BILL ANALYSIS                                                                                                                                                                                                    Ó




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                                   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.








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          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  








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               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.










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          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  








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          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  








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            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:









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           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  








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          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  ****


          








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