February 19, 2016 was the deadline for lawmakers to introduce legislation to the 2015-2016 California Legislative Session, and the Legislature’s ever-growing appetite for regulating the energy industry in California shows no signs of being satiated anytime soon. More bills than ever proposing to add new regulations on the oil and gas industry have been introduced. Below is a summary of those bills, many of which relate to natural gas storage following the Aliso Canyon natural gas well leak. Stoel Rives is monitoring these bills and will provide updates as the bills move through the legislative process.
AB 1759 (Bonta): Hydrogen fluoride: notice of use: substitution
This bill would require an owner or operator of an oil refinery that uses hydrogen fluoride, hydrofluoric acid, or modified hydrofluoric acid in its operations to send out biannual notices to each business, school, child care facility, library, church, community facility, senior facility, and residence within a 3.5-mile radius of the refinery. The cost of the notice must be paid by the owner or operator of the refinery, and the owner or operator must file a copy of the notice and distribution list with the California Air Resources Board.
In addition, this bill would require a business that, at any time, handles, maintains, or stores more than 250 gallons of hydrogen fluoride or hydrofluoric acid, to (if possible) convert to a known, significantly less hazardous substitute by January 1, 2017. If conversion to a less hazardous substance is not possible, and the business is located within two miles of a residential dwelling, the business must cease handling, maintaining, or storing hydrogen fluoride and hydrofluoric acid by January 1, 2017.
AB 1882 (Williams): Oil and gas: groundwater monitoring
This bill would require the Division of Oil, Gas, and Geothermal Resources (“Division”), in the Department of Conservation, to provide an opportunity and the information necessary for the State Water Resources Control Board and the appropriate regional water quality control board to review, comment on, and propose additional requirements for Class II underground injection well projects.
AB 1902 (Wilk): Time for commencing civil actions: Aliso Canyon gas leak
Current law sets forth a two-year statute of limitations for commencing a civil action for injury, illness, or wrongful death based upon exposure to a hazardous material or toxic substance other than asbestos, as specified. This bill would establish a three-year statute of limitations for commencing a civil action for injury, illness, or wrongful death based on exposure to methane, benzene, mercaptan, or any other hazardous material or toxic substance resulting from the Aliso Canyon gas leak.
AB 1903 (Wilk): Aliso Canyon gas leak: health impact study
This bill would require the Public Utilities Commission (“PUC”) and the Department of Public Health to jointly study the long-term health impacts of the significant natural gas leak from the Aliso Canyon natural gas storage facility located in Los Angeles County that started approximately October 23, 2015. The bill would require the commission to report its ongoing findings to the Legislature on a biennial basis, on or before January 1 of every even-numbered year, from 2018 until 2032.
AB 1904 (Wilk): Hazardous materials: natural gas odorants
Existing law requires natural gas that is delivered into any vessel or system, as specified, to have a distinctive odor of sufficient intensity so that the presence of the gas may be detected down to concentrations in air of not over 20% of the lower explosive limit, and require that these odorants be, among other things, harmless to humans, nontoxic, and noncorrosive to certain metals.
This bill would require the Office of Environmental Health Hazard Assessment to submit a report to the Legislature, on or before January 1, 2018, that includes an assessment of the danger of odorants currently used in natural gas storage facilities in the state to public health and safety and the environment, and that identifies alternative odorants for possible use in natural gas storage facilities, as specified. This bill would declare that it is to take effect immediately as an urgency statute.
AB 1905 (Wilk): Natural gas injection and storage: study
This bill would require the Secretary of the Natural Resources Agency, on or before July 1, 2017, to cause to be conducted, and completed, an independent scientific study on natural gas injection and storage practices and facilities, as specified. This bill would declare that it is to take effect immediately as an urgency statute.
AB 2206 (Williams): Biomethane: interconnection and injection into common carrier pipelines: research
This bill would request the California Council on Science and Technology to undertake and complete a study analyzing the regional and gas corporation specific issues relating to minimum specifications adopted by the PUC for biomethane before it can be injected into common carrier gas pipelines. If the California Council on Science and Technology agrees to undertake and complete the study, the bill would require each gas corporation operating common carrier pipelines in California to proportionately contribute to the expense of undertaking the study with the cost recoverable in rates.
