BILL ANALYSIS �
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
SB 1371 - Leno Hearing Date:
April 29, 2014 S
As Amended: April 10, 2014 FISCAL B
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DESCRIPTION
Current law directs the California Air Resources Board (ARB) to
establish rules and regulations to achieve technologically
feasible and cost-effective greenhouse gas (GHG) emission
reductions, as specified. (Health and Safety Code � 38590)
Current federal law and general order of the California Public
Utilities Commission (CPUC) generally require hazardous
leaks in natural gas transmission and distribution pipelines to
be repaired "promptly" and direct each gas utility to establish
grades indicating the definition of, and repair schedule for,
leaks in their pipeline system. (49 CFR 192 and General Order
112-E)
Current law directs CPUC to regulate intrastate gas pipeline
facilities pursuant to federal law. (Public Utilities Code �
955)
Current law requires that the CPUC and each gas corporation
place safety of the public and gas corporation employees as the
top priority and take all reasonable and appropriate actions to
carry out this policy priority. (Public Utilities Code � 963)
Current law requires each gas corporation to develop, adopt, and
implement a plan for the safe and reliable operation of its gas
pipeline facilities that is consistent with best practices in
the gas industry and that provides for the following:
Preventive and reactive maintenance and repair;
Effective patrol and inspection to detect leaks and
effect timely repairs;
Timely response to customer and employee reports of
leaks; and
Adequately sized, qualified, and properly trained
workforce to carry out the plan. (Public Utilities Code �
961)
This bill would require the CPUC (in consultation with the gas
workforce, ARB, and other relevant entities) to commence a
proceeding to adopt rules and procedures for minimizing leaks
and reducing emissions of natural gas from CPUC-regulated gas
pipeline facilities to the maximum extent feasible, and to
incorporate this information into the required safety plan.
Current law directs the CPUC to determine the reasonableness of
operational costs and design rates for public utilities. It also
authorizes the CPUC to fix rates, charges, standards, and
practices for service. (Public Utilities Code � 451)
This bill would direct the CPUC to consider whether the costs of
compliance are commensurate with the short- and long-term
benefits resulting from reducing leaks and emissions, and to
mandate for cost recovery in rates charged to customers.
BACKGROUND
Natural Gas Regulation - The CPUC has responsibility to ensure
compliance with federal pipeline management standards for over
108,000 miles of transmission and distribution pipeline. Toward
this end, the CPUC reviews utility<1> reports and records,
responds to inquiries and complaints from the public on issues
regarding gas pipeline and electric safety, and also
investigates accidents.
The CPUC began the Gas Safety Rate Case (GSR) proceeding
(R.11-02-019) in February 2011, following the 2010 pipeline
explosion in San Bruno. The CPUC has recently convened a new
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<1> Entities regulated by the CPUC include Pacific Gas and
Electric, Southern California Gas, San Diego Gas & Electric,
Southwest Gas, and several smaller natural gas utilities. The
CPUC also regulates Lodi Gas Storage and Wild Goose Storage,
independent/third party storage providers.
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proceeding (R.13-11-006) that seeks to update the General Rate
Case (GRC) process by incorporating the explicit assessment of
risks and the cost of minimizing them. Although the GSR and GRC
represent potential venues for developing a comprehensive leak
reduction strategy, they focus on safety and risk, rather than
reducing emissions.
Methane (CH4): Sources and Impacts - The natural gas that
travels through transmission and distribution pipelines is more
than 99.5% methane, a potent greenhouse gas.
Scientists increasingly understand the sources of methane
emissions. The largest human-derived source of methane emissions
in the U.S. is leaks from natural gas extraction and
transmission pipelines. Other human-derived emissions sources
include oil production, decomposition at landfills, belching
cattle, and sewer systems. Not all methane emissions are
attributable to human activity, however; natural sources include
seepage from rock as well as biogeochemical processes in
wetlands.
