BILL ANALYSIS Ó SENATE COMMITTEE ON ENVIRONMENTAL QUALITY Senator Wieckowski, Chair 2015 - 2016 Regular Bill No: SB 887 ----------------------------------------------------------------- |Author: |Pavley | ----------------------------------------------------------------- |-----------+-----------------------+-------------+----------------| |Version: |3/28/2016 |Hearing |4/20/2016 | | | |Date: | | |-----------+-----------------------+-------------+----------------| |Urgency: |No |Fiscal: |Yes | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant:|Dan Brumbaugh | | | | ----------------------------------------------------------------- SUBJECT: Natural gas storage wells ANALYSIS: Existing law: 1) Establishes the Division of Oil, Gas and Geothermal Resources (DOGGR) in the Department of Conservation at the Natural Resources Agency. DOGGR is the state's oil and gas regulator, and the Supervisor of DOGGR has broad authority to oversee oil and gas operations to prevent damage to life, health, property, and natural resources, among other requirements (Public Resources Code §3106). 2) Provides the California Air Resources Board (ARB) with primary responsibility for control of mobile sources of air pollution, and for greenhouse gas emissions (Health and Safety Code §39000 et seq. and §39500 et seq.). 3) Provides that air pollution control districts (APCDs) and air quality management districts (AQMDs) have primary responsibility for controlling air pollution from stationary sources and non-greenhouse gases (HSC §40000 et seq.). 4) Under the California Global Warming Act of 2006 (also known as AB 32, Núñez & Pavley), requires ARB to determine the 1990 statewide greenhouse gas (GHG) emissions level and approve a statewide GHG emissions limit that is equivalent to that level, to be achieved by 2020, and to adopt GHG emissions reductions measures by regulation (HSC §38500 et seq.). SB 887 (Pavley) Page 2 of ? 5) Requires ARB to develop a comprehensive short-lived climate pollutant strategy by January 1, 2016, in coordination with other state agencies and local air quality management and air pollution control districts (HSC §39730). 6) Provides ARB authority for monitoring of air quality from stationary sources including determining "the availability, technological feasibility, and economic reasonableness of monitoring devices to measure and record continuously the emissions concentration and amount of nonmethane hydrocarbons, oxides of nitrogen, oxides of sulfur, reduced sulfur compounds, particulate matter, and carbon monoxide emitted by stationary sources." ARB shall also "specify the types of stationary sources, processes, and the contaminants, or combinations thereof, for which a monitoring device is available, technologically feasible, and economically reasonable." (HSC §42700 et seq.) This bill provides a framework for reforming oversight of natural gas storage well facilities, including mandating minimum standards for equipment inspections, monitoring, and testing; training of personnel; leak monitoring; response planning; reporting; and sharing of information. The bill also phases out wells that fall within a new buffer zone around schools and residential housing, and requires the independent development and incorporation of best practices into regulations, a risk assessment, and penalties for the waste of natural gas. More specifically, this bill: 1) Requires ARB to develop, with appropriate consultation of the local air district and DOGGR, a natural gas storage facility monitoring program that includes continuous monitoring of ambient natural gas concentrations throughout a natural gas storage facility. The continuous monitoring program may be supplemented by daily leak detection checks; 2) Requires operators of a natural gas storage facility to submit proposed plans to implement the program to ARB for approval; 3) Requires that monitoring data be provided to ARB, and that DOGGR make available all materials to the public via their website; SB 887 (Pavley) Page 3 of ? 4) Requires DOGGR, by January 1, 2018, to annually inspect all natural gas storage wells; 5) Requires existing natural gas storage wells, as of December 31, 2016, to comply with these requirements by an unspecified future date; 6) Requires the phase-out of older wells of unspecified age by an unspecified future date; 7) Requires new standards for gas storage wells including, as specified, the use of surface controlled, subsurface safety valves on all wells; 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; annual re-testing of wells at high risk of failure; gas injections and withdrawals limited to tubing only, with no contact with the well casing; continuous well annular pressure and flow rate monitoring; DOGGR 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. Any deviations from approved programs, plans, and other conditions and protocols requires prior written approval from the DOGGR Supervisor; and enhanced reporting of all well-related activities to DOGGR. 