Amended in Assembly March 30, 2016

Amended in Assembly March 7, 2016

Amended in Assembly February 16, 2016

Amended in Senate January 27, 2016

Senate Bill No. 380

Introduced by Senator Pavley

(Principal coauthors: Senators De León and Huff)

(Coauthors: Senators Allen, Hertzberg, and Runner)

(Coauthor: Assembly Member Wilk)

February 24, 2015

An act to add and repeal Section 3217 of the Public Resources Code, and to add begin delete Section 713 to end delete begin insert and repeal Sections 714 and 715 of end insert the Public Utilities Code, relating to natural gas, and declaring the urgency thereof, to take effect immediately.

LEGISLATIVE COUNSEL’S DIGEST

SB 380, as amended, Pavley. Natural gas storage: moratorium.

(1) Under existing law, the Division of Oil, Gas, and Geothermal Resources in the Department of Conservation regulates the drilling, operation, maintenance, and abandonment of oil and gas wells in the state. Existing law requires the State Oil and Gas Supervisor to supervise the drilling, operation, maintenance, and abandonment of wells and the operation, maintenance, and removal or abandonment of tanks and facilities related to oil and gas production within an oil and gas field, so as to prevent damage to life, health, property, and natural resources, as provided; to permit owners and operators of wells to utilize all known methods and practices to increase the ultimate recovery of hydrocarbons; and to perform the supervisor’s duties in a manner that encourages the wise development of oil and gas resources to best meet oil and gas needs in this state. Under existing law, a person who fails to comply with certain requirements relating to the regulation of oil or gas operations is guilty of a misdemeanor.

This bill would require the supervisor to begin delete immediately institute a moratorium on injections of natural gas into any gas storage wells located within and serving end delete begin insert continue the prohibition against Southern California Gas Company injecting any natural gas into end insert the Aliso Canyon natural gas storage facility located in the County of Los Angeles until begin delete specified conditions are met, including that the integrity of each gas storage well has been quantitatively and objectively evaluated using state-of-the-art technology, as determined by the supervisor with input from independent experts, and the risks posed by gas storage well failure have been evaluated. end delete begin insert a comprehensive review of the safety of the gas storage wells at the facility is completed, as specified, the supervisor determines that well integrity has been ensured by the review, the risks of failures identified in the review have been addressed, the supervisor’s duty to prevent damage to life, health, property, and natural resources, and other requirements is satisfied, and the Executive Director of the Public Utilities Commission has concurred via letter with the supervisor regarding his or her determination of safety. The bill would require the supervisor to determine criteria for the gas storage well comprehensive safety review with input from independent experts and would require the criteria to include, but not be limited to, specified tests and inspections. end insert The bill would require the division to hold at least one public meeting begin delete concerning the technical methods and equipment to be used to evaluate gas storage well integrity and the risks posed by gas storage well failure, request the independent experts to also develop objective criteria to assess the overall risk of the Aliso Canyon natural gas storage facility, and make that objective criteria available to the public. end delete begin insert to provide the public an opportunity to comment on the criteria. The bill would require the supervisor to direct the contracted independent experts to provide a methodology to be used in assessing the tests and inspections specified in the criteria. The bill would require the division to post the methodology on a public portion of its Internet Web site. The bill would require the operator of the facility to provide the division with the proposed maximum reservoir pressure and to include data and calculations supporting the basis for the pressure limit. The bill would authorize the supervisor to allow injections of natural gas into the facility once the gas storage well comprehensive safety review is complete and the supervisor has approved the maximum and minimum reservoir pressure at the facility. end insert The bill would also require begin delete the supervisor to prohibit end delete begin insert that, before the completion of the gas storage well comprehensive safety review, end insert the production of natural gas begin delete by any gas storage well originally drilled earlier than 1954 end delete begin insert from gas storage wells end insert at the begin delete Aliso Canyon natural gas storage end delete facility begin delete located in the County of Los Angeles until specified conditions are met, except as specified. end delete begin insert be limited to gas storage wells that have satisfactorily completed the testing and remediation required under the review, except as specified. The bill would require the supervisor to direct the operator of the facility to provide a plan to ensure, at the earliest possible time, the availability of sufficient gas production capacity using gas storage wells that have satisfactorily completed the testing and remediation required under the review. The bill would require all gas storage wells returning to service under these provisions to inject or produce gas only through the interior metal tubing, and would require the operator to conduct ongoing pressure monitoring and comply with any other requirements specified by the supervisor. The bill would require the gas storage wells at the facility that are plugged and abandoned pursuant to these provisions to be periodically inspected by the operator for leaks using effective gas leak detection techniques. The bill would require the division, with respect to the review and in a timely manner, to post all testing, inspection and monitoring results, and other safety review-related materials to a public portion of the division’s Internet Web site. end insert Because a violation of begin insert certain of end insert these requirements would be a crime, the bill would impose a state-mandated local program. The bill would repeal these provisions on January 1, 2021.

