BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 380| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: SB 380 Author: Pavley (D), et al. Amended: 1/27/16 Vote: 27 - Urgency SENATE NATURAL RES. & WATER COMMITTEE: 9-0, 1/28/16 AYES: Pavley, Stone, Allen, Hertzberg, Hueso, Jackson, Monning, Vidak, Wolk SENATE APPROPRIATIONS COMMITTEE: 7-0, 1/28/16 AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen SUBJECT: Natural gas storage: moratorium SOURCE: Author DIGEST: This bill 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. ANALYSIS: Existing law: 1)Establishes the Division of Oil, Gas and Geothermal Resources (DOGGR) in the Department of Conservation. 2)Requires that DOGGR regulate the drilling, operation, maintenance and abandonment of oil and gas wells in the state. SB 380 Page 2 3)Requires DOGGR's leader, the state oil and gas supervisor, to supervise the drilling, operation, maintenance, and abandonment of oil and gas wells and facilities related to oil and gas production within an oil and gas field, among other activities, so as to prevent damage to life, health, property, and natural resources, as provided. 4)Authorizes the California Public Utilities Commission (CPUC) to supervise and regulate every public utility in the state. This bill: 1)Imposes an immediate moratorium on natural gas injection at the Aliso Canyon natural gas storage facility. 2)Imposes a restriction on natural gas production at the same facility for wells originally drilled earlier than 1954 except where needed to respond to the ongoing significant uncontrolled natural gas leak from a well in the facility or to ensure regional energy reliability, as specified. 3)Requires, that the integrity of each well is quantitatively and objectively evaluated using state-of-the-art technology and the risks posed by well failure evaluated. The following conditions must be met in order to lift the moratorium and production restriction: a) Well age, history and condition shall be considered in the evaluation with an emphasis on wells older than 10 years of age. b) The supervisor shall determine the technical methods used to do the evaluation and the risks posed by well SB 380 Page 3 failure with input from independent experts and the public through a public process. c) Wells posing an enhanced risk of failure must be repaired or plugged and abandoned. d) The supervisor shall determine that the overall risk from well failure satisfies the supervisor's requirement to prevent damage to life, health, property and natural resources, as specified, and e) The CPUC and the State Energy Resources Conservation and Development Commission concur with the supervisor's assessment of the overall risk. 4)Requires the CPUC, in consultation with other state regulators, to determine the feasibility of minimizing or eliminating the use of the Aliso Canyon natural gas storage facility while maintaining regional energy reliability. 5)Includes an urgency section due to ongoing harm to the community. Background On October 23, 2015, a significant uncontrolled natural gas leak from a gas storage well ("SS-25") was discovered. The well is located in the Southern California Gas Company's (SoCal Gas') Aliso Canyon natural gas storage facility located in northeastern Los Angeles County. This well is located uphill from and approximately 1-1/4 miles away from homes in the Porter Ranch community. The leak has received local, national and international news coverage. SB 380 Page 4 The natural gas storage facility at Aliso Canyon includes (approximately) 115 wells of which 108 are gas storage wells. In the early 1970s, a depleted existing oil reservoir was converted to use as a gas storage reservoir. It is the largest gas storage reservoir in the western United States at 86 billion cubic feet working capacity. Many existing oil wells serving the depleted reservoir were converted to gas storage service at the time of the conversion. Forty-eight of the gas storage wells at Aliso Canyon were originally drilled in 1954 or earlier (almost half of those in gas storage service now). An additional 47 wells were all originally drilled at least 15 years ago. DOGGR's existing regulations are not proactive with respect to identifying the locations of incipient leaks. Aliso Canyon may not be unusual, however. Over half of the approximately 420 gas storage wells in service in the state are over at least 40 years old. DOGGR was apparently notified the day of the leak's discovery by SoCal Gas. The local air quality regulator, the South Coast Air Quality Management District began receiving calls reporting the smell of leaking gas from the community on the next day, October 24. It was several more days before SoCal Gas acknowledged the leak to the community and the public. To date, South Coast Air Quality Management District has received thousands on complaints regarding the odor. 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. The well continues to leak natural gas. As of three months, the amount of natural gas leaked is estimated to be approximately equivalent to the annual greenhouse gas emissions of 450,000 cars. Seven well "kill" attempts by SoCal Gas and its contractors have failed to control or stop the leak. DOGGR ordered a relief well to be drilled for use in killing the well. Recent reports indicate that the relief well will be completed in February and efforts to kill the leaking well using the SB 380 Page 5 relief well will commence in mid-to-late February. While the gas storage facility itself is under the primary jurisdiction of the CPUC, the storage wells are under DOGGR's jurisdiction. Seven state entities in total are involved in the response to the leak in some capacity. In addition to DOGGR and the CPUC, these include the Governor's Office of Emergency Services, the Office of Environmental Health Hazard Assessment, the Air Resources Board (ARB), the Division of Occupational Safety