BILL ANALYSIS �
SB 1371
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Date of Hearing: June 23, 2014
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
SB 1371 (Leno) - As Amended: June 18, 2014
SENATE VOTE : 25-10
SUBJECT : Natural gas: leakage abatement.
SUMMARY : This bill would require the California Public
Utilities Commission (PUC) 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
greenhouse gas emissions. Specifically, this bill :
1)Requires the PUC to collaborate on the rules and procedures
with the State Air Resources Board (ARB), gas corporations,
and other relevant state and federal regulatory entities.
2)Provides that rules and procedures apply to PUC-regulated
intrastate transmission and distribution natural gas
pipelines.
3)Requires adopted rules and procedures to:
a. Provide for the most technologically feasible and
cost-effective avoidance, reduction, and repair of leaks
and leaking components in PUC-regulated pipeline
facilities within a reasonable time after discovery.
b. Provide for the repair of leaks as soon as
reasonably possible after discovery, consistent with
established safety requirements and the goals of reducing
air pollution and the climate change impacts of methane
emissions.
c. Evaluate the operations, maintenance, and repair
practices for PUC-regulated gas pipeline facilities to
determine whether existing practices are effective at
minimizing leaks.
d. Establish and require the use of best practices for
leak surveys, patrols, leak survey technology, leak
prevention, and leak reduction, and provide that
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collected leak data remains the property of the utility
and is available to the commission and parties in
commission proceedings as determined by the commission.
e. Establish protocols and procedures for the
development and use of metrics to quantify the volume of
emissions from leaking components, not inconsistent with
existing protocols and procedures, and for evaluating and
tracking leaks, both geographically and over time.
f. Establish reporting requirements for the owner of
each PUC-regulated gas pipeline facility on the baseline
system-wide leak rate.
g. Allow for the rules and procedures to be
incorporated into required safety plans.
h. Facilitate participation in all aspects of the
proceeding by the workforce of gas corporations and state
and federal entities with regulatory roles.
4)Requires the PUC, consistent with its existing ratemaking
procedures, to consider all of the following concerning
natural gas leaks and emissions:
a. Provision of a sufficient workforce to reduce
hazards and emissions from leaks, including leak
avoidance, reduction, and repair.
b. Provision of revenue for all leak activities,
including any adjustment of allowance for "lost or
unaccounted for" natural gas related to actual leakage
volumes.
c. Guidance regarding treatment of expenditures as
being either an item of expense or a capital investment.
d. Impacts on gas service affordability related to
costs of compliance with the adopted rules and
procedures.
e. Social costs associated with climate change and air
pollution, including "peer-reviewed estimates of the
social costs of emissions of greenhouse gases."
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5)Makes various findings and declarations related to natural gas
pipeline safety, leakage, and methane emissions.
EXISTING LAW
a)Directs the 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)
b)Directs the PUC to regulate intrastate gas pipeline facilities
pursuant to federal law. (Public Utilities Code � 955)
c)Requires the PUC and gas corporations to make safety of the
public and gas corporation employees a top priority and take
all reasonable and appropriate actions to achieve this policy.
(Public Utilities Code � 963)
d)Requires each gas corporation to develop, adopt, and implement
a plan for the safe and reliable operation of its gas pipeline
facilities consistent with best practices in the gas industry,
including but not limited to: (1) preventive and reactive
maintenance and repair;
(2) effective patrol and inspection to detect leaks and effect
timely repairs; (3) timely response to customer and employee
reports of leaks; and (4) adequately sized, qualified, and
properly trained workforce to carry out the plan. (Public
Utilities Code � 961)
e)Authorizes the PUC to fix rates for all public utilities
subject to its jurisdiction. (California Constitution Article
XII, Section 6)
FISCAL EFFECT : Unknown.
COMMENTS :
1)Author's statement: According to the author, "Leaky gas
pipelines have been recognized as a major safety problem in
the U.S. and in California. The significant global warming
impact of fugitive methane emissions from leaky gas pipes is
just now coming into focus, as new studies demonstrate that
methane emissions are much larger than previously understood
and the global warming potential (GWP) of methane as a GHG
relative to carbon dioxide (CO2) is revised dramatically
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upward. Many global warming experts are now concerned that
the energy strategy that transitions away from coal to natural
gas as a bridge fuel will fail if methane emissions at all
points are not curtailed. Fixing leaky gas pipes thus
provides a policy 2-fer - improving safety and reducing GHGs.
The bill places a focus on this issue, provides a policy
framework that identifies best practices including employing
an adequate workforce, and imparts a sense of urgency to
addressing it. Fixing pipes employs California workers and
utilizes local materials and services, thus providing an
additional economic rationale for the bill."
