BILL NUMBER: SB 887AMENDED BILL TEXT AMENDED IN ASSEMBLY JUNE 30, 2016 AMENDED IN SENATE MAY 31, 2016 AMENDED IN SENATE APRIL 26, 2016 AMENDED IN SENATE MARCH 28, 2016 INTRODUCED BY Senator Pavley (Coauthors: Senators Allen and De Len) (Coauthor: Assembly Member Wilk) JANUARY 20, 2016 An act to add Chapter 6 (commencing with Section 42710) to Part 4 of Division 26 of the Health and Safety Code, and to amend Section 3236.5 of, and to add Sections 3133, 3134, 3135, 3136, 3137, 3138, 3139, 3140, 3141, 3142, 3143, 3144, 3145, and 3146 to, the Public Resources Code, relating to natural gas. LEGISLATIVE COUNSEL'S DIGEST SB 887, as amended, Pavley. Natural gas storage wells. Under existing law, the Division of Oil, Gas, and Geothermal Resources in the Department of Conservation regulates the drilling, operation, maintenance, and abandonment of oil and gas wells in the state. Existing law provides that a person who fails to comply with specific laws relating to the regulation of oil or gas operations is guilty of a misdemeanor. This bill would require a natural gas storage well, before January 1, 2018, and annually thereafter, to be tested across its entire length for a loss of integrity resulting in a leak and to have those results reported to the division, and would prescribe standards for a natural gas storage well, including among other things,a requirement that the well be equipped with an automatic downhole shutoff system andrequired baseline and follow-on proactive evaluations. This bill would require, on or before July 1, 2018, all natural gas storage wells, except low-risk natural gas storage wells, as defined, to be equipped with an automatic downhole shutoff system and to conduct natural gas injection and production through tubing only and be isolated from contact with the well casing. The bill would require low-risk natural gas storage wells to comply with those requirements on or before July 1, 2019, except as provided. This bill would require all newly constructed natural gas storage wells to have a cement barrier, as determined by the supervisor. This bill would require, in the event of a loss of the integrity of a natural gas storage well, well casing, or cementing resulting in a large ongoing leak of natural gas and associated gases and materials that pose a significant present or potential hazard to public health and safety, property, or to the environment, that preparations for the drilling of a relief well begin within 24 hours of the discovery of the leak. This bill would require the operator, in the event of a leak of any size from a natural gas storage well, to notify the division immediately and would require the division to post information about the leak on its Internet Web site, as prescribed. This bill would require an operator of a natural gas storage well to develop and maintain a comprehensive gas storage well training and mentoring program for those employees whose job duties involve the safety of operations and maintenance of natural gas storage wells and associated equipment, as specified. This bill would require the division to convene an independent panel of recognized experts to develop best practices for natural gas storage facilities and to review and incorporate the best practices developed by the panel into its regulations for natural gas storage wells, if appropriate, and to the extent those practices are applicable, for other wells under the division's jurisdiction. The bill would require the division to periodically, and whenever necessary, review advances in relevant technologies and best practices for natural gas storage facilities and, if appropriate, to incorporate changes in best practices into its regulations for natural gas storage wells and, to the extent those practices are applicable, for other wells under the division's jurisdiction. This bill would require the division to, as feasible, incorporate federal regulations applicable to natural gas storage facilities, including, into the division's gas storage well regulations, and to perform unannounced randomon-siteonsite inspections of some natural gas storage wells annually. This bill would require the Office of Environmental Health Hazard Assessment and the State Department of Public Health, in consultation with the division, to perform a risk assessment of natural gas storage wells todeterminedetermine, among other things, appropriate setback distances for natural gas storage wells and to report the findings of the risk assessment to the Legislature. This bill would require the State Air Resources Board, in consultation with any local air district and the division, to develop guidelines for a monitoring program that includes continuous monitoring of the ambient concentration of natural gas at sufficient locations throughout a natural gas storage facility or planned natural gas storage facility to identify natural gas leaks and the presence of natural gas emissions in the atmosphere. The bill would require an operator of a natural gas storage facility to develop and submit to the state board a facility monitoring plan that satisfies the program requirements, and would require the state board to review the plan and to either approve or disapprove the plan. This bill would require monitoring data to be provided to the state board. This bill would require the division to post and