BILL ANALYSIS Ó AB 2788 Page 1 Date of Hearing: May 3, 2016 ASSEMBLY COMMITTEE ON NATURAL RESOURCES Das Williams, Chair AB 2788 (Gatto) - As Introduced February 19, 2016 SUBJECT: Natural gas storage: emergency regulations (Urgency) SUMMARY: Requires Division of Oil, Gas, and Geothermal Resources' (DOGGR) emergency regulations related to underground gas storage projects to remain in effect until the regulations are either made permanent, amended, or repealed. EXISTING LAW: 1)Establishes DOGGR as the state's oil and gas regulator. 2)Requires the state's Oil and Gas Supervisor (Supervisor) to supervise the drilling, operation, maintenance, and abandonment of wells, and the operation, maintenance, and removal or abandonment of tanks and facilities attendant to oil and gas production. 3)Allows DOGGR to apply to the United States Environmental Protection Agency (US EPA) to receive "primacy" to operate the Class II Underground Injection Control (UIC) program for oil and gas injection wells at the state level. The US EPA granted primacy and delegated authority to DOGGR to operate AB 2788 Page 2 the UIC program in 1983. 4)Pursuant to the Administrative Procedures Act (APA), allows an agency to adopt emergency regulations that remain in effect for 180 days. Authorizes the Office of Administrative Law (OAL) to approve two re-adoptions of emergency regulations for a period not to exceed 90 days. Allows the agency to make regulations permanent if the agency adopts the emergency regulation through the regular rulemaking process within the time period the emergency regulations are in effect. FISCAL EFFECT: Unknown COMMENTS: 1)Author's statement: AB 2788 was introduced in response to the natural gas leak discovered in Porter Ranch, California in October, 2015 at the Aliso Canyon storage facility. This gas leak has been called the largest natural disaster since the BP oil spill due to the large amounts of methane released into the atmosphere. In addition, mercaptans, or odorants added to the gas for leak detection purposes, migrated into surrounding neighborhoods and contributed to headaches, nose bleeds, and nausea for many community members. As a result, Governor Brown declared a state of emergency in the Porter Ranch area, and DOGGR issued emergency regulations to ensure additional gas leaks would not occur. Under normal circumstances, emergency regulations would dissolve after 180 days. This bill would make these emergency regulations permanent to ensure the most protective measures remain in effect as agencies take substantive time to analyze, AB 2788 Page 3 understand, and address the incident. 2)Aliso Canyon Leak. On October 23, 2015, a natural gas storage well, known as "SS-25" owned by Southern California Gas (SoCalGas) and located in the Aliso Canyon storage field in close proximity to the Porter Ranch neighborhood in Los Angeles County began leaking natural gas. The leak continued until it was initially controlled on February 11, 2016, and the well was successfully sealed on February 18, 2016. During the four months the well leaked, there were numerous attempts to control it. All attempts to stop the leak from the top of the well failed. A relief well was finally able to stop the natural gas leak by plugging the leaking well at its base. According to a recent study, the leak at Aliso Canyon was the largest natural gas leak recorded in the United States, doubling the methane emission rate of the entire Los Angeles basin. Methane is a potent greenhouse gas with a global warming potential more than 80 times as powerful as carbon dioxide. The South Coast Air Quality Management District has received thousands of complaints regarding the odor. Complaints by residents suggest that mercaptans, which are odorants required to be added to natural gas, have been present in Porter Ranch at varying levels since the gas leak started. Some people may experience adverse health effects to the strong odors of mercaptans, such as nausea and headaches. In mid-November, the Los Angeles County Department of Public Health, citing public health concerns associated with the use of odorants in the natural gas, ordered SoCal Gas to provide temporary housing relocation assistance to affected residents. Over 5,000 Porter Ranch households were relocated due to the leak. Now that the leak has been stopped, residents are returning AB 2788 Page 4 home, regulators are investigating the cause of the leak, and a comprehensive safety review of the other 114 wells at the field has begun. 3)Natural Gas Storage Facilities. Natural gas providers inject natural gas into large underground reservoirs for storage before later withdrawing the gas for sale during peak load periods. These underground reservoirs often contained oil or gas that has already been extracted. Natural gas providers utilize these facilities to reduce the cost of procurement and to maintain adequate supply of natural gas during peak times. While the California Public Utilities Commission (CPUC) regulates natural gas providers, natural gas transmission lines, and the permitting of natural gas storage facilities, it is DOGGR that regulates the wells that natural gas is injected into and withdrawn from. Gas storage injection wells are the only type of injection wells in DOGGR's UIC program that are not part of the primacy agreement with US EPA. DOGGR's UIC program regulates 14 active gas storage facilities in 12 separate fields across the state to ensure well construction and integrity, appropriateness of the injection site, and zonal isolation of the injections. Each natural gas storage facility may contain dozens of active gas storage wells. Many of these natural gas storage wells are near residential development, similar to the Aliso Canyon facility. Some natural gas storage facilities have been in operation since the 1940s and approximately half of the active wells are over 40 years old. Many of the older wells were not built to today's well construction standards and lack the best technology available to operate safely. 