2)Natural gas regulation. The PUC is responsible for ensuring
its regulated gas corporations comply with federal pipeline
standards for over 108,000 miles of transmission and
distribution pipeline. The commission reviews utility reports
and records, responds to public inquiries and complaints on
gas pipeline and electric safety, and investigates accidents.
Following the 2010 pipeline explosion in San Bruno, the PUC
opened a proceeding (R.11-02-019) in February 2011 to set
rules for safe, reliable operation of state's natural gas
pipelines. The decision, related to PG&E, mandated
implementation of a pipeline safety plan, disallowed certain
costs, imposed earnings limitations, allocated risk to
shareholders, and required improvements in safety engineering.
Another recently initiated proceeding (R.13-11-006) relates to
the development of a risk-based decision-making framework to
evaluate safety and reliability improvements in the general
rate case (GRC) applications of electric and gas utilities.
The PUC expects to complete this proceeding in January 2015.
Although these proceedings (along with the GRCs) are potential
venues for developing leak reduction strategies, the focus is
on safety and risk, rather than emission reductions, as is the
impetus of this bill.
3)California's greenhouse gas emissions policy. With Governor
Brown's signing of AB 32, the Global Warming Solutions Act of
2006, California is required to reduce greenhouse gas
emissions to 1990 levels by 2020. The bill established a
comprehensive program to reduce greenhouse gas emissions from
all sources throughout the state and designated ARB as the
lead agency for implementation. Greenhouse gas emissions are
defined in the bill to include all of the following: carbon
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dioxide, methane, nitrous oxide, sulfur hexafluoride,
hydrofluorocarbons and perfluorocarbons. The 2008 AB 32
Scoping Plan included a measure to reduce "fugitive emissions"
from natural gas transmission and distribution pipelines.
4)Sources and environmental impacts of methane. The natural gas
that travels through transmission and distribution pipelines
is about 95-98% methane.<1>
Methane emissions can be naturally occurring or due to human
activities. <2> The largest natural source is wetlands (where
bacteria emit methane), and smaller sources include oceans,
sediment, volcanoes, and wildfires. About 40% of global
methane emissions are from natural sources.
The other 60% of methane emissions are due to human
activities. According to the U.S. EPA, methane is the second
most prevalent greenhouse gas emitted in the U.S. from human
activities (at 9%, behind carbon dioxide at 82%). Major
sources of human-related U.S. methane emissions are
agriculture; energy production, distribution, and use; and
waste management. The U.S. EPA states that 2012 U.S. methane
emissions totaled 567 MMTCO2e<3> (million metric tons of
carbon dioxide equivalents, used to describe the magnitude of
greenhouse gas emissions or reductions<4>). Below is a table
describing the top 4 human-related methane emissions for 2012,
with natural gas transmission/storage and distribution shown
as a subset of natural gas systems as a whole:
--------------------------------------------------------------
|Methane emission |MMTCO2e |% of total 2012 U.S. |
|source | |anthropogenic methane |
| | |emissions (567 MMTCO2e) |
|--------------------+----------+------------------------------|
|Enteric |141 |~25% |
|fermentation | | |
---------------------------
<1>
http://www.epa.gov/methane/gasstar/basic-information/index.html
<2> http://epa.gov/climatechange/ghgemissions/gases/ch4.html
<3>
http://www.epa.gov/climatechange/ghgemissions/usinventoryreport.h
tml
<4> As a reference, a reduction of MMTCO2e is equivalent to
216,000 passenger cars not driven for one year
( http://www.arb.ca.gov/cc/factsheets/1mmtconversion.pdf )
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|(livestock | | |
|management) | | |
|--------------------+----------+------------------------------|
|Natural gas systems |130 |~23% |
--------------------------------------------------------------
---------------------------------------------------------------
| |Transmission/st| |43.5 | |~7.6% |
| |orage | | | | |
|----+---------------+-----+-----+-----+------------------------|
| |Distribution | |26 | |~4.6% |
---------------------------------------------------------------
--------------------------------------------------------------
|Landfills |103 |~18% |
|--------------------+----------+------------------------------|
|Coal mining |56 |~10% |
--------------------------------------------------------------
Methane emissions have been shown to impact climate, air
quality, and public health. The Intergovernmental Panel on
Climate Change (IPCC) reports methane has a high global
warming potential, stating it is 28 times stronger than carbon
dioxide over a 100-year time horizon (i.e., methane will trap
28 times more heat than the carbon dioxide over the next 100
years). <5> Regarding air quality, methane emissions have been
associated with emissions of other air pollutants, and methane
can react with nitrous oxide in the atmosphere to form ozone.
Ozone in urban areas adversely affects human health.<6>
5)Methane emissions (leaks) from natural gas pipelines. Natural
gas has become inexpensive and widely used, and therefore, it
is important to understand the extent of emissions (leaks)
from gas transmission and distribution pipelines. The U.S. EPA
released a white paper concerning emissions from leaks across
the natural gas system<7>, and is using the paper to determine
best practices for emissions reductions from the natural gas
sector.
