BILL ANALYSIS Ó
SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
Senator Ben Hueso, Chair
2015 - 2016 Regular
Bill No: SB 888 Hearing Date: 4/19/2016
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|Author: |Allen |
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|Version: |1/20/2016 As Introduced |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Jay Dickenson |
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SUBJECT: Gas corporations: emergency management
DIGEST: This bill prohibits a gas corporation from recovering
from ratepayers any money paid in fines, penalties or damages to
residents, businesses and other parties harmed by a gas storage
leak. This bill also directs any penalties assessed against a
gas corporation for a gas storage facility leak into a dedicated
account, to be used for direct greenhouse gas (GHG) emissions
reductions. Finally, this bill designates the Office of
Emergency Services (OES) as the lead agency for emergency
response to a leak from a natural gas storage facility.
ANALYSIS:
Existing law:
1)Directs the California Air Resources Board (ARB) to monitor
and regulate sources of emissions of GHGs that cause global
warming in order to reduce GHG emissions to 1990 levels by
2020. (Health & Safety Code §38510 et seq.)
2)Authorizes the California Public Utilities Commission (CPUC)
to fix rates, establish rules, examine records, issue
subpoenas, administer oaths, take testimony, punish for
contempt, and prescribe a uniform system of accounts for all
public utilities, including electrical and gas corporations,
subject to its jurisdiction. (Article 12 of the California
Constitution)
3)Requires that all charges demanded or received by any public
utility for any product, commodity or service be just and
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reasonable, and that every unjust or unreasonable charge is
unlawful. (Public Utilities Code §451)
4)Prohibits a gas corporation from recovering any fine or
penalty in any rate approved by the CPUC. (Public Utilities
Code §959)
This bill:
1)Prohibits a gas corporation from recovering from ratepayers
any money paid in fines, penalties or damages to residents,
businesses and other parties harmed by a gas storage leak.
2)Directs any penalties assessed against a gas corporation for a
gas storage facility leak into a dedicated account, to be used
for direct GHG emissions reductions.
3)Designates the OES as the lead agency for emergency response
to a leak from a natural gas storage facility.
Background
Aliso Canyon Gas Storage Facility leak - a disaster. On October
23, 2016, the Southern California Gas Company (SoCalGas)
discovered a leak from a well at the company's Aliso Canyon Gas
Storage Facility. The Division of Oil, Gas and Geothermal
Resources (DOGGR) - the state agency responsible for regulating
Aliso Canyon's natural gas storage wells - reports that it was
informed of the leak soon after its discovery. Other state and
local agencies, as well as nearby residents threatened by the
leak, were notified sometime later.
For more than 100 days, the well continued to dump tons of
methane gas into the atmosphere, along with irritants and other
substances. According to the ARB, the leak emitted almost
100,000 tons of methane, a potent GHG, adding approximately 20
percent to statewide methane emissions over its duration.<1>
Many resident from nearby Porter Ranch suffered noxious odors.
Others reported more serious health effects, including nose
bleeds, rashes and respiratory problems. Hundreds were
relocated from their homes. Despite assurances from public
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<1>http://www.arb.ca.gov/research/aliso_canyon/arb_aliso_canyon_m
ethane_leak_climate_impacts_mitigation_program.pdf
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health agencies, many fear the leak's long term effects on
health and wellbeing.
According to the ARB SoCalGas has committed to paying for the
damage caused by its leak, including mitigation of the emission
of thousands of tons of methane. Last month, ARB released its
Aliso Canyon Methane Leak Climate Impacts Mitigation Program,
which recommends a program that will:
Generate significant and quantifiable reductions in
methane emissions within the agriculture and waste sectors.
Promote a more sustainable energy infrastructure by
promoting energy efficiency and decreasing reliance on
fossil fuels.
Address emissions from methane "hot spots" not presently
targeted under federal, state, or local laws.
The investigation into the cause of the leak continues. The
Attorney General, ARB, the City of Los Angeles and the County of
Los Angeles have formally accused SoCalGas of violating
California laws. The CPUC, which regulates the rates of
SoCalGas, is considering penalties against the gas company.
This bill attempts to address a number of discrete issues
related to or emerging from the Aliso Canyon leak. First, this
bill declares the OES as the lead agency for emergency response
to a leak of natural gas from a natural gas storage facility.
Second, this bill directs the CPUC to place any penalties
assessed against a gas corporation for a gas storage facility
leak into a special account and places requirements and
restrictions on the use of the monies in the account. Finally,
this bill prohibits a gas corporation from recovering in rates
approved by CPUC the money paid by the gas corporation for
fines, penalties, or damages to residents, businesses, and other
parties harmed by a gas storage facility leak.
It seems appropriate to designate OES as the lead agency to
respond to leaks from a natural gas storage facility. Such a
designation is consistent with OES's responsibility for the
coordination of overall state agency response to disasters.