(2) Under existing law, the Public Utilities Commission is authorized to supervise and regulate every public utility in the state. begin insert 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. end insert

This bill would require the commission, no later than July 1, 2017, to determine the feasibility of minimizing or eliminating use of the Aliso Canyon natural gas storage facility located in the County of Los Angeles while still maintaining energy begin insert and electric end insert reliability for the region, and to consult with specified entities in making its determination. begin insert The bill would require the commission, in consultation with specified entities, to determine the range of working gas necessary to ensure safety and reliability for the region and just and reasonable rates in California, and to direct the operator of the facility to provide all information the commission deems necessary to make that determination. The bill would require the commission, within 30 days of the effective date of this act, to publish a report, including specified information regarding gas production at the facility. The bill would require the commission to make the report available on its Internet Web site, and to seek public comments on the report, as specified. The bill would require the executive director of the commission, in consultation with the supervisor, to direct the operator of the facility to maintain the specified range of working gas after certain conditions have occurred. Certain provisions of this bill would be part of the act and an order or other action of the commission would be required to implement certain of the provisions. Because a violation of the bill’s provisions or of an order or decision of the commission would be a crime, this bill would impose a state-mandated local program by creating new crimes. The bill would repeal these provisions on January 1, 2021. end insert

(3) 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.

(4) This bill would declare that it is to take effect immediately as an urgency statute.

Vote: ²⁄₃. 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.  

Section 3217 is added to the Public Resources
Code, to read:

3217.  

(a) The supervisor shall immediately institute a
moratorium on injections of natural gas into any gas storage wells
located within and serving the Aliso Canyon natural gas storage
facility located in the County of Los Angeles until all of the
following conditions are met:

(1) The integrity of each gas storage well has been quantitatively
and objectively evaluated using state-of-the-art technology, as
determined by the supervisor with input from independent experts,
and the risks posed by gas storage well failure have been evaluated.

(A) The age, history, and condition of each gas storage well
shall be specifically addressed, with particular emphasis on gas
storage wells drilled prior to 2006.

(B) The technical methods and equipment used to evaluate gas
storage well integrity and the risks posed by gas storage well failure
shall be determined by the supervisor with input from independent
experts and the public.

(C) The division shall hold at least one public meeting
concerning the technical methods and equipment. The division
shall request the independent experts to also develop objective
criteria to assess the overall risk of the Aliso Canyon natural gas
storage facility. The division shall make the objective criteria
available to the public.

(2) Any gas storage well posing an enhanced risk of failure has
been repaired to mitigate the enhanced risk or plugged and
abandoned.

(3) The supervisor determines that the overall risk from gas
storage well failure satisfies the supervisor’s duty pursuant to
Section 3106 to prevent damage to life, health, property, and
natural resources, and other requirements, as specified in Section
3106.

(4) The Public Utilities Commission and the State Energy
Resources Conservation and Development Commission concur
with the supervisor’s determination in paragraph (3).

(b) The supervisor shall prohibit the production of natural gas
by any gas storage well originally drilled earlier than 1954 at the
Aliso Canyon natural gas storage facility located in the County of
Los Angeles until after the integrity of and the risks associated
with any of these gas storage wells have been evaluated and
determinations by the supervisor, with the concurrence of the
commissions, have been made pursuant to the process described
in subdivision (a), except when necessary to do either of the
following:

(1) Respond to the uncontrolled leak of natural gas from the
“Standard Sesnon 25” well (American Petroleum Institute
identification number 03700776).

