BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 1441 (Leno) - Natural gas: methane emissions
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|Version: April 25, 2016 |Policy Vote: E., U., & C. 8 - |
| | 1, E.Q. 5 - 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:1) Requires the ARB, in consultation with the CPUC and other
relevant agencies, to adopt by regulation methane emissions
reductions 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
2013 methane emissions levels by 2025. The bill also prohibits
the CPUC from allowing gas corporations to recover 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 when
establishing rates for gas corporations in an individual
rulemaking proceeding or in general rate cases.
Fiscal
Impact:
Up to $1.15 million annually (COI) for ARB staffing costs.
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One-time cost of $500,000 to establish the natural gas
procurement tracking system, and ongoing costs of $100,000
annually to maintain the system (COI).
Approximately $6,000 annually (Out-of-State travel funds) for
staff to travel to out-of-state facilities.
Minor and absorbable costs to the CPUC.
* COI = Cost of Implementation Fee
Background:1) Fugitive methane from the natural gas sector. A growing body of
evidence suggests that national and state estimates of methane
emissions have been significantly underestimated. Studies
suggest that U.S. methane emissions from all sources are likely
anywhere from 25 to 75% higher than EPA estimates, and they note
the discrepancy may in large part be due to a small number of
very large leaks from natural gas production and distribution
system.
Additionally, several recent analyses of atmospheric
measurements in state suggest that actual California methane
emissions may be 30 to 70% higher than estimated in ARB's
emission inventory. The Short-Lived Climate Pollutant draft
strategy notes that several efforts are underway at the CEC and
ARB to improve emissions monitoring to help identify sources of
fugitive methane emissions and reduce them, including from oil
and gas operations. Additionally, ARB and NASA's Jet Propulsion
Laboratory are collaborating to identify large "hot spot"
methane sources through a systematic survey of high methane
emitters throughout California using both aerial and ground
measurements.
By state, California is the second largest user of natural gas
in the country (Texas is the largest user). Although the state
has worked to reduce fugitive methane emissions from various
sources over recent years, including new efforts to reduce
fugitive leaks from natural gas infrastructure in the state, 91%
of the natural gas used in California is imported.
State efforts to reduce natural gas system leaks. SB 1371. In an
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effort to address systemic natural gas leaks from an aging
infrastructure as well as address climate impacts due to
methane, SB 1371 (Leno, Chapter 525, Statutes of 2014) requires
CPUC, in consultation with ARB, to open a proceeding to adopt
rules and procedures that minimize natural gas leaks from
CPUC-regulated gas pipeline facilities. SB 1371 requires the
rules and procedures include procedures for the development of
metrics to quantify the volume of emissions from leaking gas
pipeline facilities, and for evaluating and tracking leaks
geographically and over time that may be incorporated into ARB's
mandatory GHG emissions reporting. SB 1371 also requires, to the
extent feasible, the owner of each commission-regulated gas
pipeline facility that is an intrastate transmission or
distribution line to calculate and report to the commission and
ARB a baseline system-wide leak rate, along with any data and
computer models used in making that calculation.
On January 15, 2015, CPUC opened a rulemaking proceeding to
implement the requirements of SB 1371, with an expected decision
in the first quarter of 2017. On July 7, 2015, CPUC released a
scoping memo that raises questions and issues in implementing
the legislation to be addressed by the rulemaking. Among many
other questions raised, the memo asks how ratepayer and
shareholder financial incentives should be aligned when
accounting for and paying for "lost gas."
SB 1441 clarifies this issue by requiring CPUC, to the extent
feasible, to prohibit gas corporations from recovering the value
of natural gas lost to the atmosphere during the extraction,
production, storage, processing, transportation, and delivery of
natural gas, from ratepayers.
ARB draft oil and gas regulations. In April of last year, ARB
released a draft regulation to address fugitive and vented
emissions from new and existing oil and gas facilities, pursuant
to authority under AB 32 to regulate GHGs. Specifically, the
proposed regulation applies to crude oil and natural gas
production, crude oil storage, underground natural gas storage,
natural gas processing plants and transmission stations. The
draft regulation contains requirements for natural gas
underground storage facility well monitoring, restrictions for
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natural gas venting and specifications for leak detection and
repair, as well as other requirements.
Aliso Canyon and DOGGR's emergency regulation. In response to
the state of emergency from the recent natural gas leak at the
Southern California Gas Company's Aliso Canyon storage well
facility, the Division of Oil Gas and Geothermal Resources
(DOGGR) adopted emergency regulations for oil and gas storage
facilities. The new regulations are in effect for six months
beginning February 5, 2016, but can be extended. DOGGR is
requiring increased inspections and monitoring requirements for
all wells, regular testing of all safety valves, minimum and
maximum pressure limits for each gas storage facility in the
state, and each storage facility to establish a comprehensive
risk management plan that evaluates and prepares for risks at
each facility, including corrosion of potential pipes and
equipment.
