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