(2) Maintain regional energy reliability, at the written direction
of the commissions.

(c) This section shall remain in effect only until January 1, 2021,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2021, deletes or extends that date.

end delete

begin insert

begin insert SECTION 1. end insert   

end insert

begin insert Section 3217 is added to the end insert begin insert Public Resources
Code end insert begin insert , to read: end insert

begin insert

begin insert 3217. end insert   

(a) (1) The supervisor shall continue the prohibition
against Southern California Gas Company injecting any natural
gas into the Aliso Canyon natural gas storage facility located in
the County of Los Angeles until a comprehensive review of the
safety of the gas storage wells at the facility is completed and the
supervisor determines that well integrity has been ensured by the
review, the risks of failures identified in the review have been
addressed, and the supervisor’s duty to prevent damage to life,
health, property, and natural resources, and other requirements,
as specified in Section 3106, is satisfied. The supervisor may not
lift the prohibition on injection until the Executive Director of the
Public Utilities Commission has concurred via letter with the
supervisor regarding his or her determination of safety.

(2) For purposes of this section, “facility” means the Aliso
Canyon natural gas storage facility located in the County of Los
Angeles operated by Southern California Gas Company.

(b) (1) The criteria for the gas storage well comprehensive
safety review shall be determined by the supervisor with input from
contracted independent experts and shall include the steps in
subdivision (c). The division shall hold at least one public meeting
to provide the public an opportunity to comment on the criteria.

(2) The supervisor shall direct the contracted independent
experts to provide a methodology to be used in assessing the tests
and inspections specified in the criteria. This requirement may be
satisfied by the independent experts reviewing and, if necessary,
revising the division’s written methodology for assessing the tests
and inspections specified in the criteria. The methodology shall
include all tests and inspections required by the criteria. The
division shall post the methodology online on a public portion of
its Internet Web site.

(c) The gas storage well comprehensive safety review shall
include the following steps to ensure external and internal well
mechanical integrity:

(1) All gas storage wells shall be tested and inspected from the
surface to the packer or to any wellbore restriction near the top
of the geologic formation being used for gas storage, whichever
is higher in elevation, to detect existing leaks using temperature
and noise logs.

(2) Any leaks shall be stopped and remediated to the satisfaction
of the supervisor.

(3) Following remediation, leak detection tests shall be repeated
and results reviewed by the supervisor.

(4) (A) Unless a well has been fully plugged and abandoned
to the supervisor’s satisfaction and in accordance with Section
3208, the well shall be evaluated and remediated in accordance
with subparagraph (B) or plugged in accordance with
subparagraph (C).

(B) If a gas storage well is intended to return to service for the
purposes of resuming injections to the facility, it shall be tested
and inspected from the surface to the packer or to any wellbore
restriction near the top of the geologic formation being used for
gas storage, whichever is higher in elevation, to ensure mechanical
integrity. As identified in the division’s criteria, these tests and
inspections shall include the measurement of casing thickness and
integrity, an evaluation of the cement bond on the casing, the
determination as to whether any deformities in the well casing
exist, and an evaluation of the well’s ability to withstand pressures
that exceed maximum allowable injection and production
pressures, with a reasonable margin for safety, at the facility in
accordance with the criteria determined by the supervisor with
input from independent experts pursuant to subdivision (b). If the
tests reveal that a well poses a risk of failure, the supervisor shall
require remediation and repeat tests as necessary to demonstrate
to the satisfaction of the supervisor that remediation has mitigated
any potential identified risks. If the operator cannot remediate the
well to mitigate the identified risks to the satisfaction of the
supervisor, the well shall be plugged and abandoned in accordance
with Section 3208.

