BILL NUMBER: SB 1441	AMENDED
	BILL TEXT

	AMENDED IN SENATE  APRIL 25, 2016
	AMENDED IN SENATE  APRIL 7, 2016
	AMENDED IN SENATE  MARCH 28, 2016

INTRODUCED BY   Senators Leno and Pavley

                        FEBRUARY 19, 2016

   An act to add Section 39731.5 to the Health and Safety Code, and
to amend Section 977 of the Public Utilities Code, relating to
natural gas.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 1441, as amended, Leno. Natural gas: 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 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   open,  public
process to achieve the maximum, technologically feasible, and
cost-effective greenhouse gas emissions reductions.
   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 
 2013 levels for systemwide  methane emissions 
levels   from natural gas used in California  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  a significant portion of
its  natural gas and imposing new requirements on the state's
regulated  natural  gas corporations related to
natural gas procurement and the tracking of interstate deliveries.
   (2) Under existing law, the 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 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, as
specified.
   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  the  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  natural  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   2013
levels for systemwide  methane emissions  levels
  from natural gas used in California,  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 
 2013 levels for systemwide  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  a significant portion of its  natural gas.
   (2) Imposing new requirements on the state's regulated 
natural  gas corporations related to natural gas procurement
and the 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) Regulations adopted pursuant to subdivision (a) shall be
designed in a manner that seeks to minimize the costs and maximize
total benefits.  
   (d) 
    (e)  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, to the extent
feasible as determined by the commission, 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.