BILL ANALYSIS Ó SB 380 Page 1 Date of Hearing: April 13, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair SB 380 (Pavley) - As Amended March 30, 2016 ----------------------------------------------------------------- |Policy |Utilities and Commerce |Vote:|13 - 0 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- 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 SB 380 Page 2 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. SB 380 Page 3 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 SB 380 Page 4 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 SB 380 Page 5 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. SB 380 Page 6 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. SB 380 Page 7 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 SB 380 Page 8 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 SB 380 Page 9 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. SB 380 Page 10 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. SB 380 Page 11 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