National efforts to reduce natural gas sector emissions. In
August 2015, the United States Environmental Protection Agency
(US EPA) proposed standards to directly reduce methane emissions
from the oil and gas sector to help address climate change. The
standards are strategies to support the Administration's goal of
reducing methane emissions from the oil and gas sector by 40 to
45% from 2012 levels by 2025. The proposed requirements address
emissions from the production to transmission segments,
including: expanding the federal New Source Performance
Standards for the oil and gas industry to include methane
emissions directly upstream; requiring leak detection and repair
at well sites, gathering and boosting stations and compressor
stations across the transmission and storage segments; new
standards to reduce methane emissions from hydraulically
fractured oil wells; and emission guidelines to reduce
smog-forming emissions from existing oil and gas sources in
areas where smog reaches unhealthy levels.
Proposed Law:
1)
1)Makes findings and declarations about California's natural gas
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usage, impacts of methane, methane leakage during the
drilling, production, and transportation of natural gas, and
how the accountability measures and initiatives to address
imported natural gas will benefit the environment and reduce
the leakage associated with the state's climate programs.
2)Requires, by January 1, 2020, the California Air Resources
Board (ARB), in consultation with the Public Utilities
Commission and other relevant state agencies, to adopt
regulations will achieve a reduction in methane emissions of
at least 40 percent below 2013 levels for systemwide methane
emissions from emissions associated with the extraction,
production, storage, processing, and transportation of natural
gas used in the state, including imports, by 2025.
3)Requires that the regulations include: (1) information
gathered to determine the 2013 levels for systemwide methane
emissions, and (2) interim targets to reach the methane
emissions level.
4)Requires ARB, in consultation with the CPUC and other relevant
state agencies, to consider all of the following:
a. 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.
b. Imposing new requirements on the state's regulated
gas corporations related to natural gas procurement and
the tracking of interstate deliveries.
c. 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.
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d. Participating in or forming interstate and federal
working groups, compacts, or agreements.
e. Regulations adopted pursuant to subdivision (a)
shall be designed in a manner that seeks to minimize the
costs and maximize total benefits.
f. Specifies that the bill must be implemented to the
extent feasible and consistent with law.
5)Prohibits the CPUC from allowing gas corporations to recover
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
when establishing rates for gas corporations in an individual
rulemaking proceeding or in general rate cases.
Related
Legislation: SB 1371 (Leno, Chapter 525, Statutes of 2014)
required the CPUC to open a proceeding to adopt rules and
procedures that minimize natural gas leaks from CPUC-regulated
gas pipeline facilities with the goal of reducing GHG emissions.
SB 605 (Lara, Chapter 523, Statutes of 2014) required the ARB
to complete a comprehensive strategy to reduce emissions of
short-lived climate pollutants, as defined, including methane
emissions, in the state.
AB 1496 (Thurmond, Chapter 604, Statutes of 2015) required the
ARB to monitor high-emission methane hot-spots in the state,
consult with specified entities to gather information for
purposes of carrying out life-cycle GHG emissions analyses of
natural gas imports, update relevant policies and programs based
on those updated life-cycle analyses, and review scientific
information on atmospheric reactivity of methane as a precursor
to the formation of photochemical oxidants.
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SB 1383 (Lara) would require the state board to approve and
implement a comprehensive strategy to reduce emissions of
short-lived climate pollutants to achieve a reduction in methane
of 40 percent, hydrofluorocarbon gases of 40 percent, and
anthropogenic black carbon of 50 percent below 2013 levels by
2030, as specified. Currently on the Suspense File.
Staff Comments: The ARB notes that "Substantial new resources
are necessary to perform the tasks required by this bill because
it covers imports of natural gas, which comprises approximately
90 percent of all natural gas consumed in California. ARB would
need to determine 2013 lifecycle methane emissions from natural
gas supplied to the State and the 2025 and interim emissions
target reductions, evaluate and implement other alternatives,
such as incentive programs, and develop and implement a
regulation that includes a methane emissions standard. Staff
would also require contract funds to develop a natural gas
procurement tracking system (estimated $500,000 to establish the
system and $100,000 annually to maintain). Further, staff would
be required to travel out of state (three times per year for
site visits to the three main pipeline routes for natural gas
entering California, gather information on imported gas
emissions, and establish the standards required under the bill,
as well as provide ongoing implementation, enforcement, and
auditing functions upon adoption of the regulation."
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