BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 2788


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          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          are either made permanent, amended, or repealed.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  








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            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,  








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               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  








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            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  








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            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  








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            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;











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             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  








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            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










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          Opposition


          None on file




          Analysis Prepared by:Michael Jarred / NAT. RES. / (916) 319-2092