BILL NUMBER: SB 1441 AMENDED
BILL TEXT
AMENDED IN SENATE MARCH 28, 2016
INTRODUCED BY Senators Leno and Pavley
FEBRUARY 19, 2016
An act to add Section 38572 39731.5
to the Health and Safety Code, and to add Section 747.2 to
amend Section 977 of the Public Utilities Code,
relating to natural gas.
LEGISLATIVE COUNSEL'S DIGEST
SB 1441, as amended, Leno. Natural gas: vented and
fugitive emissions. methane emissions.
(1) The California Global Warming Solutions Act of 2006 designates
the State Air Resources Board as the state agency charged with
monitoring and regulating sources of emissions of greenhouse gases.
The act requires the board to adopt greenhouse gas emission
limits and emission reduction measures by regulation, and authorizes
the state board to include the use of market-based compliance
mechanisms in its implementing regulations to achieve those emissions
goals. The state board is required to
adopt a statewide greenhouse gas emissions limit equivalent to the
statewide greenhouse gas emissions level in 1990 to be
achieved by 2020 and to adopt rules and regulations in an open public
process to achieve the maximum, technologically feasible, and
cost-effective greenhouse gas emissions reductions.
This bill would require the state board, in regulations
implementing a market-based compliance mechanism, to include vented
emissions and fugitive emissions of natural gas as counting against
the compliance obligation of certain covered natural-gas-related
entities under the mechanism.
The state board is also required to complete a comprehensive
strategy to reduce emissions of short-lived climate pollutants, as
defined, in the state and to take specified actions and conduct
specified analyses with respect to methane emissions.
This bill would require the state board, in consultation with the
Public Utilities Commission and other relevant state agencies, to
adopt by regulation no later than January 1, 2020, methane emissions
reduction measures for the emissions associated with the extraction,
production, storage, processing, and transportation of natural gas
used in the state, including imports, that will achieve a reduction
in methane emissions of at least 40% below 2012 methane emissions
levels by 2025, as specified. The bill also would require the state
board, in consultation with the commission and other relevant state
agencies, to consider, among other things, developing new incentives
or investment programs to facilitate emissions reductions in basins
and fields from which the state receives natural gas and imposing new
requirements on the state's regulated natural gas corporations
related to natural gas procurement and tracking of interstate
deliveries.
(2) Under existing law, the Public Utilities Commission
commission has regulatory authority over public
utilities, including gas corporations, as defined. Existing law
authorizes the commission to fix the rates and charges for every
public utility and requires that those rates and charges be just and
reasonable.
This bill would, in establishing rates for gas corporations,
prohibit the commission from considering systemic natural
gas losses in the form of vented or fugitive emissions occurring
during the injection, storage, transmission, or distribution
allowing gas corporations to seek or receive recovery
from ratepayers for the value of natural gas lost to the atmosphere
during the extraction, production, storage, processing,
transportation, and delivery of the natural gas.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all
of the following:
(a) California is the nation's second largest user of natural gas,
comprising nearly 10 percent of the entire national consumption.
This natural gas comes from a variety of basins, with over 90 percent
of the natural gas used in the state being imported from locations
across the southwestern United States, the Rocky Mountains, and
western Canada before being transported through more than 100,000
miles of pipe to over 11 million customers in state.
(b) Methane, the principle component of natural gas, is a
greenhouse gas known by the Intergovernmental Panel on Climate Change
to have a global warming potential 28 times that of carbon dioxide
over a 100-year time horizon and 84 times that of carbon dioxide over
a 20-year time horizon.
(c) Methane leakage during the drilling, production, and
transportation of natural gas used in the state contributes to the
overall climate footprint of the energy system of the state, and
although additional scientific research and analysis is presently
being conducted to evaluate how much methane is leaked, there is
enough information and it is imperative to continue to act to reduce
that leakage.
(d) The Legislature has established a policy goal to significantly
reduce emissions of greenhouse gases in California, including
methane leakage, but there is insufficient accountability over
methane that is released into the atmosphere from operations within
the state or from operations connected to gas imported into the
state.
(e) Requiring accountability for methane leakage associated with
operations necessary to bring natural gas to state residents, in
addition to adjusting and creating incentives to reduce leakage, will
enable a more thorough approach to meeting the state's climate
change goals while providing for a full accounting of the state's
climate footprint.
(f) The Legislature also has established that the safety of the
natural gas pipeline infrastructure in the state is a priority for
the Public Utilities Commission and gas corporations, and nothing in
this act shall compromise or deprioritize safety as a top
consideration.
(g) While providing just and reasonable rate revenues for
California gas corporations to find, categorize, and repair leaks
promptly when discovered, including employing an adequate workforce,
is in the public interest and promotes the interests of customers and
the public, providing revenue to gas corporations to compensate them
for the value of gas they lose to the atmosphere is not in the
public interest.