8) Requires continuous monitoring of ambient concentrations of natural gas and annual proactive evaluations for wells that fall within 10,000 feet of sensitive receptors, defined as schools, hospitals, and residential housing; 9) Requires DOGGR to use (a) setbacks from sensitive receptors of unspecified distance when issuing permits, and (b) phase-out, via plugging and abandoning, the use of existing wells violating this provision by an unspecified date; 10) Requires public review of the location of a natural gas storage well, either new or to be converted from an existing well, prior to DOGGR approval of the storage well; SB 887 (Pavley) Page 4 of ? 11) Requires immediate leak notification by operators to DOGGR, and subsequent online dissemination of information by DOGGR to the public within 24 hours of notification, with regular updates thereafter until the leak is stopped; 12) Requires starting the process of drilling a relief well within 24 hours of the discovery of a significant leak; 13) Requires DOGGR to convene an independent panel of experts to determine best practices for natural gas storage facilities, as specified, to be incorporated into DOGGR's regulations; 14) Requires DOGGR, in consultation with the Office of Environmental Health Hazard Assessment, the Department of Public Health, and the Department of Industrial Relations, to perform a risk assessment of natural gas storage wells, as specified; 15) Requires operators to disclose the full history of their wells, including all operations, injections, production, and emplacement of any materials into wells, to DOGGR; 16)Requires DOGGR to post all materials submitted in compliance with above provisions 4) through 15) to its website for access by the public; 17)Allows the public to bring suit for writ of mandate against DOGGR for failures to enforce provisions 4) through 16); and 18) In the event of a leak, provides for existing potential fines to be applied as civil penalties for the unreasonable waste of natural gas, in addition to penalties for other violations. Background 1) Regulation of natural gas storage wells. Although natural gas storage facilities are subject to the overall utilities jurisdiction of the California Public Utilities Commission SB 887 (Pavley) Page 5 of ? (CPUC), natural gas storage wells and associated piping and equipment are under the jurisdiction of DOGGR. Natural gas storage wells represent a small component of the overall Underground Injection Control (UIC) program (approximately 400 wells out of 52,000 statewide), which generally covers permitting, inspection, enforcement, mechanical integrity testing, plugging and abandonment oversight, data management, and public outreach. DOGGR has acknowledged widespread failures in the implementation of its UIC program, and has released a "Renewal Plan" to guide its commitment to reform. DOGGR has received personnel and funding through recent budgets to improve program implementation, data management, enforcement and other functions. Pursuant to UIC 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, DOGGR would issue a "project approval letter" setting specific requirements (e.g., maximum storage pressure) for the wells. The project approval letters for the 14 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 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. In addition, "field rules" may be established for a reservoir that also set requirements for wells. 2) The catastrophic leak at Aliso Canyon and its local impacts. On October 23, 2015, Southern California Gas Company (SoCalGas) discovered a significant natural gas leak from "Standard Sesnon 25" (SS 25) well at their Aliso Canyon Natural Gas Storage Facility. This well was originally drilled in 1954 for oil and gas production and was subsequently converted to a natural gas storage well. SoCalGas was aware of increasing well integrity problems at Aliso Canyon and had proposed a Storage Integrity Management Program (SIMP) to the CPUC involving 18 wells drilled from 1943-1955 and later converted in the 1970s to gas storage SB 887 (Pavley) Page 6 of ? wells (as with SS 25). SS 25, however, was not one of those wells designated in the program. The Aliso Canyon gas storage facility is located adjacent to the community of Porter Ranch within the city of Los Angeles. Some wells at the Aliso Canyon facility are less than one mile away from homes, although SS 25 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 mercaptin odorants) the next day. Several days passed before SoCalGas acknowledged to the community that a significant uncontrolled leak was occurring. While SoCalGas called in both DOGGR 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 SoCalGas's expense). The DOGGR Supervisor issued two orders to SoCalGas 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 DOGGR 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. 