BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 887 (Pavley) - Natural gas storage wells
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|Version: April 26, 2016 |Policy Vote: N.R. & W. 7 - 2, |
| | E.Q. 6 - 1 |
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|Urgency: No |Mandate: Yes |
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|Hearing Date: May 16, 2016 |Consultant: Narisha Bonakdar |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: SB 887 provides a framework for reforming oversight of
natural gas storage facilities. The bill mandates minimum
standards for equipment inspections, monitoring, and testing;
training of personnel; leak monitoring; response planning;
reporting; and information sharing. The bill also phases out
certain wells, and requires the independent development and
incorporation of best practices into regulations, a risk
assessment, and penalties for the waste of natural gas.
Fiscal
Impact:
First year costs of approximately $4.68 million and ongoing
costs of approximately $3.75 million (Oil, Gas and Geothermal
Administrative Fund) for Department of Conservation (DOC)
staffing costs resulting from increased regulatory activities
for underground gas storage facilities.
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Minor and absorbable costs to the Air Resources Board (ARB)
and the California Public Utilities Commission (CPUC).
Background:1) Regulation of natural gas storage wells. Although natural gas
storage facilities are subject to the overall utilities
jurisdiction of the CPUC, natural gas storage wells and
associated piping and equipment fall under the jurisdiction of
DOC's Division of Oil, Gas and Geothermal Resources (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.
Aliso Canyon gas leak 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 (Aliso Canyon). The
Aliso Canyon is located adjacent to the community of Porter
Ranch within the city of Los Angeles. Several days passed
before SoCalGas disclosed to the community that a significant
uncontrolled leak was occurring. The leak lasted for four
months, resulted in the relocation of more than 5,000 households
(at SoCal Gas's expense), and resulted in hundreds of public
health complaints. In addition to the public health concerns,
ARB's initial coarse estimates indicate that about 95,000 metric
tons of methane was released into the air, adding approximately
20% to the statewide methane emissions during the duration of
the leak.
The Administration's Response. On January 6, 2016, Governor
Brown issued a proclamation that declared the Aliso Canyon
situation an emergency. The emergency proclamation detailed the
administration's efforts to help stop the leak and directed
further action to protect public health and safety, ensure
accountability, and strengthen oversight of gas storage
facilities. The proclamation specifically directed DOGGR to
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promulgate emergency regulations imposing safety and reliability
standards for all underground gas storage facilities in
California
Aliso Canyon emergency regulations and subsequent reform and
investigation. DOGGR's emergency regulations for gas storage
facilities 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, and the use of leak detection
technology to monitor wells and equipment and the development of
risk management plans. Permanent regulations, which will expand
upon the emergency regulation, are expected to be released in
the near future.
Proposed Law:
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;
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3) Requires that monitoring data be provided to ARB, and that
DOGGR make available all materials to the public via their
website;
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;
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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;
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
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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.
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.
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.
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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
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.
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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.
Staff
Comments:1) 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 evaluate, with input
from experts and stakeholders, necessary technical specifics,
nuances, and implications of certain potential requirements.
2016-17 Budget. The Department of Conservation submitted a
Budget Change Proposal (BCP) for FY 2016-17 requesting 20
permanent positions and a baseline appropriation increase of
$4,172,000 from the Oil, Gas and Geothermal Administrative Fund
the first year and $3,269,000 ongoing. This proposal indicates
that the additional staff are necessary to implement increased
regulatory activities for underground gas storage facilities
resulting from the Governor's Proclamation and, presumably, the
proposed natural gas storage facility regulations (yet to be
released).
Potential litigation costs. The bill requires the phasing out of
wells placed into service prior to an unspecified year, and the
shut-in or denial a permits for projects within an unspecified
distance of sensitive receptors. These provisions could result
in litigation. According to the Department of Conservation,
this type of property rights case would require DOGGR to
contract with the Office of the Attorney General. Similar cases
have cost between $8,000 and $20,000 per month, with some cases
lasting up to one year.
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