Scientists have demonstrated diverse impacts of methane
emissions on climate, air quality, and public health. The
Intergovernmental Panel on Climate Change (IPCC) Fifth
Assessment Report<2> reiterates that methane has a very high
global warming potential (GWP): it is 28 times stronger than
carbon dioxide over a 100-year time horizon. Regarding air
quality, methane emissions are often associated with emissions
of volatile organic compounds, odors, and other local air
pollutants. Moreover, methane reacts with NOx in the atmosphere
to catalyze ozone formation. High concentrations of ozone in
urban areas have been linked to respiratory and cardiopulmonary
disease.<3>-<4>
Methane Emissions: Quantification and Reporting - Methane leaked
from natural gas pipelines represents an unusual source of GHG
emissions because the product is released into the atmosphere
unintentionally (due to equipment degradation or
malfunctioning), despite being a valuable commodity.
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<2> http://www.ipcc.ch/report/ar5/wg1/
<3>
http://globalchange.mit.edu/files/document/PewCtr_MIT_Rpt_Reilly.
pdf
<4> https://www.globalmethane.org/about/methane.aspx
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Understanding how much methane is leaked has become an
increasingly hot topic as the U.S. uses more of this "bridge"
fuel, which has become cheap and widely available due to new,
advanced drilling techniques.<5>
On April 15, 2014, the U.S. EPA released for peer-review a white
paper presenting data and mitigation techniques for emissions
from leaks across the natural gas system, which includes
production sites, processing plants, compressor stations, and
pipelines for retail service. The EPA will use the paper to
determine how best to pursue emissions reductions from the
natural gas sector.
On September 27, 2006, Governor Schwarzenegger signed Assembly
Bill 32 (AB 32), which required the reduction of emissions to
1990 levels by 2020 and designated ARB as the lead agency for
implementation. To estimate fugitive emissions in California,
ARB conducted the 2007 Natural Gas Transmission and Distribution
Survey: a comprehensive, one-time collection of data from
industry.
Survey data have not been made public. However, ARB disclosed to
committee staff that total fugitive emissions from the
transmission and distribution pipeline system in 2007 were
157,619 metric tons (MT) or 4.4 million metric tons CO2
equivalent (MMTCO2e), using the current IPCC GWP conversion
factor. ARB cautions that it "does not have high confidence that
these values accurately represent this source category" and that
"emitted methane is a complex and evolving issue that requires
further information and analysis." The 2007 survey remains the
most current source of comprehensive emissions information.
(More recent emissions data are publically available from the
annual reports required of individual utilities.)
The 2008 AB 32 Scoping Plan included a measure to reduce
fugitive emissions from natural gas transmission and
distribution pipelines. Suggesting that this measure may warrant
revision, the recently proposed AB 32 Scoping Plan Update<6>
states the following:
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<5> http://www.eenews.net/stories/1059997979
<6>
http://www.arb.ca.gov/cc/scopingplan/2013_update/draft_proposed_f
irst_update.pdf
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Several recent analyses of atmospheric measurements
suggest that actual methane emissions may be 1.3 to
1.7 times higher than estimated in ARB's emission
inventory. Recent research suggests that methane
emissions from a broad variety of sources could be
higher than previously expected, including leaks in
natural gas distribution systems. Underestimations may
explain the discrepancies between the inventory and
atmospheric measurements. With the greater GWP
assessed in recent IPCC and other studies, reductions
in methane emissions will have greater benefits."
ARB is continuing to research potential sources of methane
emissions to determine the source of higher-than-expected
ambient methane measurements, and whether additional controls
are technologically feasible and cost-effective.
Gas utilities are required to annually report emissions from
natural gas pipeline leaks to the U.S. EPA and the ARB. In 2012,
the most recent year for which data have been third-party
verified, Sothern California Gas reported that 55,337 MT of CH4
had been emitted from its pipeline system. San Diego Gas and
Electric reported 2,168 MT, and PG&E reported 10,549 MT. Using
the current IPCC GWP conversion factor, these figures correspond
to 1.55, 0.06, and 0.30 MMTCO2e, respectively.<7>
Utilities are also working with Environmental Defense Fund,
Washington State University, and the American Gas Association to
establish 'emissions per leak' rates which, they say, would make
it easy to multiply the number of leaks by the 'emissions per
leak' rate to get an overall estimate of emissions. It is
unknown whether this effort will produce information that is
compatible with data produced independently by the ARB or other
entities.
Leak Survey and Leak Patrol Practices - Leak surveys are
performed more frequently on pipelines that are close to
occupied buildings and places where people congregate
(quarterly) than on other pipelines (every 1 - 5 years).
