BILL ANALYSIS Ó
SB 888
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Date of Hearing: June 27, 2016
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Das Williams, Chair
SB
888 (Allen) - As Amended May 31, 2016
SENATE VOTE: 28-10
SUBJECT: Gas corporations: emergency management
SUMMARY: Establishes the California Office of Emergency
Services (Cal OES) as the lead agency for emergency response to
a leak of natural gas from a natural gas storage facility.
Specifies how penalty money assessed against a gas corporation
for a gas storage leak should be spent.
EXISTING LAW:
1)Creates Cal OES, within the Office of the Governor, which
coordinates disaster response, emergency planning, emergency
preparedness, disaster recovery, disaster mitigation, and
homeland security activities.
2)Requires the handler of hazardous material to immediately
report any release or threatened release of a hazardous
material to the unified program agency and to Cal OES.
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3)Directs the California Air Resources Board (ARB) to monitor
and regulate sources of emissions of greenhouse gases (GHGs)
that cause global warming in order to reduce GHG emissions to
1990 levels by 2020.
4)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.
5)Declares it is the policy of the state that the CPUC and each
gas corporation place safety of the public and gas corporation
employees as the top priority. Requires CPUC to take all
reasonable and appropriate actions necessary to carry out the
safety priority policy of this paragraph consistent with the
principle of just and reasonable cost-based rates.
6)Requires any public utility that violates or fails to comply
with any provision of the Constitution of this state or fails
or neglects to comply with any part or provision of any order,
decision, decree, rule, direction, demand, or requirement of
the CPUC, in a case in which a penalty has not otherwise been
provided, is subject to a penalty of not less than five
hundred dollars ($500), nor more than fifty thousand dollars
($50,000) for each offense.
7)Prohibits a gas corporation from recovering any fine or
penalty in any rate approved by the CPUC. Requires that any
fine or penalty imposed by the CPUC and collected from a
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public utility be paid to the General Fund.
THIS BILL:
1)Establishes Cal OES as the lead agency for emergency response
to a large ongoing leak or release of natural gas and
associated gases from a natural gas storage facility that
poses a significant present or potential hazard to the public
health and safety, property, or to the environment.
2)Requires Cal 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.
3)Creates the Gas Storage Facility Leak Mitigation Account
(Account) and requires CPUC to deposit any penalties assessed
against a gas corporation pursuant to a gas storage facility
leak into the Account.
4)Specifies that moneys in the Account shall be expended, upon
appropriation by the Legislature, subject to both of the
following conditions:
a) Requires money to be expended solely for direct
emissions reductions in furtherance of the achievement of
the GHG emissions limit established by the California
Global Warming Solutions Act of 2006. Prohibits moneys
from being used for the purchase of allowances or offsets.
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b) Requires moneys from penalties to be expended in a
manner that, at a minimum, achieves a reduction in GHGs
that equals the amount of those gases emitted by that leak,
as determined by ARB.
FISCAL EFFECT: According to the Senate Appropriations
Committee:
1)Approximately $600 (including staffing and travel costs) for
CalOES to deploy an onsite coordinator. This would be
recovered from the responsible party.
2)Approximately $100,000 (Oil, Gas and Geothermal Administrative
Fund) 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.
3)Additional unknown, but potentially significant, redirection
of penalty revenue from the General Fund.
COMMENTS:
1)Author's statement:
The unprecedented natural gas leak at Southern
California Gas Company's Aliso Canyon storage field
has shed light on the lack of a meaningful State
response plan to such disasters. While the State's
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response to the leak was swift, at least seven
different agencies have been involved with no
statutory single point of responsibility and
accountability to oversee efforts and remediation
actions. Unlike oil spill response, which is dictated
by robust framework to streamline agency coordination
and collaboration, California lacks a plan to quickly
and efficiently address a massive natural gas leak.
In fact, while the Division of Oil, Gas and Geothermal
Resources (DOGGR) was notified of the leak right away,
the ARB said it wasn't notified of the leak until Nov.
5th. State officials might have more quickly
understood the severity of the leak if emissions had
been measured earlier. Further, a Unified Command
structure, similar to what is put in place following
significant oil spill, was not established until
January.
