BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          SB 888 (Allen) - Gas corporations: emergency management
          
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          |Version: May 11, 2016           |Policy Vote: G.O. 9 - 0, E.,    |
          |                                |          U., & C. 9 - 2        |
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          |Urgency: No                     |Mandate: No                     |
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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 888 declares the Office of Emergency Services as  
          the lead agency for emergency response to a significant leak of  
          natural gas from a natural gas storage facility.  The bill also  
          directs the CPUC to place any penalties assessed against a gas  
          corporation for a natural gas storage facility leak into a  
          special account and places requirements and restrictions on the  
          use of the monies in the account. 


          Fiscal  
          Impact:  

           Potentially significant costs for OES and ARB to deploy  
            resources when a gas leak is reported. (See staff comments).
           Minor costs to the Department of Conservation (DOC) and the  
            CPUC for consultation and gas leak response activities when a  
            gas leak is reported. 
           Unknown, but potentially significant, redirection of penalty  
            revenue from the General Fund to the Gas Storage Facility Leak  







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            Mitigation Account.


          Background:  
          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. 


          What is a gas leak? On Jan. 26, 2016, the California Public  
          Utilities Commission's (CPUC) Safety and Enforcement Division  
          (SED) directed all California natural gas storage operators to  
          immediately inspect all natural gas storage facilities for leaks  
          and report the information to the state. The results indicated  








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          that 218 of the 229 (95 percent) of the leaks reported across  
          all natural gas storage fields between October 26, 2015 and  
          February 5, 2016, were non-hazardous and required minor  
          responses such as tightening or lubricating valves. Eight were  
          "Grade 1", meaning that they potentially posed a safety hazard.   
          All the identified leaks were above ground (not leaking from the  
          well storage zone) except for one below ground leak on a flange,  
          which has been repaired.




          Proposed Law:  
            This bill:
           Declares OES as the lead agency for emergency response to a  
            significant leak of natural gas from a natural gas storage  
            facility.

           Requires OES to coordinate among other state and local  
            agencies the emergency response, public health and  
            environmental assessment, monitoring, and long-term management  
            and control of the leak.

           Requires the CPUC to deposit any penalties assessed against a  
            gas corporation into the Gas Storage Facility Leak Mitigation  
            Account, which is established by the bill.

           Requires moneys in the account to be expended, upon  
            appropriation by the Legislature solely for direct emissions  
            reductions.

           Requires penalty revenues to achieve GHG emission reductions  
            equal to the amount of gases emitted by a gas leak, as  
            determined by the ARB.


          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, 2016) calls for a moratorium on injecting or  








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          producing natural gas at the Aliso Canyon facility until certain  
          safety measures have been performed and confirmed.  On the  
          Governor's desk.


          SB 887 (Pavley, 2016) reforms natural gas storage well standards  
          and operations.  The bill is pending consideration in this  
          committee.




          Staff  
          Comments:  The annual cost of this bill would depend upon how  
          many "significant" leaks occur in that year.  Both OES and ARB  
          provided the per incident costs below:
           Approximately $600 (including staffing and travel costs) for  
            OES to deploy an onsite coordinator.  This would be recovered  
            from the responsible party.
           Approximately $100,000 for ARB to contract for downwind  
            flights to characterize the natural gas release rate at  
            reasonable periodic intervals using small planes with monitors  
            to measure methane.

          The bill does not define a "significant" leak. The  
          above-referenced CPUC report indicated that 229 leaks occurred  
          across all natural gas storage fields between October 26, 2015  
          and February 5, 2016, though only eight potentially posed a  
          safety hazard.  It unclear how each operator would define  
          "significant" for the purposes of this bill.




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