BILL ANALYSIS Ó
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator Wieckowski, Chair
2015 - 2016 Regular
Bill No: SB 887
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|Author: |Pavley |
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|Version: |3/28/2016 |Hearing |4/20/2016 |
| | |Date: | |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Dan Brumbaugh |
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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.).
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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;
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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;
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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
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(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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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materials online."
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