BILL ANALYSIS Ó SB 887 Page 1 SENATE THIRD READING SB 887 (Pavley) As Amended August 17, 2016 Majority vote SENATE VOTE: 30-9 ------------------------------------------------------------------ |Committee |Votes|Ayes |Noes | | | | | | | | | | | | | | | | |----------------+-----+----------------------+--------------------| |Natural |7-2 |Williams, Cristina |Jones, Harper | |Resources | |Garcia, Gomez, | | | | |Hadley, McCarty, Mark | | | | |Stone, Wood | | | | | | | |----------------+-----+----------------------+--------------------| |Appropriations |11-2 |Gonzalez, Bloom, |Bigelow, Obernolte | | | |Bonilla, Bonta, | | | | |Eggman, | | | | | | | | | | | | | | |Eduardo Garcia, | | | | |Quirk, Santiago, | | | | |Weber, Wood, McCarty | | | | | | | | | | | | ------------------------------------------------------------------ SB 887 Page 2 SUMMARY: Provides a framework for reforming the oversight of gas storage wells. Specifically, this bill: 1)Requires Air Resources Board (ARB), in consultation with any local air district and Division of Oil, Gas, and Geothermal Resources (DOGGR), to develop a natural gas storage facilities (Facility) monitoring program that includes continuous monitoring of ambient concentrations of natural gas at a Facility to identify natural gas leaks. Requires the program to include guidelines for continuous monitoring that include optical gas imaging, where applicable, and accurate quantitative monitoring of natural gas concentrations. 2)Requires an operator of a Facility to develop and submit to the ARB a Facility monitoring plan and the monitoring data. 3)Defines "gas storage well" as an active or idle well used primarily to inject natural gas or withdraw natural gas from an underground natural gas storage facility. 4)Requires, on or before January 1, 2018, all gas storage wells to have commenced a mechanical integrity testing regime that includes leak testing, casing wall thickness inspection, pressure testing, and any other testing deemed necessary by DOGGR. 5)Requires DOGGR to promulgate regulations that establish standards for the design, construction, and maintenance of all gas storage wells to ensure that integrity concerns with a gas storage well are identified and addressed before they can become a threat to life, health, property, the climate, or natural resources. SB 887 Page 3 6)Requires gas storage wells to be designed, constructed, and maintained to ensure that a single point of failure does not pose an immediate threat of loss of control of fluids. 7)Requires operators to submit for the Oil and Gas Supervisor's (Supervisor) approval various material including: a) Data demonstrating stored gas is confined to the approved zone; b) A site-specific risk management plan; c) A natural gas leaks prevention and response program; d) A protocol for public notice of a large, uncontrollable leak; e) A plan for corrosion monitoring and evaluation; f) Planned risk mitigation efforts; and, g) A regular maintenance program. 8)Requires DOGGR to perform unannounced random onsite inspections of some gas storage wells annually. 9)Requires an operator to develop and maintain a comprehensive gas storage well training and mentoring program for employees. Specifies if storage field employees are represented by a SB 887 Page 4 labor union, the operator must consult with the relevant union local. 10)Alters annual fees charged by Supervisor to support regulatory efforts at DOGGR for Facilities to include wells that are not actively injecting and withdrawing gas and specifies a new formula for determining how to apportion the fees. 11)Requires an additional charge to defray DOGGR's costs for its response efforts to a large uncontrolled release of gas from a Facility. Requires the additional charge to be imposed entirely on the operator of the Facility where the leak occurred. 12)Requires the Public Utility Commission (CPUC) to ensure a risk assessment is conducted on any new Facility evaluating potential impacts of a leak from the facility on public and environmental health, safety, and welfare. 13)Requires DOGGR's emergency regulations related to underground gas storage projects to remain in effect until January 1, 2019. EXISTING LAW: 1)Establishes DOGGR as the state's oil and gas regulator. 2)Requires the Supervisor to supervise the drilling, operation, maintenance, and abandonment of wells and the operation, maintenance, and removal or abandonment of tanks and facilities attendant to oil and gas production. SB 887 Page 5 3)Defines "well" to mean any oil or gas well or well for the discovery of oil or gas; any well on lands producing or reasonably presumed to contain oil or gas; any well drilled for the purpose of injecting fluids or gas for stimulating oil or gas recovery, repressuring or pressure maintenance of oil or gas reservoirs, or disposing of waste fluids from an oil or gas field; any well used to inject or withdraw gas from an underground storage facility; or any well drilled within or adjacent to an oil or gas pool for the purpose of obtaining water to be used in production stimulation or repressuring operations. 4)Requires the operator of any well, before commencing the work of drilling the well, to file with the Supervisor a notice of intention (NOI). Requires approval of the NOI by the Supervisor. Authorizes the Supervisor to deny approval of proposed well operations for failure to comply with an order until the operator brings its existing well operations into compliance with the order. 5)Prohibits the unreasonable waste of natural gas by the act, omission, sufferance, or insistence of the lessor, lessee, or operator of any land containing oil or gas, or both. 6)Authorizes CPUC to regulate gas corporations, including Facilities. 7)Requires Facilities to receive a Certificate of Public Convenience and Necessity (CPCN) before constructing a Facility. Requires that the CPUC grant a CPCN on the grounds that the present or future public convenience and necessity requires or will require the Facility. 8)Requires, pursuant to the California Global Warming Solutions SB 887 Page 6 Act (AB 32 (Núñez), Chapter 488, Statutes of 2006), ARB to adopt a statewide greenhouse gas (GHG) emissions limit equivalent to 1990 levels by 2020 and to adopt rules and regulations to achieve maximum technologically feasible and cost-effective GHG emission reductions. 