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
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          |Author:    |Pavley                 |           |                 |
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          |Version:   |March 28, 2016                                       |
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          |Urgency:   |No                     |Fiscal:    |Yes              |
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          |Consultant:|Katharine Moore                                      |
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                         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  







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          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.









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          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.








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          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  








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            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  








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          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  








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          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).









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          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).








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          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 --