Further, existing law would require the fines and
penalties assed by the CPUC to go directly to the
General Fund. While it is imperative that the Gas
Company fully mitigate the methane emissions from this
disaster to ensure we stay on track to meet our
climate goals, there is no statutory requirement that
they do. Using the fine and penalty money to mitigate
emissions ensures the mitigation happens and also
ensures that it is paid for using shareholder profits,
not ratepayers dollars.
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2)Aliso Canyon Leak. On October 23 2015, a natural gas storage
well, known as "SS-25" owned by Southern California Gas
(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, have been 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
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.
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3)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 natural gas storage facilities (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 UIC program that are not part of the primacy
agreement with United States Environmental Protection Agency
(US EPA). 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 its entire length of the casing and have had a
history of well integrity issues.
4)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
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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) Directing 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.
The effort to address the leak required numerous state and
local entities to work together under the direction of CalOES.
On February 5, 2016, DOGGR established emergency regulations
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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
Plan to DOGGR to assess the integrity and risk associated with
their gas storage project. DOGGR has yet to receive a risk
management plan from an operator. 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 draft of the
regulations is expected in July.
5)Penalties. The investigation of the Aliso Canyon leak and
SoCalGas is ongoing and it is unclear whether the CPUC will
pursue penalties. If the CPUC did assess penalties against
SoCalGas or any other Facility for a leak, this bill would
direct the money into the newly created Account for GHG
reduction purposes rather than the General Fund. However,
SoCalGas may face other legal or administrative actions
against it due to the leak. DOGGR may pursue penalties based
on the leak being an unreasonable waste of natural gas. The
leak did not violate AB 32 because it was an accidental
release. ARB has proposed regulations to regulate future
leaks at Facilities under AB 32. The Attorney General, ARB,
the City of Los Angeles, and the County of Los Angeles have
filed suit against SoCalGas to mitigate the impacts of the
uncontrolled emission of a massive quantity of GHGs into the
environment and impose appropriate civil penalties as allowed
by law. The parties seek equitable relief, civil penalties,
and attorney's fees.
6)Mitigation. On December 18, 2016, the CEO of SoCalGas sent a
letter to Governor Brown pledging to mitigate the environment
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impact of the leak. Governor Brown subsequently issued a
proclamation that directed ARB to prepare a program, to be
funded by SoCalGas, that will "fully mitigate the methane
emissions from the leak and prioritize reductions of
short-lived climate pollutants." There has been disagreement
over how much emissions need to be mitigated, how quickly, and
whether the mitigation should happen in California and should
they prioritize short-lived climate pollutants. It is unclear
whether the lawsuit mentioned above would be pursued if an
agreement was reached.
6)Double referral and amendments. This bill was heard in the
Governmental Organization Committee on June 22, and passed
with a 16-2 vote. Due to timing, amendments agreed to in the
Government Organization Committee will be adopted in this
Committee. The amendments require the Account to allocate a
minimum of 25% of the available moneys to projects that
provide benefits to disadvantaged communities and 10% in those
communities. Please see the Government Organization Committee
analysis for further information. In addition to those
amendments, the author and committee may wish to consider
amending the bill to make expenditures from the Account
consistent with ARB's Aliso Canyon Climate Impacts Mitigation
Program.
7)Related legislation.
SB 380 (Pavley), Chapter 14, Statutes of 2016, sets in statute
criteria for testing and inspection of the natural gas storage
wells at the Aliso Canyon facility and required the CPUC and
others to study the feasibility of minimizing the use of or
shutting down the Aliso Canyon gas storage facility.
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AB 1903 (Wilk, 2016) requires a long-term health impact study
from the Aliso Canyon gas leak, as specified. This bill is
awaiting hearing in the Senate Environmental Quality Committee.
AB 1905 (Wilk, 2016) requires the Natural Resources Agency, on
or before July 1, 2017, to complete an independent scientific
study on natural gas injection and storage practices and
facilities. This bill was held on the suspense file in the
Assembly Appropriations Committee.
SB 887 (Pavley, 2016) provides a framework for reforming the
oversight of natural gas storage wells. This bill requires
continuous monitoring of natural gas storage wells, as well as
evaluation, testing, and installation of specified technology
and practices for operating natural gas storage wells. This
bill is scheduled to be heard in this committee on June 27,
2016.
REGISTERED SUPPORT / OPPOSITION:
SB 888
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Support
South Coast Air Quality Management District
Opposition
None on file
Analysis Prepared by:Michael Jarred / NAT. RES. / (916)
319-2092