BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:   April 13, 2016


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                               Lorena Gonzalez, Chair


          SB 380  
          (Pavley) - As Amended March 30, 2016


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          Urgency:  Yes State Mandated Local Program:  YesReimbursable:   
          No


          SUMMARY:


          This bill continues the moratorium on injecting natural gas into  
          the Aliso Canyon gas storage facility, requires the Division of  
          Oil, Gas and Geothermal Resources (DOGGR) to complete a gas  
          storage well comprehensive safety review (safety review), and  
          requires the California Public Utilities Commission (PUC) to  
          determine the feasibility of minimizing or eliminating use of  
          the facility, as specified.  This bill, in part, codifies  








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          administrative actions ordered by the Governor in his January 6,  
          2019 Proclamation of a State Emergency.  Specifically, this  
          bill: 


          1)Requires the DOGGR Supervisor to continue prohibiting the  
            Southern California Gas Company (SoCalGas) from injecting gas  
            into the Aliso Canyon Storage Facility until the safety review  
            is completed and the Supervisor makes a variety of  
            determinations, as specified.  


          2)Prohibits the Supervisor from lifting the prohibition on  
            injection until the PUC has concurred with the determination  
            of safety via letter.




          3)Requires the Supervisor to determine the criteria and  
            methodology for the safety review, as specified. Requires  
            DOGGR to hold at least one public meeting to provide the  
            opportunity for comment on the criteria.


          4)Establishes required steps, as specified, for the safety  
            review to ensure external and internal well mechanical  
            integrity.  


          5)Provides the safety review is not complete until all wells are  
            categorized and the appropriate action is taken as follows: a)  
            gas storage wells have completed testing and remediation; b)  
            gas storage wells have been temporarily abandoned and isolated  
            from the reservoir; or c) gas storage wells have been fully  
            plugged and abandoned, as specified.  











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          6)Requires the operator of the facility to propose maximum  
            reservoir pressure limits and associated data to DOGGR before  
            commencing operations.  Requires the Supervisor to review and  
            approve the maximum reservoir pressure limit, as specified.
          7)Requires any wells returning to service to inject or produce  
            gas only through interior metal tubing, and expressly  
            prohibits injection or production through the annulus (space )  
            between the tubing and the well casing.  Requires wells  
            returning to service to conduct ongoing pressure monitoring  
            and comply with any other requirements specified by the  
            Supervisor. 


          8)Requires plugged and abandoned wells to be periodically  
            inspected, as specified.


          9)Prior to the completion of the safety review, limits the  
            production of natural gas to wells that have completed testing  
            and remediation unless insufficient production capacity is  
            available, as specified.


          10)Requires DOGGR to post all testing, safety review, and  
            compliance status and remediation requirements on its website  
            in a timely manner.


          11)Requires the PUC, no later than July 1, 2017, to determine  
            the feasibility of diminishing or eliminating the use of the  
            Aliso Canyon natural gas storage facility while maintaining  
            energy reliability in the region.  Requires the PUC to consult  
            with the California Energy Commission (CEC), Independent  
            System Operator (ISO), locally public owned utilities, DOGGR,  
            affected balancing authorities, and other relevant government  
            entities prior to making its determination.


          12)Requires the PUC to publish a report within 30 days of  








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            enactment of the bill regarding gas production at the  
            facility. Requires the PUC to seek public comments and publish  
            the report on its Internet Web site.  


          13)Requires the PUC Executive Director to direct the operations  
            of the facility, as specified, to ensure reliability and just  
            and reasonable rates.


          14)Sunsets January 1, 2021


          FISCAL EFFECT:




          1)Increased costs for the PUC of approximately $1.7 million to  
            determine the feasibility of a full or partial closure of the  
            facility through a proceeding (Public Utilities Commission  
            Utilities Reimbursement Account.)  


          2)To the extent this bill requires DOGGR to repeat steps already  
            taken, increased costs of $250,000 or more (Oil, Gas, and  
            Geothermal Administrative Fund).


          3)Potential unknown increased costs for CEC and ISO to consult  
            with DOGGR and the PUC as specified (special fund).


