Amended in Senate April 10, 2014

Amended in Senate March 25, 2014

Senate Bill No. 1371

Introduced by Senator Leno

(Principal coauthor: Assembly Member Mullin)

(Coauthor: Senator Hill)

February 21, 2014

An act to add Article 3 (commencing with Section 975) to Chapter 4.5 of Part 1 of Division 1 of the Public Utilities Code, relating to natural gas.

LEGISLATIVE COUNSEL’S DIGEST

SB 1371, as amended, Leno. Natural gas: leakage abatement.

The California Constitution establishes the Public Utilities Commission with regulatory authority over public utilities, authorizes the commission to establish its own procedures, subject to statutory limitations or directions and constitutional requirements of due process, and authorizes the commission to fix rates and establish rules for all public utilities, subject to control by the Legislature.

The Natural Gas Pipeline Safety Act of 2011, within the Public Utilities Act, designates the commission as the state authority responsible for regulating and enforcing intrastate gas pipeline transportation and pipeline facilities pursuant to federal law, including the development, submission, and administration of a state pipeline safety program certification for natural gas pipelines.

begin insert

The California Global Solutions Act of 2006 requires the State Air Resources Board to adopt regulations to require the reporting and verification of emissions of greenhouse gases and to monitor and enforce compliance with the reporting and verification program, and requires the state board to adopt a statewide greenhouse gas emissions limit equivalent to the statewide greenhouse gas emissions level in 1990, to be achieved by 2020.

end insert

This bill would require the commission to adopt rules and procedures governing the operation, maintenance, repair, and replacement of commission-regulated gas pipeline facilities to minimize leaks as a hazard to be mitigated pursuant to the Natural Gas Pipeline Safety Act of 2011 and to begin delete eliminate uncontrolled end delete begin insert reduce end insert emissions of natural gas from commission-regulated gas pipeline facilities to the maximum extent feasible begin delete with the goal of cutting total emission in end delete begin delete 1⁄2 end delete begin delete by January 1, 2020. end delete begin insert in order to advance the state’s goals in reducing emissions of greenhouse gases pursuant to the California Global Warming Solutions Act of 2006. end insert The bill would require the commission to commence a proceeding by January 15, 2015, and to adopt rules and procedures not later than December 31, 2015. The bill would require the commission to consult with the begin delete State Air Resources Board end delete begin insert state board end insert and those other state and federal entities that the commission determines have regulatory roles of relevance to the rules and procedures under consideration. The bill would require that the rules and procedures provide for the begin delete elimination end delete begin insert cost-effective avoidance, reduction, and repair end insert of leaks in commission-regulated gas pipeline facilities within a reasonable time after discovery, but require that leaks discovered in close proximity to residential and commercial buildings be begin delete eliminated end delete begin insert repaired end insert as soon as reasonably possible after discovery, consistent with the begin delete goal end delete begin insert goals end insert of reducing the risk of begin delete injury or loss of life. end delete begin insert injury, loss of life, property damage, and air pollution. The bill would require the rules and procedures to provide for the ranking, by volume, of leaks recorded by each commission-regulated gas pipeline facility and require the implementation of programs that provide for the ongoing repair of leaks that are in the top 20% of gas volumes leaked on an annual basis. The bill would require that the rules and procedures evaluate the operations, maintenance, and repair practices of commission-regulated gas pipeline facilities to determine whether existing practices are effective at achieving the goals of the bill and to determine whether alternative practices may be more effective at achieving the goals of the bill. end insert The bill would require that the rules and procedures establish and require the use of best practices for leak surveys, patrols, leak survey technology, begin delete and metrics for evaluating and comparing leaks end delete begin insert leak prevention, and leak reduction. The bill would require the rules and procedures to establish protocols and procedures for the development and use of metrics to quantify the volume of emissions from leaking components, and for evaluating and tracking leaks, both geographically and over time, end insert so that operators, the commission, and the public have accurate information about the number and severity of leaks and about the quantity of gas that is emitted to the atmosphere over time. The bill would require that the rules and procedures, to the extent feasible, begin delete provide for the establishment of a baseline systemwide leak rate, a periodic updating of systemwide leak rate quantifications, and an annual reporting structure of the end delete begin insert require the owner of each commission-regulated gas pipeline facility to calculate and report to the commission a baseline systemwide leak rate, to periodically update that systemwide leak rate calculation, and to annually report end insert measures that will be taken in the following year to reduce the systemwide leak rate to achieve the goals of the begin delete bill for each commission-regulated pipeline. end delete begin insert bill. end insert The bill would require that the commission consider whether the costs of compliance with the adopted rules and procedures are commensurate with the short- and long-term benefits resulting from reducing leaks and emissions and provide for cost recovery in rates charged to their customers by a gas corporation, consistent with the commission’s existing ratemaking procedures and authority to establish just and reasonable rates.

Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because the provisions of this bill would be a part of the act and because a violation of an order or decision of the commission implementing its requirements would be a crime, the bill would impose a state-mandated local program by creating a new crime.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

SECTION 1.  

Article 3 (commencing with Section 975) is added
to Chapter 4.5 of Part 1 of Division 1 of the Public Utilities Code,
to read:

 

Article 3.  Methane Leakage Abatement

 

975.  

The Legislature finds and declares all of the following:

(a) The Legislature has established that safety of the natural gas
pipeline infrastructure in California is a priority for the Public
Utilities Commission and gas begin delete corporations. end delete begin insert corporations, and
nothing in this article shall compromise or deprioritize safety as
a top consideration. end insert

(b)  begin delete The end delete begin insert It is undisputed that natural gas pipelines and
infrastructure in California leak natural gas. The end insert incidence of
natural gas leaks and their repair is considered by the industry and
regulators to be a significant indicator of pipeline integrity and
safety.

(c) The Legislature has established a policy goal to significantly
reduce emissions of greenhouse gases in California.

(d) There is a growing awareness of the potency of methane,
the primary component of natural gas, as a greenhouse gas. The
Intergovernmental Panel on Climate Change estimates that the
global warming potential of methane is begin delete approximately 80 end delete begin insert 84 end insert times
that of carbon dioxide over a 20-year time horizon. begin insert There is also
a growing awareness that climate change impacts impose high
social costs, including impacts upon the public health and
economy. end insert

begin delete

(e) It is undisputed that natural gas pipelines and infrastructure
in California leak substantial volumes of natural gas, estimated in
2011 to exceed 35 billion cubic feet annually.

end delete begin delete

(f)

end delete

begin insert (e) end insert  Reducing begin delete these fugitive end delete methane emissions by promptly and
effectively repairing or replacing the pipes and associated
infrastructure that is responsible for these leaks advances both
policy goals of natural gas pipeline safety and integrity and
reducing emissions of greenhouse gases.

begin delete

(g) Although there are existing

end delete

begin insert (f) end insert begin insert   end insert begin insert Existing end insert federal and state rules and regulations begin delete that pertain end delete
begin insert pertaining end insert to the natural gas transmission and distribution system
and associated begin delete infrastructure, these rules and regulations are
insufficient to prevent end delete begin insert infrastructure were not developed for the
purpose of preventing end insert the climate change impacts from leaks of
natural gas.

begin insert

(g) Examining the methods used by gas corporations under
existing federal and state rules to conduct and schedule leak repair
and prevention based on the implications of these practices with
respect to emissions of greenhouse gases will enable a more
thorough evaluation of whether existing practices are
commensurate with California’s goals for reducing emissions of
greenhouse gases.

end insert

(h) Reducing leaks and begin delete promoting the integrity of end delete begin insert repairing end insert
pipelines and associated infrastructure in California provides
significant employment opportunities for California residents and
for domestic fabricators of high quality pipeline materials and
other equipment associated with finding and fixing leaks.

(i) Providing just and reasonable rate revenues for gas
corporations to find, categorize, and begin delete eliminate end delete begin insert repair end insert leaks
promptly when discovered, including employing an adequate
workforce, is in the public interest, and promotes the interests of
customers and the public.

976.  

(a) For purposes of this chapter, “commission-regulated
gas pipeline facility” has the same meaning as defined in Section
950.

(b) The commission shall adopt rules and procedures governing
the operation, maintenance, repair, and replacement of
commission-regulated gas pipeline facilities to achieve both of the
following:

(1) Minimize leaks as a hazard to be mitigated pursuant to
paragraph (1) of subdivision (d) of Section 961.

(2) While giving due consideration to the cost considerations
of Section 977, begin delete eliminate uncontrolled end delete begin insert reduce end insert emissions of natural
gas from commission-regulated gas pipeline facilities to the
maximum extent begin delete feasible with the goal of cutting total emission
in half by January 1, 2020, end delete begin insert feasible end insert in order to advance the state’s
goals in reducing emissions of greenhouse gases pursuant to the
California Global Warming Solutions Act of 2006 (Division 25.5
(commencing with Section 38500) of the Health and Safety Code).

(c) Not later than January 15, 2015, the commission shall
commence a proceeding to adopt rules and procedures for intrastate
distribution lines and intrastate transmission lines, as respectively
described in paragraphs (1) and (2) of subdivision (a) of Section
950, to achieve the goals of subdivision (b). The commission shall
consult with the State Air Resources Board and those other state
and federal entities that the commission determines have regulatory
roles of relevance to the rules and procedures under consideration.
The commission shall adopt rules and procedures not later than
December 31, 2015.