AB 2313 (Williams): Renewable natural gas
This bill would require the State Air Resources Board to study and evaluate a strategy or strategies to increase the instate production and use of renewable natural gas, as defined, to further specified goals.
AB 2729 (Williams): Oil and gas: operations
Existing law provides that an active observation well is not an idle well. This bill would limit the definition of “active observation well,” and would expand the definitions of “idle well” and “long-term idle well” by no longer excluding active observation wells from their definitions. The bill would provide that the abandoned underground personal property of an operator becomes the property of the mineral interest owner.
This bill would provide that the monies in the Hazardous and Idle-Deserted Well Abatement Fund are continuously appropriated to the department for expenditure without regard to fiscal year to mitigate a hazardous or potentially hazardous condition, by well plugging and abandonment, decommissioning attendant production facilities, or both, at a well of a feepaying operator.
Existing law provides steps that must be taken to determine that a well is properly abandoned. This bill would provide that proper steps include plugging the well, decommissioning the attendant production facilities of the well, or both, if determined necessary by the supervisor. Additionally, this bill would authorize the State Oil and Gas Supervisor (“Supervisor”) or district deputy to order or permit the reabandonment of any previously abandoned well if the Supervisor or the district deputy has reason to question the integrity of the previous abandonment, or if the well is not accessible or visible. This bill would authorize a party to plug and abandon a well that the Supervisor has determined to be either a hazardous or idle-deserted well by obtaining all necessary rights to the well, and would require that party to be subject to certain requirements applicable to an operator of a well, file with the Supervisor the appropriate bond or deposit, and complete the abandonment.
This bill would revise existing law to increase the amounts of the required individual and blanket indemnity bonds; require a person acquiring the right to operate a well or production facility to file a specified individual or blanket indemnity bond for each well; increase the fees required to be filed for each idle well if the operator does not file a plan with the Supervisor to provide for the management and elimination of all its long-term idle wells; repeal the ability of an operator to provide an escrow account or indemnity bond for each idle well in lieu of paying a fee or filing a plan; and revise the conditions for the cancellation of an individual or blanket indemnity bond.
AB 2748 (Gatto): Aliso Canyon Gas Storage Facility: leak: claims for damage to property
This bill would state the intent of the Legislature to enact legislation that would facilitate the resolution of claims for property damage against Southern California Gas Company growing out of a major leakage of natural gas at its Aliso Canyon Gas Storage Facility that commenced in October 2015, in order to achieve just results while avoiding clogging the courts.
AB 2756 (Thurmond): Oil and gas operations: enforcement actions
Under existing law, the Division regulates the drilling, operation, maintenance, and abandonment of oil and gas wells in the state. This bill would authorize the Supervisor to consider specified circumstances when establishing the amount of the civil penalty for a violation of certain requirements related to the regulation of oil and gas. In addition, this bill would make numerous changes to the process and procedures for an informal hearing before the Director of Conservation, and to discovery provisions.
AB 2788 (Gatto): Natural gas storage: emergency regulations
Under existing law, a regulation, amendment, or order of repeal adopted as an emergency regulation remains in effect no more than 180 days unless the adopting agency and the Office of Administrative Law comply with certain requirements. This bill would instead require that emergency regulations adopted by the Division effective ____ remain in effect until the adoption, amendment, or repeal of the regulation is promulgated by the Division.
AB 2874 (Gaines): Gas corporations: natural gas production and storage
Existing law requires the PUC to investigate, as part of the rate proceeding for any gas corporation, impediments to the production and storage of natural gas within the state, and authorizes the PUC to adopt a tariff that encourages the production or storage of natural gas within the state. This bill would make technical, nonsubstantive changes to that provision.
SB 248 (Pavley): Oil and gas
Existing law requires the Division to regulate the drilling, operation, maintenance, abandonment, and operation of wells. This bill would require the Supervisor to establish an inspection program for all regulated activities, and would require the Supervisor to make public a report on specified information on or before the first day of October of each year. The total number of inspections and results of the inspections must be included in the report. In addition, the bill would require the Division regulations, field rules, notices, manuals, and other requirements to be reviewed and revised, as needed, through a public process at least once every 10 years.
This bill would require the Division, as part of the Oil and Gas Data Management System developed pursuant to the Budget Act of 2015, to ensure that required well data and well-related submissions are retained and readily available to the public and that publicly available data are machine-readable.
