BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session SB 887 (Pavley) - Natural gas storage wells ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: April 26, 2016 |Policy Vote: N.R. & W. 7 - 2, | | | E.Q. 6 - 1 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: Yes | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: May 16, 2016 |Consultant: Narisha Bonakdar | | | | ----------------------------------------------------------------- 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. SB 887 (Pavley) Page 1 of ? 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 SB 887 (Pavley) Page 2 of ? 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; SB 887 (Pavley) Page 3 of ? 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; SB 887 (Pavley) Page 4 of ? 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 SB 887 (Pavley) Page 5 of ? 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. SB 887 (Pavley) Page 6 of ? 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. SB 887 (Pavley) Page 7 of ? 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. SB 887 (Pavley) Page 8 of ? -- END --