and Health and the California Energy Commission. In addition Governor Brown has been directly involved in leak response, issuing a State of Emergency on January 6, and the Governor's Office has coordinated state response. Of particular note: The DOGGR supervisor has issued two orders to SoCal Gas regarding the leak. The first, on November 18, 2015, required immediate sharing of monitoring data and ordered preparations for drilling a relief well to start. The second, on December 10, 2015, required numerous actions by SoCal Gas including, among other items, pursuing options to capture the leaking gas, prepare for a second relief well, reduce reservoir pressure by producing stored gas, continuing to not inject gas into the storage reservoir and maximizing the rate of withdrawal from the facility. DOGGR reports convening a panel of technical experts from national labs to assist it in its response to the leak. The Governor's State of Emergency, among other provisions, directed DOGGR to strengthen oversight of gas storage wells by promulgating new emergency regulations and directed DOGGR, the CPUC, ARB and California Energy Commission to assess the long-term viability of natural gas storage facilities in California. On January 15, 2016, DOGGR announced emergency regulations to SB 380 Page 6 improve the regulation of gas storage wells. While much is left at the discretion of the supervisor, the emergency regulations provide for more regulatory oversight including testing. On January 21, 2016, the CPUC wrote to SoCal Gas ordering the working gas capacity at Aliso Canyon be reduced to 15 billion cubic feet until further notice. SoCal Gas agreed in its response the next day. Comments Public process. The public has an opportunity to comment on the DOGGR emergency regulations through the rulemaking process. The public did not have a formal role in developing the proposal to best of the Senate Natural Resources and Water Committee's staff's knowledge. Two 1940s era wells at Aliso Canyon have recently had upgraded operating and other conditions imposed upon them (API #s 03700722 and 03700723, originally drilled in 1945 and 1946, respectively). It is not known what results prompted the additional requirements for these two wells. State-of-the-art technology? DOGGR's existing gas storage regulations have been criticized for detecting leaks only after the leak has started. The proposed emergency regulations are substantially revised, although, as noted above, provide significant discretion to the supervisor. Proactive leak detection using, for example, ultrasonic imaging, is, according to reports, widely available. The two wells noted in the preceding comment have both been required to undergo ultrasonic imaging. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: Yes According to the Senate Appropriations Committee: SB 380 Page 7 Unknown, but potentially in the hundreds of thousands of dollars from the Oil, Gas, and Geothermal Administrative Fund (special) to the Department of Conservation for the additional required evaluation of wells at the Aliso Canyon storage facility. Minimum costs likely in the high hundreds of thousands and possibly in the low millions to the Public Utilities Reimbursement Account (special fund) for the CPUC to determine the feasibility of minimizing or eliminating the use of the Aliso Canyon storage facility and to make a determination regarding the lifting of the moratorium. Unknown costs to the California Energy Commission to the Energy Resources Program Account (General Fund). SUPPORT: (Verified1/27/16) None received OPPOSITION: (Verified1/27/16) None received ARGUMENTS IN SUPPORT: According to the author, "My constituents have been on the receiving end of a natural disaster for the last three months. The uncontrolled leak of natural gas from the Aliso Canyon facility is a public health and climate emergency." "Over 2,500 Porter Ranch households have relocated, and another 1,600 are in the process of being relocated. The Los Angeles Unified School District relocated two schools to avoid students and staff breathing in the noxious fumes. There are concerns about public health, the health of our children, long-term SB 380 Page 8 damage to a robust and happy community, lost business revenues, property value loss and more. Not all of these issues are necessarily appropriately addressed by the Legislature. For example, the Los Angeles City Attorney, the Los Angeles City Council, the Los Angeles Board of Supervisors, local regulators, including City and County Fire, the Department of Public Health and the South Coast Air Quality Management District have all taken action to address and facilitate response to the leak for areas within their jurisdiction. Additionally, state regulators, coordinated by the Governor's Office, have and are taking appropriate action to respond too." "However, we have an important role in ensuring that this never happens again and taking appropriate steps to calm and address the community's concerns about the risks associated with the continued operation of Aliso Canyon. SB 380 builds on the two DOGGR orders, the Governor's State of Emergency declaration, DOGGR's proposed emergency gas storage regulations and statements by the CPUC and the California Energy Commission, among others. It institutes a public, rigorous and transparent process to ensure the integrity of the gas storage wells. We have an obligation to the public to ensure that they have a formal voice in this process to ensure its credibility to them." "With the first relief well likely to be completed within weeks and a hoped-for successful effort to stop the leak using the relief well, it is urgent that we pass this legislation in order to address the community's fears about moving back to their homes and near the gas storage facility." Prepared by:Katharine Moore / N.R. & W. / (916) 651-4116 1/28/16 10:22:36 **** END **** SB 380 Page 9