This bill would define “enhanced oil recovery” as “any process to enhance the displacement of oil or other hydrocarbons from a reservoir, including, but not limited to, the injection or subsurface emplacement of fluids or other materials into the productive strata . . . .” It would require the Division, by July 1, 2017, to develop and implement additional safeguards, as needed, to protect groundwater where a well stimulation treatment is proposed for a shallow well or at a shallow depth in a well, as specified.
In addition, this bill would require all operations to be described and recorded in the well history; any fluid injected or emplaced in the well to be fully characterized and reported as part of the history; and the monthly statement to the Supervisor to include the full characterization of the chemical composition of water produced from each well. This bill would prohibit, commencing July 1, 2017, a chemical from being injected or emplaced in a well unless the Division has in its possession specified information to permit assessment of the chemical’s toxicity, persistence, and mobility in the surrounding environment. Further, the Division must post a list of chemicals and the measured parameters on its website, in consultation with the Office of Environmental Health Hazard Assessment.
The Division is required to revise its regulations under the Safe Drinking Water Act to include reporting requirements, and consult with independent experts and stakeholders in the development and review of the regulations. Injection wells and well projects existing as of December 31, 2017, must be brought into compliance with these regulations on or before January 1, 2020.
The definition of “oil sump” is revised to mean any open basin in the ground “serving as a receptacle for collecting, disposing of, or storing waste fluids, including, but not limited to, mud, oil, or waters or waste waters attendant to oil and gas field exploration, development, and production.” This bill would provide that, in order to protect groundwater, surface water, air quality, and wildlife resources, commencing July 1, 2017, no oil sumps can be used for the disposal of waters or waste waters.
SB 380 (Pavley): Natural gas storage: moratorium
On October 23, 2015, a natural gas well at Aliso Canyon located in Los Angeles County began leaking. To date, the leak has not yet been plugged and continues to release methane emissions. This bill was amended on January 27, 2016 to specifically address this leak. It requires the Supervisor to immediately institute a moratorium on injections of natural gas into any wells located within and serving the Aliso Canyon storage facility until specified conditions are met. This bill would also require the Supervisor to prohibit the production of natural gas by any well originally drilled earlier than 1954 at the Aliso Canyon storage facility until specified conditions are met. In addition, the PUC is required to determine the feasibility of minimizing or eliminating the use of the Aliso Canyon natural gas storage facility while still maintaining energy reliability for the region.
SB 788 (McGuire): California Coastal Protection Act of 2015
This bill is technically still live as a two-year bill, but it has had no activity since August 2015. The California Coastal Sanctuary Act of 1994 authorizes the State Lands Commission to enter into a lease for the extraction of oil or gas from state-owned tide and submerged lands in the California Coastal Sanctuary, if the State Lands Commission determines that the oil or gas deposits are being drained by means of producing wells upon adjacent federal lands and the lease is in the best interest of the state. This bill enacts the California Coastal Protection Act of 2015, which would prohibit this authorization.
SB 886 (Pavley): Natural gas storage: moratorium
This bill is similar to SB 380 in that it would require the Supervisor to immediately institute a moratorium on injections of natural gas into any wells located within and serving the Aliso Canyon storage facility located in Los Angeles County until specified conditions are met. The bill would require the Supervisor to prohibit the production of natural gas by any well originally drilled earlier than 1954 at the Aliso Canyon storage facility until certain conditions are met, except as specified. In addition, the bill requires the PUC to determine the feasibility of minimizing or eliminating use of the Aliso Canyon natural gas storage facility while still maintaining energy reliability for the region. As of January 28, 2016, this bill has been referred to the Committees on Natural Resources & Water, and Energy, Utilities & Communications.
SB 887 (Pavley): Natural gas storage wells
This bill also addresses the Aliso Canyon natural gas leak, focusing specifically on regulation of natural gas wells. This bill would require, before January 1, 2018, and annually thereafter, the Division to inspect all natural gas storage wells serving or located in a natural gas storage facility. It provides that a natural gas storage well in existence on December 31, 2016, must be brought into compliance with the bill provisions. This bill would prohibit the Division from issuing a permit for a new natural gas storage well located within a certain distance of a sensitive receptor, as defined, and would require the Division to order operators to cease the use of an existing well that is located within the same distance.