Traditionally, field crews have conducted leak surveys using
handheld detectors. This method is advantageous in that the
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<7> Because natural gas is composed of more than 99.5 percent
methane, the additional emissions attributable to CO2 (rather
than CH4) are miniscule.
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location of an identified leak can be determined specifically,
yet not all leaks are identified. More recently, utilities have
employed new technologies, including vehicle-mounted GPS-enabled
methane analyzers<8>, optical, infrared, and laser detectors,
and aerial survey equipment. These new technologies are
increasing the number of leaks identified as well as
revolutionizing the labor of leak detection. According to PG&E,
new technologies do not necessarily reduce the size of the labor
workforce; instead, they require crews to be arranged and
deployed differently.
During leak patrols, crews check transmission and distribution
pipelines for activity, e.g., unauthorized excavation, on or
near the pipeline or within right-of-ways. Patrol is conducted
at least quarterly using a variety of fixed-wing aerial,
helicopter, and ground-based technologies.
Leak Repair Practices - Although federal regulation 49 CFR 192
and General Order 112-E direct utilities to establish, and abide
by, a leak grading and repair scheme, the regulations are not
specific. For example, 49 CFR 192.703(c) states that "hazardous"
leaks must be repaired "promptly." This language is broad and
gives utilities latitude in designing their leak grading and
repair schemes. During audits, the CPUC inspects records to
determine if the utilities repair and monitor leaks as required
by their own standards.
Because gas utilities have no requirements or financial
incentives to "promptly" fix "non-hazardous" leaks, numerous
non-hazardous Grade 2 and 3 (see below) leaks persist and are
sometimes managed through venting rather than repair. For
context, in 2013 PG&E reported 27,103 non-hazardous Grade 2 and
3 leaks in its system.
The grading systems of PG&E and SEMPRA are not based on GHG
emissions, but on several safety-related factors including
percent gas-in-air, soil type and conditions, proximity to
subsurface structures, and whether the leak is above ground (and
venting to the atmosphere; likely non-hazardous) or below ground
(and covered by pavement; potentially hazardous).
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http://www.picarro.com/products_solutions/solutions/picarro_surve
yor_for_natural_gas_leaks. This technology counts, maps, and
measures the concentration of methane emitted from leaks.
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A high-level overview of the classification system of SEMPRA
follows:
Grade 1: A leak that represents an existing or probable
hazard to persons or property and requires immediate repair
or continuous action until the leak source has been located
and the hazard eliminated;
Grade 2: A leak that is recognized as being
non-hazardous at the time of detection, but justifies
scheduled repair based on probable future hazard; and
Grade 3: A leak (sometimes called a "fuzz" leak) that is
non-hazardous at the time of detection and can be
reasonably be expected to remain non-hazardous.
PG&E's classification is identical to SEMPRA's except for the
following specifications:
Grade 1: Repair within 24 hours;
Grade 2+: No immediate risk, but still requires a
priority scheduled repair within 90 days;
Grade 2: Repair within 15 months; and
Grade 3: On-going monitoring.
It is important to note that a leak can be non-hazardous but
still releasing a large volume of methane and, therefore, having
harmful climate, air quality, and/or health impacts.
COMMENTS
1. Author's Statement . The author writes, "Many global
warming experts are now concerned that transition from coal
to natural gas will fail as an energy strategy if methane
emissions at all points are not curtailed. Fixing leaky gas
pipelines provides a policy two-fer by improving safety and
reducing GHGs. It would also employ California workers,
providing an economic rationale for the bill."
2. Is This a Sufficiently Important Problem ? Any leak in a
natural gas pipeline releases methane to the atmosphere and
thus produces harmful effects on climate, air quality,
and/or public health. Since methane is known to be 28 times
more potent than carbon dioxide, repairing leaks from
pipelines represents an important step toward achieving the
goals set forth in AB 32.
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3. Is the Scope of the Problem Understood ? The technology
and methodology for measuring leaks and the calculations
for converting leak data into emissions are both topics of
current research and discussion. ARB, gas utilities,
nonprofit groups, and academic researchers employ different
tools and sampling protocols in their recent and ongoing
studies. Moreover, the equation to calculate emissions
(i.e., pipe mileage x pipe activity factor) is widely
questioned. It was developed almost 20 years ago, is based
on a small set of data, and assumes a "normal" distribution
of leak rates. In all likelihood, the distribution of leak
rates is actually "skewed," with the vast majority of leaks
emitting very little and a few leaks emitting a lot.