(C) (i) If a well is to be taken out of service before resumption
of gas injections at the facility, it shall be removed from operation
and isolated from the gas storage reservoir through plugging
according to the division’s criteria, including, but not limited to,
the demonstration of sufficient cement to prevent migrations
between the reservoir and other zones, placement of a mechanical
plug at the bottom of the well, and subsequent filling of the well
with fluid, and to specifications approved by the supervisor. All
gas storage wells that are taken out of service under this
subparagraph shall be subjected to ongoing testing and monitoring
requirements identified in the criteria determined by the supervisor
with input from independent experts. The monitoring shall include,
but not be limited to, real-time and daily pressure monitoring, as
applicable. A gas storage well shall not be returned to service
unless the testing and remediation required under subparagraph
(B) has been completed.

(ii) A gas storage well, within one year of being plugged and
isolated from the gas storage reservoir pursuant to clause (i), shall
either be returned to service by satisfactorily completing the testing
and remediation required under subparagraph (B) or be
permanently plugged and abandoned to the supervisor’s
satisfaction in accordance with Section 3208.

(D) The supervisor shall make a written finding for each gas
storage well that has satisfactorily completed the testing and
remediation required under subparagraph (B).

(5) The gas storage well comprehensive safety review is not
complete until every gas storage well at the facility has completed
the testing and remediation required under subparagraph (B) of
paragraph (4), been temporarily abandoned and isolated from the
reservoir as required under clause (i) of subparagraph (C) of
paragraph (4), or been fully plugged and abandoned to the
supervisor’s satisfaction in accordance with Section 3208.

(d) (1) Before commencing injections at the facility, the
operator of the facility shall provide the division with the proposed
maximum reservoir pressure and include data and calculations
supporting the basis for the pressure limit. The pressure limit shall
account for the pressure required to inject intended gas volumes
at all proposed inventory levels and the pressure limit shall not
exceed the design pressure limits of the reservoir, wells, wellheads,
piping, or associated facilities with an appropriate margin for
safety.

(2) The operator’s proposed maximum reservoir pressure shall
be subject to review and approval by the supervisor, and the
supervisor shall consult with independent experts regarding the
appropriate maximum and minimum reservoir pressure at the
facility.

(e) Once the gas storage well comprehensive safety review is
complete pursuant to paragraph (5) of subdivision (c) and the
supervisor has approved the maximum and minimum reservoir
pressure pursuant to paragraph (2) of subdivision (d), the
supervisor may allow injections of natural gas at the facility.

(f) All gas storage wells returning to service pursuant to
subdivision (e) shall only inject or produce gas through the interior
metal tubing and not through the annulus between the tubing and
the well casing. The operator shall also conduct ongoing pressure
monitoring and comply with any other requirements specified by
the supervisor.

(g) The gas storage wells at the facility that are plugged and
abandoned in accordance with Section 3208 pursuant to this
section shall be periodically inspected by the operator for leaks
using effective gas leak detection techniques such as optical gas
imaging.

(h) (1) Before the completion of the gas storage well
comprehensive safety review, production of natural gas from gas
storage wells at the facility shall be limited to gas storage wells
that have satisfactorily completed the testing and remediation
required under subparagraph (B) of paragraph (4) of subdivision
(c) unless insufficient production capacity is available. Only if
production capacity supplied by the tested and remediated wells
is demonstrably insufficient may the supervisor allow other gas
storage wells to be used.

(2) The supervisor shall direct the operator of the facility to
provide a plan to ensure, at the earliest possible time, the
availability of sufficient gas production capacity using gas storage
wells that have satisfactorily completed the testing and remediation
required under subparagraph (B) of paragraph (4) of subdivision
(c).

(i) With respect to the gas storage well comprehensive safety
review at the facility, all testing, inspection and monitoring results
reported to the division, gas storage well compliance status, any
required remediation steps, and other safety review-related
materials shall be posted in a timely manner by the division online
on a public portion of its Internet Web site.

(j) This section shall remain in effect only until January 1, 2021,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2021, deletes or extends that date.

end insert

SEC. 2.  