(d) The rules and procedures adopted pursuant to subdivision
(c) shall accomplish all of the following:

(1) Provide for the begin delete elimination end delete begin insert cost-effective avoidance,
reduction, and repair end insert of leaks in commission-regulated gas pipeline
facilities within a reasonable time after discovery, consistent with
eliminating hazards and reducing emissions to achieve the goals
in subdivision (b). begin insert Cost-effectiveness criteria used to determine
leak avoidance, reduction, and repair requirements pursuant to
this paragraph shall take into account societal and public costs
associated with climate change and air pollution, including
peer-reviewed estimates of the social costs of emissions of
greenhouse gases. end insert

(2)  begin delete Provide for the elimination end delete begin insert As determined by the commission,
provide for the repair end insert of any leaks discovered in close proximity
to residential and commercial buildings as soon as reasonably
possible after discovery, consistent with the begin delete goal end delete begin insert goals end insert of reducing
the risk of begin delete injury or loss of life. end delete begin insert injury, loss of life, property
damage, and air pollution, including the climate change potential
associated with methane emissions. end insert

begin insert

(3) Commensurate with a goal of reducing systemwide emissions
of methane, provide for a ranking, by volume, of leaks recorded
by each commission-regulated gas pipeline facility and require
the implementation of programs that, at a minimum, provide for
the ongoing repair of leaks that are in the top 20 percent of gas
volumes leaked on an annual basis.

end insert begin insert

(4) Evaluate the operations, maintenance, and repair practices
of commission-regulated gas pipeline facilities to determine
whether existing practices are effective at achieving the goals of
subdivision (b) and determine whether alternative practices may
be more effective at achieving the goals of subdivision (b).

end insert begin delete

(3)

end delete

begin insert (5) end insert  Establish and require the use of best practices for leak
surveys, patrols, leak survey technology, begin delete and metrics for evaluating
and comparing leaks so that operators, the commission, and the
public have accurate information about the number and severity
of leaks and about the quantity of natural gas that is emitted to the
atmosphere over time. end delete begin insert leak prevention, and leak reduction. end insert Best
practices shall include evaluation of the quality of materials and
equipment from various sources, including foreign and domestic
third-party suppliers.

begin insert

(6) Establish protocols and procedures for the development and
use of metrics to quantify the volume of emissions from leaking
components, and for evaluating and tracking leaks, both
geographically and over time, so that operators, the commission,
and the public have accurate information about the number and
severity of leaks and about the quantity of natural gas that is
emitted into the atmosphere over time.

end insert begin delete

(4)

end delete

begin insert (7) end insert  To the extent feasible, begin delete provide for each end delete begin insert require the owner
of each end insert commission-regulated gas pipeline begin delete facility, the
establishment of a baseline systemwide leak rate, a periodic
updating of end delete begin insert facility to calculate and report to the commission a
baseline systemwide leak rate, along with any data and computer
models used in making that calculation, to periodically update
that end insert systemwide leak rate begin delete quantifications, and an annual reporting
structure of the end delete begin insert calculation, and to annually report on end insert measures
that will be taken in the following year to reduce the systemwide
leak rate to achieve the goals of subdivision (b).

(e) The rules and procedures, including best practices and repair
standards, shall be incorporated into the safety plans required by
Section 961.

(f) Consistent with subdivision (e) of Section 961, the
commission shall facilitate robust ongoing participation of the
workforce of gas corporations begin insert and those state and federal entities
that have regulatory roles of relevance end insert in all aspects of the
proceeding.

977.  

As an element of the proceeding required by Section 976,
the commission shall consider whether the costs of compliance
with the adopted rules and procedures are commensurate with the
short- and long-term benefits resulting from reducing leaks and
emissions and shall provide for cost recovery in rates charged to
their customers by a gas corporation, consistent with the
commission’s existing ratemaking procedures and authority to
establish just and reasonable rates. Cost considerations shall
include, but are not limited to, all of the following:

(a) Providing an adequate workforce to achieve the objectives
of reducing hazards and emissions from leaks, including leak
begin delete elimination. end delete begin insert avoidance, reduction, and repair. end insert

(b) Directing the revenues from any allowance for lost or
unaccounted for natural gas to leak begin delete elimination. end delete begin insert end insert begin insert avoidance,
reduction, and repair. end insert

(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.

SEC. 2.  

No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of
the Government Code, or changes the definition of a crime within
the meaning of Section 6 of Article XIII B of the California
Constitution.