The study of natural gas leaks in complex and evolving. The AB
32 Scoping Plan Update states the following:
"Several recent analyses of atmospheric measurements
----------------------
<5> http://www.ipcc.ch/report/ar5/wg1/
<6> http://www.pnas.org/content/103/11/3988.full.pdf
<7>
http://www.epa.gov/airquality/oilandgas/pdfs/20140415leaks.pdf
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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 global
warming potential assessed in recent IPCC and other
studies, reductions in methane emissions will have
greater benefits."
To estimate fugitive emissions in California, the ARB
collected industry data in the one-time 2007 Natural Gas
Transmission and Distribution Survey. Survey data have not
been made public, but ARB disclosed to Senate Energy Committee
staff that total fugitive emissions from the transmission and
distribution pipeline system in 2007 were 157,619 metric tons
or 4.4 MMTCO2e.<8> ARB cautioned that these values may not
accurately represent this source and that methane emissions
are a complex issue.
Gas utilities are required to annually report emissions from
natural gas pipeline leaks to the U.S. EPA and the ARB. Within
the annual Gas Reports, for example, utilities list gas that
is "lost and unaccounted for" (LUAF), but do not report
specific line items within that number such as company use,
errors in measurement, theft, and the topic of interest here,
distribution and transmission leakage. In response to a data
request, SoCalGas reported that in 2012, 615,453 thousand
cubic feet (MCF) was leaked to the atmosphere. This
corresponds to 1% of the LUAF total and 0.06% of the total
2012 throughput. SCE also claims "reported leakage in
comparison to throughput is ~0.3%." PG&E reported that
distribution pipeline and residential meter leakage accounted
for 0.8 million decatherms (MMDth) out of a 16.5 MMDth of LUAF
gas - about 5% of the total LUAF gas. The percentage this is
of total throughput is unknown. Using SoCalGas and PG&E leak
data along with the Henry Hub natural gas wholesale pricing
--------------------------
<8> As a rough estimate, this is about 0.6% of all human-related
U.S. methane emissions, using the 2009 U.S. anthropogenic
methane emissions total of 731 MMTCO2e,
<9> http://www.eia.gov/dnav/ng/hist/rngwhhdW.htm
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for June 6, 2014<9> and the EIA conversions<10>, it is
estimated that SoCalGas lost about $2.9 million worrth of
leaked gas, while PG&E lost $3.6 million.
6)Natural gas leak surveys, patrols, and repair. Leak surveys
are performed quarterly on pipelines near occupied buildings
and places where people congregate, whereas the timeline on
other pipelines is every 1-5 years. Field crews have
traditionally conducted leak surveys using handheld detectors,
and this type of survey can specifically determine leak
location, but cannot identify many leaks. Utilities have begun
using new technologies to survey leaks, including
vehicle-mounted GPS-enabled methane analyzers<11>, optical,
infrared, and laser detectors, and aerial survey equipment.
These new technologies are identifying more leaks and also
changing the way the utility workforce is deployed.
Leak patrols differ from surveys in that crews check for
activity (such as unauthorized excavation), on or near the
pipelines or within right-of-ways. Patrol is conducted at
least quarterly using a variety of fixed-wing aerial,
helicopter, and ground-based technologies.
Regarding repair of leaks, federal and state regulations give
utilities latitude in designing leak grading and repair
schemes. For example, federal regulation 49 CFR 192.703(c)
states "hazardous" leaks must be repaired "promptly", whereas
PUC General Order 112-E directs utilities to establish a leak
grading and repair scheme. Thus many non-hazardous leaks are
allowed to persist and are sometimes managed through venting
rather than repair. For example, in 2013 PG&E reported 27,103
non-hazardous Grade 2 and 3 leaks in its system.
PG&E and Sempra grade leaks based not on GHG emissions, but on
safety-related factors such as percent gas-in-air, soil type
and conditions, proximity to subsurface structures, and
whether the leak is above ground (venting to the atmosphere;
likely non-hazardous) or below ground (covered by pavement;
potentially hazardous).
--------------------------
<10> http://www.eia.gov/tools/faqs/faq.cfm?id=45&t=8
<11>
http://www.picarro.com/products_solutions/solutions/picarro_surve
yor_for_natural_gas_leaks
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A high-level overview of Sempra's leak grading system 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 requires a priority
scheduled repair within 90 days;
Grade 2: Repair within 15 months; and
Grade 3: On-going monitoring.
Although a leak can be non-hazardous, it may still release a
large volume of methane and, therefore, have adverse climate,
air quality, and/or health impacts.
