BILL ANALYSIS Ó SENATE COMMITTEE ON NATURAL RESOURCES AND WATER Senator Fran Pavley, Chair 2015 - 2016 Regular Bill No: SB 887 Hearing Date: March 29, 2016 ----------------------------------------------------------------- |Author: |Pavley | | | ----------------------------------------------------------------- ----------------------------------------------------------------- |Version: |March 28, 2016 | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant:|Katharine Moore | | | | ----------------------------------------------------------------- Subject: Natural gas storage wells BACKGROUND AND EXISTING LAW Existing law establishes the Division of Oil, Gas and Geothermal Resources (division) in the Department of Conservation at the Natural Resources Agency. The division is the state's oil and gas regulator. Existing law provides the division's leader, the state's oil and gas supervisor (supervisor), with broad authority to supervise oil and gas operations to prevent damage to life, health, property and natural resources, among other requirements (see Public Resources Code (PRC) §3106). While natural gas storage facilities are subject to the overall jurisdiction of the California Public Utilities Commission (commission), natural gas storage wells and associated piping and equipment are under the jurisdiction of the division. In California, gas storage wells are regulated through the state's underground injection control (UIC) program (see Title 14, Code of California Regulations, §§1724.6 - 1724.10, (14 CCR §§1724.6 - 1724.10)). The principal regulation specific to gas storage wells is 14 CCR §1724.8. Prior to February 2016, none of these regulations had been updated since 1978. Natural gas storage wells represent a small component of the overall UIC program (approximately 400 wells out of 50,000 SB 887 (Pavley) Page 2 of ? statewide). The division has acknowledged widespread failures in the implementation of its UIC program (see, for example, the review of the division's Cypress (Los Angeles) district office released in October 2015), although how the regulation of gas storage wells was affected by this remains unclear. At the same time the Cypress report was released, the division released a "Renewal plan" to guide its commitment to reform. The division has received personnel and funding through recent budgets to improve program implementation, data management, enforcement and other functions. Pursuant to regulation, an operator wishing to drill gas storage wells would have to provide certain information about the proposed reservoir to the division for approval. If approved, the division would issue a "project approval letter" setting specific requirements (e.g. maximum storage pressure) for the wells. The 14 project approval letters for natural gas storage facilities in California include a wide variety of requirements and are not generally available online to the public. Additionally, while required by regulation, it is not clear - as the dates of the letters span decades - what further review, absent litigation, the project approval conditions received after initial issuance. After a project approval letter is issued, the operator would still be required to obtain an approved permit for each individual well serving the reservoir. Additionally, "field rules" may be established for a reservoir that also set requirements for wells. On October 23, 2015, efforts started to stop a significant natural gas leak from the "Standard Sesnon 25" gas storage well located at the Southern California Gas Company's (SoCal Gas') Aliso Canyon gas storage well facility. This well was originally drilled in 1954 for oil and gas production and subsequently converted to a natural gas storage well. While SoCal Gas was aware of increasing well integrity problems at Aliso Canyon and had proposed a still-pending-before-the-commission Storage Integrity Management Program (SIMP) for implementation, the leaking well was not one of those designated for the program. The 18 wells proposed for SIMP were all originally drilled from 1943 - 1955 and later converted in the 1970s to gas storage wells. SB 887 (Pavley) Page 3 of ? The Aliso Canyon gas storage facility is located adjacent to the community of Porter Ranch in Los Angeles County. Some wells at the Aliso Canyon facility appear to be less than one mile away from homes, although the well that failed was approximately 1-1/2 miles away from the nearest home. The local air quality management district began receiving complaints about the smell (from added odorants) the next day. Several days passed before SoCal Gas acknowledged to the community that a significant uncontrolled leak was occurring. While SoCal Gas called in both the division and contracted with experts to stop the leak quickly, contemporaneous news reports indicate considerable missteps in public communication and initial efforts to relocate members of the community (at SoCal Gas' expense). The supervisor issued two orders to SoCal Gas related to leak response and the Governor issued a State of Emergency proclamation on January 6, 2016. Drilling a relief well in combination with reducing the pressure in the reservoir ultimately allowed for the leaking well to be brought under control and the division confirmed this on February 18, 2016. Over 5,000 households were relocated during the leak, two public schools were moved and hundreds of public health complaints were logged by the County. In addition to the public health concerns, the amount of methane released has been estimated to be about 100,000 metric tons, fully 20% of the state's methane emissions over the four months of the leak. Natural gas (methane) is a potent greenhouse gas and a short-lived climate pollutant. The division released emergency regulations for gas storage wells during the leak which went into effect in