3) Climate impacts from the Aliso Canyon leak. In addition to the public health concerns, ARB's initial coarse estimates of the amount of methane released, based on repeated aerial sampling, are about 95,000 metric tons. According to ARB, the leak added approximately 20% to the statewide methane emissions during its duration. SoCalGas is in the process of conducting their own analysis of lost gas based on changes in the volume of natural gas within the reservoir. Natural gas (methane) is a potent short-lived climate pollutant (SLCP), which has about 84 times more greenhouse warming potential (GWP) per kilogram over a 20-year time frame than carbon dioxide. On December 18, 2015, SoCalGas issued a press release stating that it "recognizes the impact this incident is having on the SB 887 (Pavley) Page 7 of ? environment. ?we intend to mitigate environmental impacts from the actual natural gas released from the leak and will work with state officials to develop a framework that will help us achieve this goal." Subsequent statements by SoCalGas reiterated this commitment. Governor Brown's State of Emergency proclamation directed the state to develop a program to fully mitigate the leak's emissions of methane, with priority on projects that reduce short-lived climate pollutants. ARB issued the Aliso Canyon Methane Leak Climate Impacts Mitigation Program on March 31, 2016. This plan provided a rationale that full mitigation of the impacts of the Aliso Canyon requires an emphasis on ton-for-ton reductions of methane rather than other greenhouse gases, and that the GWP of the leaked methane is best estimated using the 20-year time frame. As stated in ARB's new Proposed Short-Lived Climate Pollutant Reduction Strategy (April 2016), "the use of GWPs with a time horizon of 20 years better captures the importance of the SLCPs and gives a better perspective on the speed at which SLCP emission controls will impact the atmosphere relative to CO2 emission controls." Just a week prior to the Mitigation Program's release, however, SoCalGas issued a letter to ARB stating that its mitigation requirement is entirely voluntary and that for its mitigation, it will use a more drawn out and less stringent 100-year time frame better suited for estimating the global warming potential of CO2 rather than methane. Over the 100-year period, because it is atmospherically potent but short-lived, methane has 28 times more GWP per kilogram than carbon dioxide (versus 84 times over 20 years), so the use of this metric allows SoCalGas to justify a smaller, cheaper mitigation program than would otherwise occur if the more methane-appropriate metric were used. Although Proposed Short-Lived Climate Pollutant Reduction Strategy states that ARB is developing and implementing rules "to limit methane leaks from the oil and gas production, processing, and storage sector, and from the natural gas pipeline system," fugitive emissions from these sources are currently not directly regulated by ARB. 4) Aliso Canyon emergency regulations and subsequent reform and SB 887 (Pavley) Page 8 of ? investigation. DOGGR released emergency regulations for gas storage wells during the leak which went into effect in February 2016. These emergency regulations include a number of provisions and require operators to provide complete project data to DOGGR, allow DOGGR 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. DOGGR, in consultation with independent experts from national laboratories, released a Comprehensive Safety Review of Aliso Canyon. The safety review requires temperature and noise logs to check for existing leaks on all wells. 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. DOGGR issued an order on March 4, 2016 to SoCalGas regarding the steps necessary to complete the comprehensive safety review. The CPUC and DOGGR are currently investigating the causes of the leak at Aliso Canyon. A preliminary report is not expected for several months at the earliest. SoCalGas has also contracted with Blade Energy Partners (Frisco, Texas) for a "root-cause" analysis of the leak, which may be released by the fall. Comments 1) Purpose of Bill. 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. This disruption SB 887 (Pavley) Page 9 of ? continues even though the leak was finally stopped in February. We must not allow a rapid return to 'business-as-usual' when it comes to the oversight and monitoring of these wells and facilities. 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." "After the leak started, state and local regulators worked diligently to protect the public and stop it. Going forward, it is important that new minimum standards for gas storage wells be set to ensure safe operation, including the development of best practices by experts. SB 887 institutes proactive testing and evaluation of wells to prevent leaks from starting. This is the best method to protect against another disaster on the scale of Aliso Canyon. If a leak does occur, however, new air monitoring requirements will help to identify it quickly. This will help to limit emissions of methane, a potent short-lived climate pollutant, to the atmosphere." "When the South Coast Air Quality Management Board went to investigate the facility at Aliso Canyon after the well failure, an additional 15 leaking pieces of equipment were found. The CPUC just reported that another 200 leaks were found at other gas storage facilities statewide during testing required following Aliso Canyon. Eight of those leaks were serious. These results highlight the need for SB 887 and for better oversight and monitoring." "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." 