In the event of any well casing failure or natural gas leak, the operator must make preparations for the drilling of a relief well to begin within 24 hours of the discovery of the leak, the operator must notify the Division immediately, and the Division must post information about the leak on its website. Further, this bill requires the Division to convene an independent panel of recognized experts to develop best practices for natural gas storage facilities, and requires the Division, in consultation with the Office of Environmental Health Hazard Assessment, the State Department of Public Health, and the Department of Industrial Relations, to perform a risk assessment of natural gas storage wells and to report the findings to the Legislature. The Air Resources Board, in consultation with any local air district and the Division, must develop guidelines for a monitoring program that includes continuous monitoring of the ambient concentration of natural gas at locations throughout a natural gas storage facility to identify natural gas leaks.
This bill would provide that the public has a right to review the location of all new natural gas storage wells or existing wells converting to a natural gas storage well before approval. Finally, this bill would require that the report of a well’s history include all operations, injections, production, and emplacement of any materials into a natural gas storage well, and to be disclosed to the Division by the operator.
SB 888 (Allen): Gas corporations: emergency management
This bill establishes the Office of Emergency Services as the lead agency for emergency response to a leak of natural gas from a natural gas storage facility. The PUC has regulatory authority over public utilities and must investigate the cause of all accidents occurring upon the property of any public utility. Under this bill, the PUC is authorized to deposit monies from penalties assessed against a gas corporation related to a gas storage facility leak into the Gas Storage Facility Leak Mitigation Account, in the State Treasury. The bill would provide that monies in this account must be expended, upon appropriation by the Legislature, solely for direct emissions reductions in furtherance of the achievement of the state’s greenhouse gas emissions limit.
SB 900 (Jackson): State lands: coastal hazard removal and remediation program
This bill would require, upon appropriation of monies by the Legislature, the State Lands Commission to administer a coastal hazard removal and remediation program, and would authorize the State Lands Commission to seek and accept on behalf of the state any gift, bequest, devise, or donation whenever the gift and the terms and conditions thereof will aid in actions undertaken to administer that program. The State Lands Commission is authorized to seek to abandon, in cooperation with the Division, legacy oil and gas wells that present a hazard to the public health and safety and the environment, and is required to annually report to the Legislature the activities and accomplishments of the program.
In addition, this bill would require that, for the 2017-2018 fiscal year, out of those funds deposited into the General Fund by the State Lands Commission, $2 million will be transferred to the Land Bank Fund and be available, upon appropriation in the annual Budget Act, for the purpose of implementing the coastal hazard and remediation program. Commencing with the 2018-2019 fiscal year and each fiscal year thereafter, an amount sufficient to bring the unencumbered balance of the Land Bank Fund to $2 million must be transferred to that fund and be available, upon an appropriation in the annual Budget Act, for the purpose of implementing the program.
SB 1147 (Galgiani): Hazardous materials: aboveground storage tanks
As regulated by the Aboveground Petroleum Storage Act, this bill would amend the definition of “aboveground storage tank” to mean a tank that has the capacity to store 55 gallons or more of transportation fuel and that is substantially or totally above the surface of the ground or a tank in an underground area, as defined, except for certain types of tanks and vessels. Further, the bill would define “transportation fuel” to include petroleum, ethanol, and biodiesel.
SB 1206 (Morrell): Natural Gas Pipeline Safety Act of 2011
The Natural Gas Pipeline Safety Act of 2011 designates the PUC 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. The act requires the PUC to open an appropriate proceeding or expand the scope of an existing proceeding to establish compatible emergency response standards that owners or operators of certain commission-regulated gas pipeline facilities are required to follow. This bill would make a technical, nonsubstantive change to the compatible emergency response standards requirements.
SB 1441 (Leno): Natural gas: vented and fugitive emissions
This bill would require the State Air Resources Control Board, in regulations implementing a market-based compliance mechanism, to include vented emissions and fugitive emissions of natural gas as counting against the compliance obligation of certain covered natural-gas-related entities under the mechanism. Further, in establishing rates for gas corporations, this bill would prohibit the PUC from considering systemic natural gas losses in the form of vented or fugitive emissions occurring during the injection, storage, transmission, or distribution of the natural gas.