February. These emergency regulations include a number of provisions and require operators to provide complete project data to the division, put in regulation the division's ability to impose pressure limits on projects, require monitoring for annular gas in the well, valve testing, the use of leak detection technology to monitor wells and equipment and the development of risk management plans. Existing law establishes the Air Resources Board (board) in the California Environmental Protection Agency. The board has jurisdiction over greenhouse gas emissions. SB 887 (Pavley) Page 4 of ? PROPOSED LAW This bill would comprehensively reform natural gas storage well standards and develop information specific to natural gas storage well operations necessary to understand and prevent risks to safety. Specifically this bill would: 1)Require the board to develop, with appropriate consultation, a natural gas storage facility monitoring program that includes continuous monitoring of ambient natural gas concentrations and may include daily leak detection checks, as specified. a) Require operators to submit proposed plans to implement the program to the board for approval. 2)Require the division to annually inspect all natural gas storage wells. 3)Require existing natural gas storage wells to comply with these requirements by a future date. 4)Require the phase-out use of older wells of unspecified age by a future date. 5)Require new standards for gas storage wells including: a) The use of subsurface safety wells on all wells, as specified. b) Proactive evaluation of well integrity using best available technology, a risk assessment interpreting these results, and repair of leaking wells or wells at imminent risk of leaking, as specified. c) Annual re-testing of wells at high risk of failure. d) Gas injections and withdrawals limited to tubing and packer only. e) Continuous well annular pressure and flow rate monitoring, as specified. f) Approved programs for regular maintenance (including training); design and operation; inspection, leak detection and monitoring; and site specific risk management, as specified, that includes prevention and response protocols to ensure timely public notice, and emergency response and training, among other requirements. g) Enhanced reporting of all well-related activities to the division. 6)Within 10,000 feet of sensitive receptors, as defined, require continuous monitoring of ambient concentrations of natural gas and annual proactive evaluations for wells. 7)Set setbacks from sensitive receptors of undetermined SB 887 (Pavley) Page 5 of ? distance, and phase-out the use of wells violating this provision, as specified. 8)Require immediate leak notification to the division with follow-on dissemination of information requirements for the division. 9)Require starting the process of drilling a relief well within 24 hours of the start of a significant leak. 10) Require the division to convene an independent panel of experts to determine best practices for natural gas storage facilities, as specified, to be incorporated into the division's regulations. 11) Require the division to perform a risk assessment of natural gas storage wells, as specified. 12) Provide for an increase in the amount of potential fines in the event of a leak. 13) Require submittal of monitoring and other data to the appropriate state agencies with subsequent posting online for the public, as specified. In addition, the bill would provide the public with a right to review the location of a well and a right to take action against the division for failing to enforce these requirements. Finally, the bill would make appropriate and supporting legislative findings particularly regarding ensuring the safety of natural gas storage well operations. ARGUMENTS IN SUPPORT According to the author, "a leak like the one in Aliso Canyon must not be allowed to happen again. Thousands of my constituents have had their health or their loved ones' health affected by the leak. Lives, families, businesses and communities have been disrupted for months and this disruption continues even though the leak was finally stopped last month. We must not allow a rapid return to "business-as-usual." We now are aware of the all-to-real risks to public health and the environment posed by natural gas facilities and must ensure meaningful changes occur in their operations." "State and local regulators worked diligently to protect the public and stop the leak. Going forward, it is important that new minimum standards for gas storage wells be set to ensure safe operations, including the development of best practices by experts. New air monitoring requirements will help to identify SB 887 (Pavley) Page 6 of ? leaks early. SB 887 will also ensure a rapid response to stop a leak and proactive testing and evaluation of wells to prevent a leak from even starting. SB 887 also addresses the public communication problems experienced at the start of the Aliso Canyon leak by requiring improved planning and more rapid and complete reporting and dissemination of information to the public." ARGUMENTS IN OPPOSITION None received COMMENTS Double-referral . This bill is double-referred to this Committee and to the Senate Environmental Quality Committee (Senate EQ). Parts of this bill subject to Senate EQ's jurisdiction and included here for context and completeness. Work-in-progress . This bill is a work-in-progress. While the author's intent to revise minimum standards for natural gas storage wells and their operations is evident, necessary technical specifics and the nuances and implications of certain potential requirements continue to be evaluated by the author's office with input from experts and stakeholders (see, for example, the concerns raised by independent gas storage operators detailed below). In addition to its new