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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