BILL ANALYSIS Ó
SB 1441
Page 1
Date of Hearing: June 29, 2016
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Mike Gatto, Chair
SB
1441 (Leno) - As Amended May 31, 2016
SENATE VOTE: 28-11
SUBJECT: Natural gas: methane emissions
SUMMARY: Prohibits gas corporations from using ratepayer dollars
to recover costs associated with fugitive or unplanned natural
gas leaks during the extraction, production, storage,
processing, transportation, and delivery of natural gas.
Requires the California Public Utilities Commission (CPUC) to
establish rates for gas corporations in furtherance of this
requirement, as specified.
EXISTING LAW:
1)Establishes the California Global Warming Solutions Act of
2006. Requires the California Air Resource Board (ARB) to
determine the 1990 statewide greenhouse gas (GHG) emissions
level, approve a statewide GHG emissions limit that is
equivalent to that level to be achieved by 2020, and adopt GHG
emissions reductions measures by regulation. Defines methane
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as a greenhouse gas. (Health and Safety Code Section 38500 et
seq.)
2)Requires the ARB to develop a comprehensive strategy to reduce
emissions of short-lived climate pollutants in the state.
(Health and Safety Code Section 39730)
3)Requires the CPUC, in consultation with the ARB, to open a
proceeding to adopt rules and procedures that minimize natural
gas leaks from CPUC-regulated gas pipeline facilities while
giving priority to safety, reliability, and affordability of
service. (Public Utilities Code Section 975)
4)Requires gas corporations to file a report that includes a
summary of utility leak management practices, list of leaks,
and a best estimate of gas loss due to leaks. (Public
Utilities Code Section 975)
5)Requires adopted rules and procedures to accomplish the
following: prevent and repair gas leaks in CPUC-regulated
intrastate gas transmission and distribution lines in a
technologically feasible and cost-effective manner; develop
metrics to quantify the amount of gas leaking from pipeline
facilities; evaluate and track gas leaks geographically and
over time so data may be incorporated into ARB's mandatory GHG
emission reporting. (Public Utilities Code Section 975)
6)Requires the CPUC to provide revenues for all activities
identified and required to address leaks, including any
adjustment of allowance for lost and unaccounted for gas
related to actual leakage volumes, among other provisions.
(Public Utilities Code Section 977)
7)Establishes that the CPUC is the state authority responsible
for regulating and enforcing intrastate gas pipeline
transportation and pipeline facilities pursuant to Chapter 601
(commencing with Section 60101) of Subtitle VIII of Title 49
of the United States Code, including the development,
submission, and administration of a state pipeline safety
program certification for natural gas pipelines pursuant to
Section 60105 of that chapter. (Public Utilities Code Section
955 et seq.)
8)Establishes the Division of Oil, Gas, and Geothermal Resources
(DOGGR) in the Department of Conservation at the Natural
Resources Agency as the state authority responsible for
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regulating oil and gas, including natural gas storage wells.
Provides the division's leader with broad authority to
supervise oil and gas operations to prevent damage to life,
health, property and natural resources, among other
requirements. (Public Resources Code Section 3100 et seq.)
9)Authorizes the CPUC to fix rates, establish rules, and examine
records for all public utilities subject to its jurisdiction,
including gas corporations. (California Constitution Article
XII, Section 6)
FISCAL EFFECT: Unknown.
COMMENTS:
1)Author's Statement: According to the author, "SB 1441
leverages recent regulatory and technological advances in the
methodology of quantifying natural gas leaks to achieve
meaningful and effective reductions in one of the most common
and potent climate changing pollutants. SB 1441 prohibits the
[CPUC] from including in the prices charged to ratepayers the
cost of natural gas lost to the atmosphere during the
injection, storage, transmission, or distribution of natural
gas. Methane emissions represent a threat to our climate and a
waste of natural gas, a valuable energy resource. Enough
natural gas is lost each year to fuel 6 million homes. In the
U.S. last year alone, this lost gas had the same negative
impact on the climate as the annual carbon emissions of 117
million cars, or roughly half the cars in the United States.
In 2014, I authored SB 1371 that required the CPUC to open a
proceeding to adopt rules and procedures that minimize natural
gas leaks from PUC-regulated gas pipeline facilities, with the
goal of reducing GHG emissions. Currently underway, this
proceeding has produced formulas for quantifying lost gas that
can be used to determine what gas utilities should not
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recover. SB 1441 clarifies that utility companies should be
prevented from charging ratepayers for this lost gas.
Preventing cost recovery from ratepayers of lost natural gas
creates an added incentive to repair leaks to the maximum
extent feasible."
2)Methane Emissions: Methane is the primary component of
natural gas. It can also be produced biologically under
anaerobic conditions in animals such as cattle and sheep,
landfills, and waste handling. Atmospheric methane
concentrations are increasing as a result of agriculture,
fossil fuel extraction and distribution, and waste generation
and processing. Methane is a short-lived climate pollutant
that can persist in the atmosphere for about 12 years. Like
other GHGs, methane warms the atmosphere by blocking infrared
radiation (heat) that is re-emitted from the earth's surface
from reaching space. Methane is a potent GHG, with roughly 28
times the warming power of carbon dioxide over a 100-year
period and more than 80 times over a 20-year timespan.
Methane also affects local air quality by contributing to the
formation of global background levels of ozone. Ozone itself
is a powerful short-lived climate pollutant as well as a
regional ground level air pollutant (also known as smog) which
negatively impacts human health and can lead to asthma
attacks, hospitalizations, and even premature death. About
two-thirds of the rise in global levels of background ozone
can be attributed to methane emissions.
