usinventoryreport.h
tml
<2> A reduction of 1 MMTCO2e is equivalent to 216,000 passenger
cars not driven for one year
( http://www.arb.ca.gov/cc/factsheets/1mmtconversion.pdf )
<3> http://www.ipcc.ch/report/ar5/wg1/
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Ozone in urban areas adversely affects human health.
5)Methane emissions (leaks) from natural gas pipelines. The
study of natural gas leaks is complex and evolving. To
estimate fugitive emissions in California, the ARB collected
industry data in the one-time 2007 Natural Gas Transmission
and Distribution Survey. Survey data have not been made
public, but ARB disclosed to Senate Energy Committee that
total fugitive emissions from the transmission and
distribution pipeline system in 2007 were 157,619 metric tons
or 4.4 MMTCO2e.<4> ARB cautioned that these values may not
accurately represent this source and that methane emissions
are a complex issue.
Gas utilities are required to annually report emissions from
natural gas pipeline leaks to the U.S. EPA and the ARB.
Within the annual Gas Reports, for example, utilities list gas
that is "lost and unaccounted for" (LUAF), but do not report
specific line items within that number such as company use,
errors in measurement, theft, and the topic of interest here,
distribution and transmission leakage. In response to a data
request, Southern California Gas Company (SoCalGas) reported
that in 2012, 615,453 thousand cubic feet (MCF) was leaked to
the atmosphere. This corresponds to 1% of the LUAF total and
0.06% of the total 2012 throughput. Southern California
Edison also claims "reported leakage in comparison to
throughput is ~0.3%." Pacific Gas and Electric Company (PG&E)
reported that distribution pipeline and residential meter
leakage accounted for 0.8 million decatherms (MMDth) out of a
16.5 MMDth of LUAF gas - about 5% of the total LUAF gas. The
percentage this is of total throughput is unknown. Using
SoCalGas and PG&E leak data along with the Henry Hub natural
gas wholesale pricing for June 6, 2014<5> and the EIA
conversions<6>, it is estimated that SoCalGas lost about $2.9
million worth of leaked gas, while PG&E lost $3.6 million.
6)Gas leak repair. Federal and state regulations give utilities
latitude in designing leak grading and repair schemes. For
example, federal regulation 49 CFR 192.703(c) states
---------------------------
<4> As a rough estimate, this is about 0.6% of all human-related
U.S. methane emissions, using the 2009 U.S. anthropogenic
methane emissions total of 731 MMTCO2e,
<5> http://www.eia.gov/dnav/ng/hist/rngwhhdW.htm
<6> http://www.eia.gov/tools/faqs/faq.cfm?id=45&t=8
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"hazardous" leaks must be repaired "promptly", whereas PUC
General Order 112-E directs utilities to establish a leak
grading and repair scheme. Thus many non-hazardous leaks are
allowed to persist and are sometimes managed through venting
rather than repair. Although a leak can be non-hazardous, it
may still release a large volume of methane and, therefore,
have adverse climate, air quality, and/or health impacts.
PG&E and Sempra grade leaks based not on GHG emissions, but on
safety-related factors such as percent gas-in-air, soil type
and conditions, proximity to subsurface structures, and
whether the leak is above ground (venting to the atmosphere;
likely non-hazardous) or below ground (covered by pavement;
potentially hazardous). In 2013 PG&E reported 27,103
non-hazardous Grade 2 and 3 leaks in its system.
7)"Best practices" and "metrics" are unknown. This bill
requires the PUC to "establish and require the use of best
practices for leak surveys, patrols, leak survey technology,
leak prevention, and leak reduction", and to also "establish
protocols and procedures for the development and use of
metrics to quantify the volume of emissions from leaking
components." Research on leak measurement and calculations
for converting leak data into emissions is at the cutting
edge, and it is unlikely to provide (at least in the near
future) information and/or data needed to achieve the goals of
this bill.
8)Not all leaks are equal. The equation to calculate emissions
(i.e., pipe mileage x pipe activity factor) was developed
almost 20 years ago, is based on a small set of data, and
assumes a normal distribution of leak rates (i.e., a bell
curve, where most leaks emit an average amount of gas, and
less emitting a large or a small amount). The distribution of
leak rates is likely skewed, with the vast majority of leaks
emitting very little and a few leaks emitting a lot.
This bill provides for "the maximum technologically feasible
and cost-effective avoidance, reduction, and repair of leaks
and leaking components in those commission-regulated gas
pipeline facilities." Even with this language, this bill may
call for more extensive leak repair than is feasible and/or
necessary to confer significant environmental and health
benefits.
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For a full discussion, please see the policy committee analysis.
Analysis Prepared by : Brandon Gaytan / U. & C. / (916)
319-2083
FN: 0004916