(h) While action in other states and by the federal government is
necessary to fully address methane pollution from operations
associated with gas imported into the state, integrating the full
climate footprint of California natural gas into statewide planning
efforts while also developing initiatives to actually reduce that
footprint benefits the environment and reduces the leakage associated
with the state's climate programs.
SEC. 2. Section 39731.5 is added to the
Health and Safety Code , to read:
39731.5. (a) Notwithstanding Sections 38550 and 38551, no later
than January 1, 2020, the state board, in consultation with the
Public Utilities Commission and other relevant state agencies, shall
adopt by regulation methane emissions reduction measures for the
emissions associated with the extraction, production, storage,
processing, and transportation of natural gas used in the state,
including imports, that will achieve a reduction in methane emissions
of at least 40 percent below 2012 methane emissions levels by 2025.
(b) The regulation adopted pursuant to subdivision (a) shall
include both of the following:
(1) Information gathered or acquired pursuant to subdivision (b)
of Section 39731 to determine the 2012 level of methane emissions.
(2) Interim targets to reach the methane emissions level described
in subdivision (a).
(c) The state board, in consultation with the Public Utilities
Commission and other relevant state agencies, shall consider all of
the following:
(1) Developing new incentives or investment programs to facilitate
emissions reductions in basins and fields from which the state
receives natural gas.
(2) Imposing new requirements on the state's regulated natural gas
corporations related to natural gas procurement and tracking of
interstate deliveries.
(3) Modifying the state's market-based emissions reduction
measures, including a market-based compliance mechanism adopted
pursuant to Section 38570, to account for and include methane
emissions within the compliance obligations of natural gas utilities
or fuel importers.
(4) Participating in or forming interstate and federal working
groups, compacts, or agreements.
(5) Designing regulations in a manner that seeks to minimize costs
and maximize the total benefits.
(d) This section shall be implemented to the extent feasible and
consistent with law.
SEC. 3. Section 977 of the Public
Utilities Code is amended to read:
977. In order to achieve transparency and accountability for rate
revenues and best value for ratepayers, and consistent with the
commission's existing ratemaking procedures and authority to
establish just and reasonable rates, the commission shall consider
all of the following:
(a) Providing an adequate workforce to achieve the objectives of
reducing hazards and emissions from leaks, including leak avoidance,
reduction, and repair.
(b) (1) Providing revenues for all
activities identified and required pursuant to Section 975, including
any adjustment of allowance for lost and unaccounted for gas related
to actual leakage volumes.
(2) In establishing rates for gas corporations, in an individual
rulemaking proceeding or in general rate cases, the commission shall
not allow gas corporations to seek or receive recovery from
ratepayers for the value of natural gas lost to the atmosphere during
the extraction, production, storage, processing, transportation, and
delivery of the natural gas.
(c) Providing guidance for treatment of expenditures as being
either an item of expense or a capital investment.
(d) The impact on affordability of gas service for vulnerable
customers as a result of the incremental costs of compliance with the
adopted rules and procedures.
SECTION 1. In enacting this act, it is the
intent of the Legislature to create incentives to reduce or eliminate
vented emissions and fugitive emissions of natural gas.
SEC. 2. Section 38572 is added to the Health
and Safety Code, to read:
38572. (a) For purposes of this section, the following
definitions apply:
(1) "Fugitive emissions" has the same meaning as set forth in
Section 39023.3.
(2) "Vented emissions" means intentional or designed releases of
natural gas or hydrocarbon gas, not including stationary combustion
flue gas, including process designed flow to the atmosphere through
seals or vent pipes, equipment blowdown for maintenance, and direct
venting of gas used to power equipment, such as pneumatic devices.
(b) In regulations implementing a market-based compliance
mechanism pursuant to this part, the state board shall include vented
or fugitive emissions of natural gas as counting against the
compliance obligation of covered entities engaged in the extraction,
distribution, or transmission of natural gas under the mechanism.
SEC. 3. Section 747.2 is added to the Public
Utilities Code, to read:
747.2. (a) For purposes of this section, the following
definitions apply:
(1) "Fugitive emissions" has the same meaning as set forth in
Section 39023.3 of the Health and Safety Code.
(2) "Vented emissions" means intentional or designed releases of
natural gas or hydrocarbon gas, not including stationary combustion
flue gas, including process designed flow to the atmosphere through
seals or vent pipes, equipment blowdown for maintenance, and direct
venting of gas used to power equipment, such as pneumatic devices.
(b) In establishing rates for gas corporations, the commission
shall not consider the systemic natural gas losses in the form of
fugitive or vented emissions occurring during the injection, storage,
transmission, or distribution of the natural gas.
(c) (1) This section does not prohibit gas corporations from using
ratepayer funds to repair systemic natural gas leaks or to improve
industry practices to reduce or eliminate vented or fugitive
emissions.
(2) This section does not prohibit gas corporations from
recovering their costs incurred in compliance with regulations
adopted pursuant to Section 38572 of the Health and Safety Code.