2) Work in progress. SB 887 will require enhanced risk management planning, training of on-site personnel, standards and inspections of equipment, routine emissions monitoring, and overall public transparency. The author notes, though, that the bill is still a work in progress, with several threshold distances, commencement dates, and deadlines still requiring specification. While the author's intent to revise minimum standards for natural gas storage wells and their operations is evident, the author's office continues to SB 887 (Pavley) Page 10 of ? evaluate, with input from experts and stakeholders (e.g., the concerns raised by independent gas storage operators mentioned below), necessary technical specifics, nuances, and implications of certain potential requirements. In addition to its new emergency regulations, DOGGR 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 is also continuing to discuss how to incorporate DOGGR's existing and proposed regulations, the approaches of other states, and industry recommended practices into an appropriate statutory framework. 3) Concerns raised by independent natural gas storage operators. Three independent storage providers (ISPs) jointly expressed numerous concerns regarding this bill. Specifically, the ISPs noted their facilities are located in rural areas, their wells are designed specifically for natural gas storage and are typically of newer construction (1999-2012) and therefore "represent the best well technology and design for our individual geologic and geographic conditions." There are also no co-located oil and gas production wells that could present risks to the gas storage wells. Last, ISPs, unlike the natural gas distribution utilities, do not have any captive rate base for cost recovery, so the owners are wholly at risk, and their rates are market-based. In general, the ISPs support site-specific, risk-based assessments and emphasize that each storage facility and its wells present a unique situation. They also note their commitment to safety and the potential risks of leaks associated with the repeated "downhole operations," including casing inspection logging, visual and corrosive logging, and the placement and maintenance of subsurface safety valves. The author's office reports continuing to work to address these issues. 4) Strengthening risk management. SB 887 proposes to better manage the risk of leaks from natural gas storage facilities in a number of important ways, though there is opportunity to strengthen some of the pieces. a) The bill currently requires a one-time independent expert review panel to develop best practice recommendations regarding natural gas storage facility SB 887 (Pavley) Page 11 of ? regulations (proposed §3140). As technology and experience with that technology evolves, however, so should the best practices. The bill should require DOGGR to periodically review and update, if necessary, how their regulations incorporate best practices. An amendment is therefore needed to require that DOGGR periodically review and update, when necessary, current best practices and how these should be incorporated into their regulations. 5) Further policy questions. The immensity of the environmental impacts from the Aliso Canyon leak, as well as the human displacement and health effects, highlight the enormous risks associated with some natural gas storage facilities. Other natural gas storage facilities, presumably due to some combination of smaller size, more advanced technology, different geological formations, etc., would likely fall somewhere lower on the risk gradient. Such a range of characteristics and associated risks raise questions about minimal standards that all facilities should face, as well as higher standards that higher risk facilities should face. SB 887 bill requires at least annual re-testing of natural gas storage wells found to be at high risk of a loss of integrity (proposed §3134(b)), though what constitutes high risk is not specified, which in turn raises questions regarding how precautionary the provision is. For example, for wells at a "high risk of failure," is annual re-testing too infrequent, too frequent, or just right? SB 887 mandates that DOGGR, in consultation other relevant agencies, perform a risk assessment of natural gas storage wells (proposed §3141). SB 887 currently emphasizes across-the-board minimal standards for all storage facilities. A complementary approach would be to take better advantage of the planned risk analyses, and require storage facilities with greater risks to have greater safety and environmental requirements than lower risk storage facilities. Under such a scenario, very large facilities like Aliso Canyon that present substantially greater risk of catastrophic emissions than do smaller storage facilities would face greater precautionary requirements. As the bill moves forward, the author may wish to continue considering how to craft an approach where the pro-active, precautionary requirements scale across categories of risk SB 887 (Pavley) Page 12 of ? for both individual wells and whole storage facilities sharing the same reservoirs. Related/Prior 