1)"Best practices" and "metrics" are unknown. This bill requires
the PUC to "establish and require the use of best practices
for leak surveys, patrols, leak survey technology, leak
prevention, and leak reduction", and to also "establish
protocols and procedures for the development and use of
metrics to quantify the volume of emissions from leaking
components". Research on leak measurement and calculations for
converting leak data into emissions is at the cutting edge,
and it is unlikely to provide (at least in the near future)
information and/or data needed to achieve the goals of this
bill.
2)Not all leaks are equal. The equation to calculate emissions
(i.e., pipe mileage x pipe activity factor) was developed
almost 20 years ago, is based on a small set of data, and
assumes a normal distribution of leak rates (i.e., a bell
curve, where most leaks emit an average amount of gas, and
less emitting a large or a small amount). The distribution of
leak rates is likely skewed, with the vast majority of leaks
emitting very little and a few leaks emitting a lot.
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Currently, this bill provides for "the maximum technologically
feasible and cost-effective avoidance, reduction, and repair
of leaks and leaking components in those commission-regulated
gas pipeline facilities". Even with this language, this bill
may call for more extensive leak repair than is feasible
and/or necessary to confer significant environmental and
health benefits.
3)Scope of PUC authority. The PUC mission is to serve the public
interest by protecting consumers and ensuring the provision of
safe, reliable utility service and infrastructure at
reasonable rates.
The author may wish to consider an amendment clarifying that
when the PUC considers rules and procedures related to
maintenance, repair, and replacement of regulated gas pipeline
facilities, priority is given to safety, reliability, and
affordability, as follows:
975(b) The commission shall adopt rules and
procedures, with priority given to safety,
reliability, and affordability of service, governing
the operation, maintenance, repair, and replacement of
those commission-regulated gas pipeline facilities
that are intrastate transmission and distribution
lines, as described in paragraphs (1) and (2) of
subdivision (a) of Section 950, to achieve both of the
following:
Furthermore, the PUC does not have jurisdiction over GHG
emissions; rather, this is the authority of the ARB.
Therefore, the author may wish to consider an amendment
specifying that this bill does not expand the scope of the
PUC's authority with regard to GHG, by creating a new code
section, as follows:
978. Except as expressly provided in this article,
this article does not expand or in any way alter the
commission's jurisdiction over the regulation of
greenhouse gas emissions.
Finally, language proposed in Section 977(e) asking the PUC to
consider social and public costs associated with climate
change and air pollution is inconsistent with the PUC charge.
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Therefore, the author may wish to consider an amendment
striking language in 977(e).
4)Clarify transparency/accountability for rate revenues. The
transparency and accountability for rate revenues is not
always sufficient.
The author may wish to consider an amendment to Section 977
related to transparency and accountability for rate revenues ,
as follows:
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:
5)Technical amendments. Language proposed in Section 977(b)
incorrectly refers to Section 976, when the intent was to
refer to Section 975.
The author may wish to consider an amendment to 977(b)
correcting this reference, as follows:
Providing revenues for all activities identified and
required pursuant to Section 976 975 , including any
adjustment of allowance for lost and unaccounted for gas
related to actual leakage volumes.
6)Support and opposition.
Supporters state that fixing pipeline leaks promptly and
efficiently improves the safety and integrity of the system
for both workers and the public, and also addresses the
significant global warming impacts of fugitive emissions of
methane, which is many times more potent that carbon dioxide
as a greenhouse gas. Others argue that "we cannot let leaky
pipes go unrepaired because they are more of an environmental
problem than an explosion risk."
There is no opposition on file.
REGISTERED SUPPORT / OPPOSITION :
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Support
American Lung Association in California
Asian Pacific Environmental Network
Bay Area Air Quality Management District (BAAQMD)
BlueGreen Alliance (BGA)
Breathe California
California Coalition of Utility Employees (CCUE)
California Environmental Justice Alliance
California Interfaith Power & Light
California Labor Federation
California State Association of Electrical Workers
California Teamsters Public Affairs Council
Engineers & Scientists of California, IFPTE Local 20
Environmental Defense Fund (EDF)
Environmental Justice Project of Catholic Charities, Diocese of
Stockton
Global Green USA
Los Angeles Alliance for a New Economy (LAANE)
Los Angeles County Federation of Labor, AFL-CIO
Natural Resources Defense Council (NRDC)
Physicians for Social Responsibility - LA (PSR-LA)
San Francisco Bay Area Physicians for Social Responsibility (SF
Bay Area PSR)
Sierra Club California
The Utility Reform Network (TURN)
Union of Concerned Scientists
United Food & Commercial Workers Union Western States Council
United Steelworkers (USW) District 12
Utility Workers Union of America (UWUA)
Opposition
None on file.
Analysis Prepared by : Brandon Gaytan / U. & C. / (916)
319-2083