          COMMENTS:


          1)Purpose.   According to the author, the leak of natural gas  
            from the Aliso Canyon facility posed a public health and  
            climate emergency.  This bill builds upon and codifies  








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            portions of the Governor's State of Emergency declaration and  
            proposed emergency regulations and DOGGR orders.   


          2)Aliso Canyon Gas Leak.  The Aliso Canyon Gas Storage Facility  
            is owned by the SoCalGas and is located in Los Angeles County  
            just north of Porter Ranch.  SoCalGas is a gas corporation  
            regulated by the PUC.


            On October 23, 2015, SoCalGas detected a methane gas leak at  
            its Aliso Canyon Gas Storage Facility at Well # SS-25.  
            Following an initial evaluation and several attempts to stop  
            the leak, SoCalGas began drilling a relief well in order to  
            plug the leaking well. The initial attempts to plug the leak  
            failed, and the leak lasted 112 days before being permanently  
            capped on February 18, 2016. 


            A study in the journal Science confirmed that the methane gas  
            leak was not only the largest in California's history, but  
            also the second largest in the nation. According to the lead  
            author of the study, as much as 60 metric tons of methane  
            spewed from the leak each hour.





            The leak displaced nearly 2,290 households, requiring families  
            to move into temporary housing and hotels provided by  
            SoCalGas. 





            Since October 25, 2016, no natural gas has been injected into  
            the facility.








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          3)Chronology of Events and State Response.  Following the  
            detection of the leak, in November and December 2015, DOGGR  
            and the PUC issued orders establishing a moratorium on natural  
            gas injection at Aliso Canyon.  The orders included  
            requirements to provide data, retain evidence, and track the  
            costs of the effort to plug the well.  Additionally, the Air  
            Resources Board (ARB) began collecting and publishing data on  
            methane emissions caused by the leak.


            On January 6, 2016, the Governor issued a Proclamation  
            directing various state entities to oversee SoCalGas' actions  
            to stop the leak, protect public safety, ensure accountability  
            and strengthen oversight of natural gas storage facilities. 





            On February 11, 2016, SoCalGas announced it had temporarily  
            controlled the flow of natural gas at the leaking well and  
            would continue to work in coordination with DOGGR and other  
            agencies during the process of permanently sealing the well.

            On February 18, 2016, DOGGR confirmed the leaking well was  
          permanently sealed and taken out                              of  
          service.


            On March 4, 2016, DOGGR issued an order to SoCal Gas to follow  
          a comprehensive safety                                       
          review, upgrade equipment and detection devices, and plug and  
          abandon wells as specified.                              This  
          order prohibits the Supervisor from lifting the injection  
          prohibition until all specified                           
          requirements have been met.








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            On March 28, 2016, the PUC, DOGGR, ARB, and CEC issued an  
          update on the status of                                  state  
          actions taken in response to the gas leak.




          4)Governor's Emergency Proclamation and Budget Proposals.  In  
            addition to the provisions in this bill, the Governor's  
            Proclamation required DOGGR to issue emergency regulations and  
            require all gas storage facilities in the state to undertake  
            specific actions to protect against uncontrolled has leaks.   
            Additionally, the Proclamation: 1) requires ARB to expand its  
            monitoring of emissions in the community; 2) requires the  
            Office of Environmental Health Hazzard Assessment (OEHHA) to  
            review health concerns and determine if additional measures  
            are necessary; and 3) requires the PUC and CEC, in  
            coordination with the ISO, to take all steps necessary to  
            ensure energy reliability during the moratorium.




            




            On April 1, 2016 the Governor revised his proposed January  
            budget to include additional augmentations to the following  
            agencies to implement the directed actions and improve public  
            safety statewide:




             a)   CEC - $1,739,000 and three positions to monitor, model  








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               and analyze the interaction of electricity and natural gas  
               systems for reliability (Public Interest Research,  
               Development, and Demonstration Fund);




             b)   DOGGR - $4,172,000 and 20 positions to support increased  
               regulatory activities and $1 million to increase efforts to  
               remediate orphan wells (Oil, Gas and Geothermal Resources  
               Fund);




             c)   ARB - $2,276,000 and four positions to provide air  
               quality monitoring near oil and gas operations (Oil, Gas  
               and Geothermal Resources Fund);




             d)   OEHHA - $350,000 and 2 positions to support ARB's air  
               quality monitoring (Oil, Gas and Geothermal Resources  
               Fund);




             e)   PUC - $1,479,000 and 10 positions for increased workload  
               related to regulating natural gas facilities and $1,694,000  
               and 11 positions to create the Division of Safety Advocates  
               (Public Utilities Commission Utilities Reimbursement  
               Account).  