4. Not All Leaks Are Created Equal . This bill may call for
more extensive leak repair than is feasible and/or
necessary to confer significant environmental and health
benefits. Additionally, the cost-effectiveness standard
established in this bill may be inconsistent with that of
the ARB, which is currently reevaluating its own criteria.
To ensure that the leak repair program called for in this
bill is implemented in a manner consistent with AB 32 goals
and cost-effectiveness standards and directed at those
leaks that are most significantly contributing to the
harmful climate, air quality, and health impacts of
methane, the author and committee may wish to consider
amending the bill to strike the cost-effectiveness criteria
on page 6, lines 17 to 22, and instead require that all
required work is based on achieving the maximum
technologically feasible and cost-effective reductions, as
called for in AB 32. Without this direction, significant
resources could be dedicated to the repair of all
leaks-even though repairing the largest leaks (by volume)
will more effectively and efficiently produce important
climate, air quality, and health benefits.
5. Avoid Unintended Consequences . Public gas utilities'
existing leak grading and repair standards require them to
immediately address all hazardous leaks (i.e., those that
pose an existing or probable hazard to persons or property)
within 24 hours after discovery-regardless of whether the
leaks are near buildings. This bill provides for the
"repair of any leaks discovered in close proximity to
residential and commercial buildings as soon as reasonably
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possible after discovery, consistent with the goals of
reducing the risk of injury, loss of life, property
damage." This provision could be in conflict with, or
undermine, existing safety requirements. To avoid
confusion, the author and committee may wish to consider
striking 976 (d-2).
6. Intervenor Compensation ? Under current law, a gas
corporation's workforce must be included in the development
of utilities' safety plans and any party can file a
petition with the CPUC to participate in any open
rulemaking. This bill goes further by mandating that the
CPUC include a gas corporation's workforce in all aspects
of the proposed rulemaking. The purpose of this language is
not clear and could be interpreted as mandating intervenor
compensation for parties not currently eligible. To avoid
confusion, the author and committee may wish to consider
striking this section.
7. Avoid Legislative Ratemaking . The CPUC has the
discretion to determine appropriate rate recovery for a
corporation to carry out the work necessary to ensure a
safe gas pipeline system. This bill specifically mandates
cost recovery, which is tantamount to legislative
ratemaking. There have been instances, particularly with
regard to regulation of gas pipelines, where the CPUC has
denied cost recovery from ratepayers and instead required
shareholders to cover expenses. To ensure that the CPUC
maintains its discretion to determine whether expenses are
appropriate for rate recovery or shareholder expense, the
author and committee may wish to consider striking 975 (i),
the prepositional clause of 976 (b-2), and 977.
8. Technical Amendments . This bill references
"commission-regulated gas pipeline facilities" (see 976 (b)
and (d)) and "intrastate distribution lines and intrastate
transmission lines" (see 976 (c)). For consistency
throughout the bill, the author and committee may wish to
replace these phrases with "commission-regulated intrastate
distribution and transmission pipelines."
The bill uses the 20-year GWP of 84. Given that utilities
report GHG emissions to the U.S. EPA and the ARB using the
100-year GWP, which the IPCC AR5 lists as 28, the author
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and committee may wish to replace "20-year" with "100-year"
and "84 times" with "28 times" in 975 (d).
POSITIONS
Sponsor:
Utility Workers Union of America
Support:
American Lung Association
Asian Pacific Environmental Network
BlueGreen Alliance
California Coalition of Utility Employees
California Interfaith Power & Light
California Labor Federation
California State Association of Electrical Workers
California Teamsters Public Affairs Council
Catholic Charities, Diocese of Stockton
Communication Workers of America, District 9
Engineers & Scientists of California, IFPTE Local 20, AFL-CIO
Environmental Defense Fund
Global Green USA
Los Angeles Alliance for a New Economy
Natural Resources Defense Council
Physicians for Social Responsibility-LA
Sierra Club California
Strategic Concepts in Organizing and Policy Education
The Utility Reform Network
Union of Concerned Scientists
United Food and Commercial Workers Western States Council
United Steelworkers, District 12
Oppose:
None on file
Alexis Erwin
SB 1371 Analysis
Hearing Date: April 29, 2014
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