Surely, the Aliso Canyon disaster could have benefited from
clear lines of responsibility (though, according to OES,
SoCalGas, in failing to notify it of the Aliso Canyon leak
sooner, violated existing law). The South Coast Air Quality
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Management District, writing in tentative support of this bill,
recommends additionally requiring OES to work in coordination
with local air districts.
The other aspects of this bill are addressed below.
GHG emissions reduction program allows for indirect emissions
reductions. Existing law - ARB's regulations to implement the
Global Warming Solutions Act - authorizes the use of "market
mechanisms" to reduce California's emissions of GHGs.
Specifically, ARB authorizes the creation of a "cap-and-trade"
market, in which covered entities purchase tradable allowances
authorizing the emission of a quantity of GHGs. Similarly, ARB
has authorized covered entities to receive GHG emissions
reduction credit for "offset" projects, that is, projects that,
according to ARB, represent verified GHG emission reductions or
removal enhancements. The rationale for use of both of these
types of indirect emissions reductions is that allowances and
offsets may allow a covered entity to reduce an amount of GHG
emissions at a lower cost than would otherwise occur.
This bill requires that money in a special account established
by this bill - the Gas Storage Facility Leak Mitigation Account
- be expended only for direct GHG emissions reductions.
Relatedly, this bill prohibits the money from being used for the
purchase of GHG emissions allowances or offsets. This bill also
requires that monies in the account be used in a manner that, at
a minimum, reduces GHG in an amount at least as great as the
amount of GHGs emitted by the leak.
It is unclear why this bill limits use of monies in the account
in this way. According to ARB, allowances and offsets both
represent real, verifiable and additional reductions in GHG
emissions. Each, therefore, seems a legitimate tool for
mitigating environmental damage caused by a gas storage facility
leak.
The author describes the prohibitions against allowances and
offsets as better assurance that benefits go most directly to
those harmed by the leak. However, in the case of the Aliso
Canyon leak, this bill does not restrict direct emissions
reductions by SoCalGas to the area of surrounding Aliso Canyon.
Under this bill, SoCalGas - the largest natural gas utility in
the country - could reduce its direct emissions of methane in
locations nowhere near Aliso Canyon. As the utility itself
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says, it operates across 20,000 square miles throughout Central
and Southern California, from Visalia to the Mexican border.
In addition, the two requirements described above may be at odds
with one another. At this point, it is unknown the dollar
amount, if any, of penalties that would be assessed against a
natural gas corporation for a storage facility leak (although
substantial penalties against SoCalGas for the Aliso Canyon leak
seem likely, to say the least). Generally, the purchase of
allowances or the use of offsets is a more cost-effective way to
reduce GHGs. The more cost-effective the uses of money in the
account, the more GHG reductions are realized. This bill
requires that monies in fund be used in a manner that, at a
minimum, reduces GHG in an amount at least as great as the
amount of GHGs emitted by the leak; it may be necessary to
realize the most cost-effective reductions of GHGs possible to
achieve the requirement of this bill.
Law already prohibits recovery of fines and penalties in rates.
This bill creates a new prohibition against a gas corporation
recovering in rates approved by CPUC the money paid by the gas
corporation for fines, penalties, or damages to residents,
businesses, and other parties harmed by a gas storage facility
leak. This is appropriate: a utility should not recover from
ratepayers the costs of its wrongdoing. However, existing
statute already prevents such an outcome. Public Utilities Code
§959, added following the explosion of a PG&E natural gas
pipeline in San Bruno in 2010, prohibits a gas corporation from
recovering any fine or penalty in any rate approved by the CPUC.
The author's office agrees that the existing prohibition is
sufficient. Therefore, the author and committee may wish to
amend this bill to delete Public Utilities Code §972(c), as that
section reads in the latest version of this bill.
Prior/Related Legislation
AB 56 (Hill, Chapter 519, Statutes of 2011) prohibited a gas
corporation from recovering any fine or penalty in any rate
approved by the CPUC.
SB 380 (Pavley) calls for a moratorium on injecting or producing
natural gas at the Aliso Canyon facility until certain safety
measures have been performed and confirmed. The bill passed the
Senate 40-0 and is pending consideration by Assembly Committee
on Appropriations.
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SB 887 (Pavley) reforms natural gas storage well standards and
operations. The bill is pending consideration by Senate
Committee on Environmental Quality.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: Yes
SUPPORT:
California Public Interest Research Group
Clean Water Action
Environment California
Environmental Working Group
Food & Water Watch
Los Angeles Unified School District
National Parks Conservation Association
Sierra Club California
South Coast Air Quality Management District
Union of Concerned Scientists
OPPOSITION:
None received
ARGUMENTS IN SUPPORT: Supporters contend this bill protects
ratepayers from preventing them from having to pay for
misconduct of a gas corporation and better protects the public
by designating OES as the lead agency for responding to leaks
from natural gas storage facilities.
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