          1)Amendments.  The Committee is proposing two amendments to  








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            address implementation concerns.  First, per Administrative  
            directive, the safety review is already underway and over 50  
            of the 114 wells have been reviewed. Thus, the public hearing  
            requirement on the safety review criteria is not timely and  
            may require re- starting the review process.  Instead, the  
            Committee proposes requiring DOGGR to hold a noticed public  
            hearing in the community on the safety review findings, as  
            well as the proposed pressure limits prior to commencing  
            operations at the facility.




            Second, the CEC and PUC are currently conducting a statewide  
            reliability review.  This information will help inform the PUC  
            to meet its requirement to determine the feasibility of  
            diminishing or eliminating the use of the Aliso Canyon natural  
            gas storage facility.  Currently the bill requires the PUC to  
            make its determination by July 1, 2017.  Alternatively, the  
            Committee proposes requiring the PUC to open a proceeding on  
            the issue by July 1, 2017 to allow the statewide reliability  
            review to be completed before making a determination.


          2)Emergency Authority for Reliability.    This bill limits  
            natural gas production at the facility prior to the completion  
            of the safety review to wells that have completed testing and  
            remediation, unless production capacity is insufficient to  
            ensure reliability. There is no similar provision for well  
            injection.



            In order to ensure electrical and gas energy reliability  
            during the moratorium, the Administration is proposing an  
            amendment to expressly give the Governor the authority to  
            adjust the requirements of the bill in the event of  
            extraordinary circumstances, catastrophic events, or threat to  
            public health and safety from the loss of energy reliability.








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            The author has rejected this amendment and contends the  
          Governor and Supervisor have                      sufficient  
          existing authorities to address emergencies. Specifically,  
          Section 8558(c),                                  Chapter 7 of  
          Division 1 of Title 2 of the Government Code which allows the  
          Governor to                                       take all  
          actions necessary in the event of a sudden and severe energy  
          shortage, among                                   other things.   
          Further, the author contends the Supervisor has broad discretion  
          under  existing law.


          3)Related Legislation.  Numerous bills have been introduced to  
            respond to the Aliso Canyon Gas Storage Facility leak.  AB  
            1902 (Wilk) extends the statute of limitations for civil  
            actions resulting from exposure to hazardous materials from  
            the Aliso Canyon gas leak.  This bill is pending in the  
            Judiciary Committee.   


            AB 1903 (Wilk) directs the Public Utilities Commission  and  
            the State Department of Public Health to jointly study the  
            long-term health impacts of the Aliso Canyon natural gas leak.  
             This bill is pending in the Health Committee.


            AB 1904 (Wilk)  Requires the Office of Environmental Health  
            Hazard Assessment (OEHHA) to evaluate and report to the  
            Legislature on natural gas odorants and potential alternatives  
            by January 1, 2018.  This bill is scheduled to be heard in  
            this Committee today.


            AB 1905 (Wilk) directs the Natural Resources Agency to conduct  
            an independent scientific study on natural gas injection and  
            storage practices and facilities.   This bill is pending in  
            this Committee.








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            SB 886 (Pavley) requires the Division of Oil, Gas, Geothermal  
            Research (DOGGR) to institute a moratorium on natural gas  
            injections at the Aliso Canyon gas storage facility and  
            prevent use of wells drilled pre-1954.  This bill is pending  
            in the Senate Energy, Utilities and Communications Committee.   



            SB 887 (Pavley) requires DOGGR to prescribe standards for  
            natural gas storage wells and requires annual inspections.   
            This bill is pending in the Senate Environmental Quality  
            Committee. 







          Analysis Prepared by:Jennifer Galehouse / APPR. / (916)  
          319-2081