9)Requires the Supervisor to continue the prohibition against Southern California Gas Company (SoCalGas) injecting any natural gas into the Aliso Canyon Facility located in the County of Los Angeles until a comprehensive review of the safety of the gas storage wells at the Facility is completed and the Supervisor determines that well integrity has been ensured by the review. Prohibits the Supervisor from lifting the prohibition on injection until the Executive Director of the CPUC has concurred via letter with the Supervisor regarding his or her determination of safety. 10)Requires the CPUC, no later than July 1, 2017, to open a proceeding on the feasibility of minimizing or eliminating use of the Aliso Canyon Facility while still maintaining energy and electric reliability for the region. FISCAL EFFECT: According to the Assembly Appropriations Committee: 1)Increased first-year costs of approximately $4.68 million and ongoing annual costs of approximately $3.75 million (Oil, Gas and Geothermal Administrative Fund) for DOGGR regulatory activities. 2)Potentially significant costs, in the million dollar range, for OEHHA to conduct the risk assessment (Oil, Gas and Geothermal Administrative Fund). SB 887 Page 7 3)Increased costs of approximately $360,000 (Oil, Gas and Geothermal Administrative Fund) for DPH to contribute to the risk assessment. 4)Minor and absorbable costs to the Air Resources Board (ARB) and the California Public Utilities Commission (PUC). COMMENTS: 1)Aliso canyon leak. On October 23, 2015, a natural gas storage well, known as "SS-25," owned by SoCalGas and located in the Aliso Canyon storage field in close proximity to the Porter Ranch neighborhood in Los Angeles County began leaking natural gas. The leak continued until it was initially controlled on February 11, 2016, and the well was successfully sealed on February 18, 2016. During the four months the well leaked, there were numerous attempts to control it. All attempts to stop the leak from the top of the well failed. A relief well was finally able to stop the natural gas leak by plugging the leaking well at its base. According to a recent study, the leak at Aliso Canyon was the largest natural gas leak recorded in the United States, doubling the methane emission rate of the entire Los Angeles basin. Methane is a potent GHG with a global warming potential more than 80 times as powerful as carbon dioxide. The South Coast Air Quality Management District has received thousands of complaints regarding the odor. Complaints by residents suggest that mercaptans, which are odorants required to be added to natural gas, were present in Porter Ranch at varying levels since the gas leak started. Some people may experience adverse health effects to the strong odors of mercaptans, such as nausea and headaches. In mid-November, the Los Angeles County Department of Public Health, citing SB 887 Page 8 public health concerns associated with the use of odorants in the natural gas, ordered SoCal Gas to provide temporary housing relocation assistance to affected residents. Over 8,000 households were relocated due to the leak. Now that the leak has been stopped, residents are returning home, regulators are investigating the cause of the leak, and a comprehensive safety review of the other 114 wells at the field is in progress. 2)Natural gas storage facilities. Natural gas providers inject natural gas into large underground reservoirs for storage before later withdrawing the gas for sale during peak load periods. These underground reservoirs often contained oil or gas that has already been extracted. Natural gas providers utilize these facilities to reduce the cost of procurement and to maintain adequate supply of natural gas during peak times. While the CPUC regulates natural gas providers, natural gas transmission lines, and the permitting of Facilities, it is DOGGR that regulates the wells that natural gas is injected into and withdrawn from. Gas storage injection wells are the only type of injection wells in DOGGR's Underground Injection Control (UIC) program that are not part of the primacy agreement with US Environmental Protection Agency. DOGGR's UIC program regulates 14 active gas storage facilities in 12 separate fields across the state to ensure well construction and integrity, appropriateness of the injection site, and zonal isolation of the injections. Each Facility may contain dozens of active gas storage wells. There are 343 active and 85 idle natural gas storage wells in the state. Some natural gas storage facilities have been in operation since the 1940s, and approximately half of the active wells are over 40 years old. Natural gas storage wells vary in construction, depth, design, age, location, and operating conditions. In Aliso Canyon, the wells were drilled in the 1940s for production purposes and then converted into storage wells. The wells at Aliso Canyon do not contain a cement barrier along the entire length of the casing and have had a history of well integrity issues. SB 887 Page 9 3)State actions. On January 6, 2016, the Governor issued a proclamation of a state of emergency, which directed several state agencies to act in response to the Aliso Canyon gas leak. These actions included all of the following: a) Direction to DOGGR to continue prohibiting all injections into Aliso Canyon; b) Direction to CPUC and California Energy Commission (CEC) to reduce the pressure of the facility by withdrawing gas; c) Direction to ARB to require real-time monitoring of emissions; d) Direction to Office of Environmental Health Hazard Assessment to review public health concerns, ensure energy and natural gas reliability; e) Direction to DOGGR to promulgate emergency regulations to require new safety and reliability measures for underground natural gas storage facilities; and, f) Direction to DOGGR, CPUC, ARB, and CEC to assess the long-term viability of natural gas storage facilities. On February 5, 2016, DOGGR established emergency regulations to improve the regulation of gas storage wells. The regulations include the requirement that within six months (August 6) after the regulations become effective, the operator of a gas storage facility to submit a Risk Management SB 887 Page 10 Plan to DOGGR to assess the integrity and risk associated with their gas storage project. DOGGR is working with Lawrence Berkeley National Laboratory, Lawrence Livermore National Laboratory, and Sandia National Laboratory on its permanent regulations for gas storage wells. A discussion draft of the regulations was released July 8, 2016. This bill is consistent with the proposals in DOGGR's discussion draft. Analysis Prepared by: Michael Jarred / NAT. RES. / (916) 319-2092 FN: 0004390