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. SB 380 (Pavley, 2015) extends the Administration's moratorium on injection at the Aliso Canyon facility until the wells are determined to be safe, and is currently before the Assembly Appropriations Committee. SB 888 (Allen, 2016) establishes 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, and is currently before the Senate Energy, Utilities, and Commerce Committee. SB 1383 (Lara, 2016) establishes goals for the emissions of short-lived climate pollutants (including methane), and is currently before Senate Appropriations Committee. SB 1441 (Leno, 2016) requires vented and fugitive emissions to count against compliance requirements, and is currently before the Senate Environmental Quality Committee. AB 1882 (Williams, 2016) prevents the approval of underground injection well projects without concurrence of the State Water Resources Control Board, and is currently before the Assembly Appropriations Committee. AB 1902 (Wilk, 2016) establishes a three-year statute of limitations for Aliso Canyon leak-related civil actions, and is currently before the Assembly Judiciary Committee. AB 1903 (Wilk, 2016) requires the commission and the Department of Public Health to conduct a long-term health study of the Aliso Canyon leak, and is currently before the Assembly Appropriations Committee. AB 1904 (Wilk, 2016) requires the Office of Environmental Health Hazard Assessment to undertake a study of odorants, and is SB 887 (Pavley) Page 13 of ? currently before the Assembly Appropriations Committee. AB 1905 (Wilk, 2016) requires an independent science study of natural gas storage facilities, and is currently before the Assembly Appropriations Committee. AB 2729 (Williams, 2016) revises oil and gas well operations, including idling requirements, and is currently before the Assembly Environmental Safety and Toxic Materials Committee. AB 2748 (Gatto, 2016) facilitates the claims for property damage stemming from the Aliso Canyon leak, and is currently before the Assembly Judiciary Committee. AB 2756 (Thurmond, 2016) revises enforcement processes and procedures for oil and gas wells, and is currently before the Assembly Appropriations Committee. AB 2798 (Gatto, 2016) requires applicants to build new power plants and electric transmission lines to determine the effect of the plant on natural gas storage facilities, and is currently before the Assembly Utilities and Commerce Committee. SB 248 (Pavley, 2015) requires the division to update it standards, among other provisions, and is currently a two-year bill in the Assembly Appropriations Committee. DOUBLE REFERRAL: This measure was heard in the Senate Natural Resources and Water Committee on March 29, 2015, and passed out of committee with a vote of 7-2. SOURCE: Senator Pavley SUPPORT: American Lung Association in California Asian Pacific Environmental Network California Coastal Protection Network CalPIRG Clean Water Action Consumer Attorneys of California Environment California Los Angeles County Board of Supervisors SB 887 (Pavley) Page 14 of ? Los Angeles Unified School District Natural Resources Defense Council Porter Ranch Neighborhood Council Scott Schmerelson, LAUSD Board Member, District 3 Sierra Club California Santa Susana Mountain Park Association South Coast Air Quality Management District OPPOSITION: None received ARGUMENTS IN SUPPORT: According to the Consumer Attorneys of California, SB 887 seeks to prevent future natural gas leaks by "setting new minimum standards for natural gas storage wells including annual inspections, mandatory setbacks from homes and schools, stricter requirements near homes and schools, subsurface safety valves, regular proactive and quantitative evaluations of well integrity, continuous well operation and air quality monitoring, and limiting production and injection to well tubing only, among others. It would also require the phase-out of old wells and require existing wells comply with SB 887's requirements in the future. The bill would also? increase penalties for wasting gas to $10,000 - $25,000 per violation per day, among other robust consumer protection measures." CalPIRG writes that "this bill requires oversight agencies to convene a panel of independent experts to develop best practices for natural gas storage, perform a risk assessment of natural gas wells and report findings to the Legislature, annually inspect all gas storage wells, and enforce prescribed safety standards. The bill also requires the State Air Resources Board to develop guidelines for a monitoring program to track ambient concentrations of natural gas around facilities to identify leaks faster." A letter from a number of environmental and public health organizations notes that "This bill also provides greater transparency by requiring utilities to disclose all well-related operations and activities to DOGGR. It also requires that the proposed methane gas well location be publically reviewed before DOGGR can permit digging. Most importantly, it requires utilities to notify DOGGR of leaking wells immediately and DOGGR must post leaking well information and all gas storage well SB 887 (Pavley) Page 15 of ? materials online." -- END --