BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 380 (Pavley) - Natural gas storage: moratorium
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|Version: January 27, 2016 |Policy Vote: Pending |
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|Urgency: Yes |Mandate: Yes |
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|Hearing Date: January 28, 2016 |Consultant: Marie Liu |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: SB 380 would place a moratorium on the injection and
production of natural gas at the Aliso Canyon storage facility
until specific conditions are met regarding well integrity and
would require the California Public Utilities Commission (CPUC)
to determine the feasibility of minimizing or eliminating use of
that facility.
Fiscal
Impact:
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
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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).
Background: In October 2015, a significant uncontrolled natural gas leak
from a gas storage well was discovered within the Southern
California Gas Company's Aliso Canyon natural gas storage
facility. The Aliso Canyon natural gas storage facility is the
largest natural gas storage facility in the western United
States.
The facility has approximately 115 wells of which 108 are gas
storage wells. 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.
The Division of Oil, Gas, and Geothermal Resources (DOGGR)
within the Department of Conservation and headed by the
supervisor is responsible for the regulation of natural gas
wells while the regulation of the storage facility itself is
under the California Public Utilities Commission (CPUC).
Proposed Law:
This bill would require DOGGR to institute a moratorium on the
injections of natural gas at the Aliso Canyon storage facility
until several conditions are met regarding the integrity of the
wells. Specifically, each well must be evaluated by
"state-of-the-art" technology for well integrity and well
failure risks. The technical methods and equipment used would be
determined by DOGGR with input from independent experts and
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through a public process. The supervisor of DOGGR, the CPUC, and
the California Energy Commission (CEC) must all concur that the
DOGGR's responsibility to prevent the damage to life, health,
property, and natural resources has been fulfilled before the
moratorium is lifted.
This bill would also prohibit the use of wells drilled prior to
1954 for the production of natural gas at the Aliso Canyon
storage facility until the wells have been evaluated as
specified unless the well is needed to respond to the current
gas leak or to maintain regional energy reliability as
determined by the "commissions."
Related
Legislation: SB 886 (Pavley), which was introduced on January
20, 2016, is identical to this measure. No actions have yet been
taken on SB 886.
Staff
Comments: This bill would require DOGGR to determine what
"state-of-the-art" technology must be used to evaluate well
integrity and risks posed by well failure through a public
process, which presumably would be through the development of
regulations. As DOGGR has been widely criticized for using
outdated and inadequate methods, such technology is likely to be
a departure from its current practices and therefore reasonably
may result in additional costs to DOGGR. That said, staff notes
that DOGGR has received significant additional resources in the
last two budgets to both improve and expand its existing
programs in a manner generally consistent by this bill. It is
unclear whether those new resources would be sufficient to cover
the additional actions required by this bill.
This bill would require the CPUC to determine the feasibility of
minimizing or eliminating the use of the Aliso Canyon storage
facility while maintaining energy reliability for the region.
While reliability is considered by the CPUC as part of its
regular duties, this feasibility study would require additional
analysis, similar to those studies conducted regarding
electricity reliability after the closure of San Onofre nuclear
power plant and the adoption of once-through-cooling
regulations. The large size of the Aliso Canyon facility will
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also increase the impacts that need to be considered. Depending
on the level of existing analyses, staff roughly estimates that
these costs could range in the high hundreds of thousands of
dollars to low millions.
Staff notes that this bill would require the CPUC and the CEC to
make a determination regarding whether DOGGR's responsibilities
have been fulfilled. At this time, it is unclear how this
determination will be made by those agencies and therefore any
costs associated with such a determination are unknown.
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