4)DOGGR's UIC Problems. In 1974, the Safe Drinking Water Act gave the US EPA the authority and responsibility to control AB 2788 Page 5 underground injection to protect underground drinking water sources. In 1983, a primacy agreement was signed that allowed DOGGR to implement the US EPA's UIC program for oil and gas wells in California. DOGGR's handling of the portion of the UIC program delegated to it by the US EPA has come under criticism in recent years. A 2011 US EPA audit of DOGGR's UIC program implementation concluded that DOGGR was misclassifying underground sources of drinking water and doing an insufficient job monitoring the UIC program. In June 2014, it was discovered that DOGGR was approving injection wells in nonexempt aquifers. This included injections into aquifers that were not properly exempted, but also included injections into aquifers that were never exempt. California Environmental Protection Agency's (CalEPA) review found that DOGGR's district offices were approving projects without review from DOGGR and were making errors identifying the injectable zone of exempt aquifers. This included misidentifying the borders and depth of the aquifer and allowing expansion of productive limits over time beyond boundaries established in the Primacy Application. Last year, SB 83 (Committee on Budget and Fiscal Review), Chapter 24, Statutes of 2015, required the Secretary of CalEPA and the Secretary of Natural Resources Agency (NRA) to appoint an independent review panel (Panel), on or before January 1, 2018. The Panel will evaluate the regulatory performance of DOGGR's administration of the UIC program and make recommendations on how to improve its effectiveness. The recommendations the Panel can make include: requests for additional resources; needed statutory or regulatory changes; proposals for program reorganization; and, whether to transfer the UIC program to the State Water Resources Control Board. In October 2015, DOGGR released a plan titled "Renewal Plan For Oil and Gas Regulation," which was intended to address concerns over its handling of the UIC program and its regulation of oil and gas in general. The plan called for the review of all injection projects and the review and updating AB 2788 Page 6 of all UIC regulations. Many of those regulations had not been changed in decades. Concerns have been raised that DOGGR has not required adequate inspections, maintenance, or upgrades for older natural gas storage wells to prevent leaks. DOGGR indicates they were already in the process of updating their gas storage regulations when the leak occurred. 5)State Actions. On January 6, 2016, the Governor issued a proclamation of a state of emergency, which directed several state agencies to act in response to the Aliso Canyon gas leak. These actions included all of the following: a) Direction to DOGGR to continue prohibiting all injections into the Aliso Canyon facility; b) Direction to CPUC and California Energy Commission (CEC) to reduce the pressure of the facility by withdrawing gas; c) Directing the California Air Resources Board (ARB) to require real-time monitoring of emissions; d) Direction to the Office of Environmental Health Hazard Assessment to review public health concerns, and ensure energy and natural gas reliability; AB 2788 Page 7 e) Direction to DOGGR to promulgate emergency regulations to require new safety and reliability measures for underground natural gas storage facilities; and, f) Direction to DOGGR, CPUC, ARB, and CEC to assess the long-term viability of natural gas storage facilities. On February 5, 2016, DOGGR adopted emergency regulations to improve the regulation of gas storage wells. The regulations include additional data reporting from the operator, testing of the gas storage facility, and the submission of a Risk Management Plan by the Operator to DOGGR to assess the integrity and risk associated with their gas storage project. 6)This bill. This bill would require DOGGR's emergency regulations to remain in effect until the agency either permanently adopts, amends, or appeals the regulations. The author states, "This bill would suspend the APA and allow these emergency regulations to remain in effect beyond 180 days in order to provide ample time for permanent regulations to be adopted though the appropriate administrative procedures." However, if DOGGR never adopted permanent regulations, the emergency regulations would be permanent without going through the normal APA process. The normal APA process provides for more public review and a more through OAL review of the regulations than the emergency rulemaking process. The author and committee may wish to consider amending the bill to sunset its provisions in two years to clarify that DOGGR must eventually go through the APA process. In addition, the author and committee may wish to consider amending the bill to specify that the emergency regulations AB 2788 Page 8 were effective February 5, 2016. 5)Related Legislation. AB 1905 (Wilk) requires NRA, on or before July 1, 2017, to complete an independent scientific study on natural gas injection and storage practices and facilities. This bill is currently on the suspense file in the Assembly Appropriations Committee. SB 380 (Pavley) imposes an immediate moratorium on natural gas injection and a restriction on natural gas production at the Aliso Canyon storage facility until certain conditions are met. This bill is on the Assembly Floor. SB 887 (Pavley) revises requirements for natural gas storage facilities. This bill is awaiting hearing in the Senate Appropriations Committee. REGISTERED SUPPORT / OPPOSITION: Support None on file AB 2788 Page 9 Opposition None on file Analysis Prepared by:Michael Jarred / NAT. RES. / (916) 319-2092