Section begin delete 713 end delete begin insert 714 end insert is added to the Public Utilities Code,
to read:

begin delete 713. end delete

begin insert 714. end insert   

begin insert (a) end insert begin insert   end insert The commission, no later than July 1, 2017, shall
determine the feasibility of minimizing or eliminating use of the
Aliso Canyon natural gas storage facility located in the County of
Los Angeles while still maintaining energy begin insert and electric end insert reliability
for the region. begin insert This determination shall be consistent with the
Clean Energy and Pollution Reduction Act of 2015 (Chapter 547
of the Statutes of 2015) and Executive Order B-30-2015. end insert The
commission shall consult with the State Energy Resources
Conservation and Development Commission, the Independent
System Operator, the local publicly owned utilities that rely on
natural gas for electricity generation, the Division of Oil, Gas, and
Geothermal Resources in the Department of Conservation, begin insert affected
balancing authorities, end insert and other relevant government entities, in
making its determination.

begin insert

(b) This section shall remain in effect only until January 1, 2021,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2021, deletes or extends that date.

end insert

begin insert

begin insert SEC. 3. end insert   

end insert

begin insert Section 715 is added to the end insert begin insert Public Utilities Code end insert begin insert , to
read: end insert

begin insert

begin insert 715. end insert   

(a) The commission shall direct the operator of the Aliso
Canyon natural gas storage facility located in the County of Los
Angeles to provide all information the commission deems necessary
for the commission to determine, in consultation with the State
Energy Resources Conservation and Development Commission,
the Independent System Operator, and affected publicly owned
utilities, the range of working gas necessary to ensure safety and
reliability for the region and just and reasonable rates in
California. The determination shall be based on best available
data, and shall incorporate data from recent and on-going studies
being conducted to determine energy and gas use in the region by
the commission, the State Energy Resources Conservation and
Development Commission, the Independent System Operator, and
affected publicly owned utilities.

(b) Within 30 days of the effective date of the act adding this
section, the commission shall publish a report that includes, but
is not limited to, all of the following:

(1) The range of working gas necessary at the facility to ensure
safety and reliability and just and reasonable rates in California
determined pursuant to subdivision (a).

(2) The amount of natural gas production at the facility needed
to meet safety and reliability requirements.

(3) The number of wells and associated injection and production
capacity required.

(4) The availability of sufficient natural gas production using
gas storage wells that have satisfactorily completed testing and
remediation required under subparagraph (B) of paragraph (4)
of subdivision (c) of Section 3217 of the Public Resources Code.

(c) The commission shall make the report required under
subdivision (b) available on its Internet Web site and seek, either
through written comments or a workshop, public comments on the
report.

(d) The executive director of the commission, in consultation
with the State Oil and Gas Supervisor, shall direct the operator
to maintain the specified range of working gas, determined
pursuant to subdivision (a), at the facility to ensure reliability and
just and reasonable rates in California, after all of the following
occur:

(1) The gas storage well comprehensive safety review is
complete pursuant to paragraph (5) of subdivision (c) of Section
3217 of the Public Resources Code.

(2) The State Oil and Gas Supervisor has approved the maximum
and minimum reservoir pressure pursuant to subdivision (d) of
Section 3217 of the Public Resources Code.

(3) The State Oil and Gas Supervisor has allowed injections of
natural gas at the facility, pursuant to subdivision (e) of Section
3217 of the Public Resources Code.

(4) The commission has allowed, and received, public comment
on the report pursuant to subdivision (c).

(e) In no case may the volume of working gas set by the
executive director of the commission result in reservoir pressures
that fall out of the range established pursuant to subdivision (d)
of Section 3217 of the Public Resources Code.

(f) This section shall remain in effect only until January 1, 2021,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2021, deletes or extends that date.

end insert

begin delete SEC. 3. end delete

begin insert SEC. 4. 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.

begin delete SEC. 4. end delete

begin insert SEC. 5. end insert   

This act is an urgency statute necessary for the
immediate preservation of the public peace, health, or safety within
the meaning of Article IV of the Constitution and shall go into
immediate effect. The facts constituting the necessity are:

In order to mitigate, at the earliest possible time, ongoing harm
from the gas leak at the Aliso Canyon natural gas storage facility,
and to evaluate the integrity of and the risks associated with begin delete older end delete
gas storage wells at that facility, it is necessary that this act take
effect immediately.