emergency regulations, the division has recently released a pre-rulemaking discussion document for gas storage operations that goes beyond the material included in emergency regulations. The author's office may further consider how to incorporate the division's existing and proposed regulations, the approaches of other states, and industry recommended practices into an appropriate statutory framework. The Committee may wish to direct staff to continue working with the author's office as the bill progresses. Concern raised by independent gas storage facility operators . Three independent gas storage facility operators writing jointly expressed numerous concerns regarding this bill. Specifically, the operators noted that the seasonality of their operations and their business can be markedly different from those of public utilities. In addition, their facilities are located in rural areas, their wells are designed specifically for natural gas storage and are typically newer construction, and there are no co-located oil and gas production wells that could present risks SB 887 (Pavley) Page 7 of ? to the gas storage wells. In general, the operators supported site-specific risk-based assessments and emphasized that each storage facility and its wells present a unique situation. They also noted their commitment to safety and the potential risks associated with repeated "downhole" operations. Aliso Canyon safety criteria. The division, in consultation with independent experts from national laboratories, released a comprehensive safety review plan for Aliso Canyon. The safety review requires temperature and noise logs to check for existing leaks on all wells serving the facility (approximately 115). Following a review of these logs (and any necessary remediation), wells will either go through an additional four tests to return to service, be temporarily plugged-and-abandoned or permanently plugged-and-abandoned. The four additional tests that must be successfully completed include a casing thickness evaluation, a cement bond log, a multi-caliper arm evaluation and a pressure test. These are proactive tests to evaluate the risk of well integrity failure during operation. Additionally future withdrawals at the facility will be through tubing and packer only to protect the integrity of the casing. The division issued an order on March 4, 2016 to SoCal Gas regarding the steps necessary to complete the comprehensive safety review. Investigation of the Aliso Canyon leak . The commission and the division are currently investigating the causes of the leak at Aliso Canyon. A preliminary report is not expected for several months at the earliest. A "root cause" analysis of the leak by a third party will likely be released earlier (possibly by the fall). Committee oversight/informational hearing. This Committee will be holding an oversight/informational hearing on natural gas storage well safety in the near future. Recent related legislation Senate Bills 380, 887, 888, 1383 and 1441 are part of the Senate's announced bill package to respond to the Aliso Canyon leak. AB 1902 (Wilk, 2016) would establish a 3 year statute of limitations for Aliso Canyon leak-related civil actions (before the Assembly Judiciary Committee). SB 887 (Pavley) Page 8 of ? AB 1903 (Wilk, 2016) would require the commission and the Department of Public Health to conduct a long-term health study of the Aliso Canyon leak (before the Assembly Utilities and Commerce Committee). AB 1904 (Wilk, 2016) would require the Office of Environmental Health Hazard Assessment to undertake a study of odorants (before the Assembly Environmental Safety and Toxic Materials Committee). AB 1905 (Wilk, 2016) would require an independent science study of natural gas storage facilities (before the Assembly Natural Resources Committee). AB 2729 (Williams, 2016) would revise oil and gas well operations, including idling requirements (before the Assembly Natural Resources Committee). AB 2748 (Gatto, 2016) would facilitate the claims for property damage stemming from the Aliso Canyon leak (before the Assembly Judiciary Committee). AB 2756 (Thurmond, 2016) would revise enforcement processes and procedures for oil and gas wells (before the Assembly Natural Resources Committee). AB 2798 (Gatto, 2016) would require applicants to build new power plants and electric transmission lines to determine the effect of the plant on natural gas storage facilities (before the Assembly Utilities and Commerce Committee). SB 380 (Pavley, 2016) would extend the Administration's moratorium on injection at the Aliso Canyon facility until the wells are determined to be safe (before the Assembly Appropriations Committee). SB 888 (Allen, 2016) would establish the Governor's Office of Emergency Services as the lead state responder in the event of a natural gas leak and bar leak-related costs from being borne by rate payers (before the Senate Energy Committee). SB 1383 (Lara, 2016) would establish goals for the emissions of short-lived climate pollutants (including methane) (before Senate EQ). SB 887 (Pavley) Page 9 of ? SB 1441 (Leno, 2016) would require vented and fugitive emissions to count against compliance requirements (before the Senate Energy Committee). SB 248 (Pavley, 2015) would require the division to update it standards, among other provisions (2 year bill in the Assembly Appropriations Committee). SUPPORT American Lung Association in California Asian Pacific Environmental Network California Coastal Protection Network CalPIRG Clean Water Action Consumer Attorneys of California Environment California Natural Resources Defense Council Porter Ranch Neighborhood Council Scott Schmerelson, LAUSD Board Member, District 3 Sierra Club California Santa Susana Mountain Parks Association South Coast Air Quality Management District OPPOSITION None Received -- END --