3)Methane Emission Reduction: Methane emissions can be
intentional or unintentional releases of natural gas.
Unintentional releases of methane, or fugitive emissions, can
come from leaking pipelines, abandoned wells, or inefficient
combustion. Intentional releases occur when there is a need to
vent natural gas to reduce excess pressure on pipeline
infrastructure when such pressure presents a safety risk.
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Currently, there are various regulatory initiatives at the
state level related to air pollution, GHGs, and increased use
of renewable energy sources. Initiatives at the federal level
include efforts to reduce short-lived climate pollution,
improvements to pipeline safety in response to the fatal
Pacific Gas and Electric Company San Bruno explosion of 2010,
legislative requirements to address natural gas leaks,
emergency regulations to address storage well integrity, and
proposals to address methane emissions.
4)SB 1371 (Leno): In 2014, SB 1371 (Leno), Chapter 525,
Statutes of 2014, became law. This statute requires the CPUC,
in consultation with ARB, to adopt rules and procedures to
minimize natural gas leaks within gas pipeline facilities
regulated by the CPUC. The rules and procedures instruct the
development of metrics to quantify the amount of gas leaking
from pipeline facilities. With this data, fugitive emissions
may be evaluated and tracked geographically and over time, and
may be incorporated into ARB's mandatory GHG emission
reporting. To the extent feasible, SB 1371 also requires the
owner of each intrastate gas transmission or distribution line
regulated by the CPUC to calculate and report to the CPUC and
ARB a baseline system-wide leak rate, along with any data and
computer models used to make that calculation. As part of
this effort, the CPUC is developing a methodology to calculate
the lost and unaccounted for gas specific to CPUC-regulated
gas pipelines. The CPUC opened a rulemaking proceeding in
January 2015 to instruct the ongoing implementation of this
statue with an expected decision in the first quarter of 2017.
5)Aliso Canyon Gas Leak: In response to the recent natural gas
leak at the Aliso Canyon storage well facility controlled by
Southern California Gas Company, DOGGR adopted emergency
regulations of oil and gas storage facilities. The new
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regulations will remain in effect for six months beginning
February 5, 2016, but may be extended. DOGGR is requiring
increased inspection and monitoring requirements for all
wells, regular testing of all safety valves, the development
of minimum and maximum pressure limits for each gas storage
facility in the state, and the establishment of a
comprehensive risk management plan that evaluates and prepares
for risks at each facility, including corrosion of potential
pipes and equipment.
6)Gas Pipeline Safety Requirements: In addition to the Federal
Pipeline Safety Regulations, the CPUC enforces statutes and
rules (General Order 112-E) which establish minimum
requirements for the design, construction, quality of
materials, locations, testing, operations and maintenance of
facilities used in the gathering, transmission and
distribution of gas or in liquefied natural gas facilities.
These regulations are meant to safeguard life or limb, health,
property and public welfare and to provide that adequate
service will be maintained by gas utilities operating under
the jurisdiction of the CPUC.
In February 2016, ARB proposed new emissions regulations for
oil and gas facilities aimed at tackling fugitive and vented
methane emissions in the state. The proposed regulations
require underground storage well facility owners to develop a
plan for surface-leak monitoring on a continuous or daily
basis, and require that intentional venting be limited to the
use of no-vent devices, vapor collection, and other measures.
In August 2015, the United States Environmental Protection
Agency proposed standards to directly reduce methane emissions
from the oil and gas sector to help address climate change.
The proposed requirements address emissions from production to
transmission, including: requiring leak detection and repair
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at well sites and other points 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.
7)Protecting Ratepayers: This bill continues efforts by the
state and federal government to reduce natural gas leaks and
methane emissions by preventing utilities from recovering
costs from ratepayers associated with the value of natural gas
lost during the production and delivery cycle, to the extent
feasible as determined by the CPUC. The author's intent is to
eliminate most, if not all, fugitive emissions during the full
cycle of natural gas extraction, production, distribution and
delivery. In recognition of logistical limitations, this bill
provides the CPUC with discretion to determine what is
feasible to recover in rates since the natural gas system runs
as a market. As such, the utility does not control aspects of
the system outside of the facilities it owns and operates in
California. Further, it may not be feasible, or
cost-effective, to capture 100% of all potential lost gas
during the full cycle of the natural gas system. The current
state of emissions accounting is very uncertain due to the
complexities of the natural gas system and the many entities
involved from the gas producers, marketers, purchasers.
8)Related Legislation:
SB 1383 (Lara) of 2016: Requires 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%, hydrofluorocarbon gases of 40%, and
anthropogenic black carbon of 50% below 2013 levels by 2030,
as specified. Pending in the Assembly.
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9)Prior Legislation:
AB 1496 (Thurmond), Chapter 604, Statutes of 2015: Requires
the ARB to monitor hot-spots in the state with high methane
emissions, gather information for purposes of conducting
analyses of life-cycle GHG emissions 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.
SB 1371 (Leno), Chapter 525, Statutes of 2014: Requires 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: Requires the ARB
to complete a comprehensive strategy to reduce emissions of
short-lived climate pollutants, as defined, including methane
emissions, in the state.
REGISTERED SUPPORT / OPPOSITION:
Support
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California Interfaith Power & Light
California League of Conservation Voters
Clean Water Action
Consumer Federation of California
Engineers and Scientists of California
Environmental California
Environmental Defense Fund
Moms Clean Air Force
Sierra Club California
Union of Concerned Scientists
Utility Workers Union of America
Opposition
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Pacific Gas and Electric Company
Analysis Prepared by:Darion Johnston / U. & C. / (916)
319-2083