BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session SB 888 (Allen) - Gas corporations: emergency management ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: May 11, 2016 |Policy Vote: G.O. 9 - 0, E., | | | U., & C. 9 - 2 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: May 16, 2016 |Consultant: Narisha Bonakdar | | | | ----------------------------------------------------------------- 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 SB 888 (Allen) Page 1 of ? 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 SB 888 (Allen) Page 2 of ? 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 SB 888 (Allen) Page 3 of ? 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. -- END --