make available on its Internet Web site all materials that are provided to the state board or division in order to comply with the provisions added by this act. Because a violation of these requirements would be a crime, the bill would impose a state-mandated local program. Existing law requires the operator of a well to file a written notice of intention to commence drilling with, and prohibits any drilling until approval is given by, the supervisor or district deputy. Under existing law, the notice is deemed approved if the supervisor or district deputy fails to respond to the notice in writing within 10 working days from receipt and is deemed canceled if operations have not commenced within one year of receipt. Existing law provides that these provisions also apply to the deepening or redrilling of the well, any operation involving the plugging of the well, or any operations permanently altering in any manner the casing of the well. This bill would require certain materials, relating to wells serving or located in a natural gas storage facility, to be submitted by the operator and approved at the supervisor's discretion before approval of the notice. This bill would provide that the public has a right to review the locations of all new natural gas storage wells or existing wells converting to natural gas storage wells before the approval of the notice. Existing law requires the owner or operator of any well to keep, or cause to be kept, a careful and accurate log, core record, and history of the drilling of the well. This bill would require the well history to include all operations, injection, production, and emplacement of any materials into a natural gas storage well, and to be disclosed to the division by the operator, as specified. Under existing law, a person who violates certain statutes or regulations relating to oil and gas well operations is subject to a civil penalty not to exceed $25,000 for each violation. Existing law provides that the unreasonable waste of natural gas by act, omission, sufferance, or insistence is opposed to the public interest and is unlawful. This bill would provide that a violation of the prohibition against the unreasonable waste of natural gas is subject to the civil penalty not to exceed $25,000 for each violation. 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. The Legislature finds and declares as follows: (a) Public transparency regarding risks, the regulations designed to mitigate those risks, and regulatory activity are essential to protect public health and welfare and natural resources. (b) Public disclosure and safe operation of gas storage wells and associated piping and equipment are essential in order to provide for public, environmental, and occupational health and welfare, including a proactive approach to potential problems. (c) On October 23, 2015, a significant, uncontrolled leak from a natural gas storage well that was originally drilled over 60 years ago was discovered in the Aliso Canyon natural gas storage facility located in the County of Los Angeles. Initial efforts to stop the leak failed. (d) The Division of Oil, Gas, and Geothermal Resources in the Department of Conservation responded swiftly to the leak, including by issuing two orders that, among other things, require the use of relief wells. The division worked around the clock overseeing efforts to stop the leak. (e) It was several days before the community was notified of the leak, although numerous residents started reporting odor concerns almost immediately. The leaking well is up the hill and approximately one and one-quarter miles away from the nearest home. Other natural gas storage wells serving this facility are located closer to homes and businesses. (f) The operator of the leaking well had removed a subsurface safety valve decades earlier and had not replaced it. Regulations in effect at that time did not require approval or replacement of the valve. There was no automatic downhole shutoff system installed in the event of a leak. In 2014, the operator acknowledged publicly in a filing to the Public Utilities Commission that many of its wells needed additional assessment and repair. There was no requirement to disclose to potential homebuyers and business owners the existence of the Aliso Canyon natural gas storage facility and its attendant risks. (g) The Governor declared a state of emergency on January 6, 2016, in order to facilitate the ongoing state response and efforts to stop the leak. (h) On February 18, 2016, the Division of Oil, Gas, and Geothermal Resources in the Department of Conservation certified that the Aliso Canyon leak had been stopped. Reports estimate almost 100,000 metric tons of the potent greenhouse gas methane were emitted to the atmosphere. Community health concerns continue postleak with hundreds of complaints reported to the County of Los Angeles along with widespread concern about the short- and long-term impacts of the leak on public health and economic welfare in the area. (i) The standards for natural gas storage wells need to be improved in order to reflect 21st century technology, disclose and mitigate any risks associated with those wells, recognize that these facilities may be in locations near population centers, and ensure a disaster like the Aliso Canyon leak does not happen again. SEC. 2. Chapter 6 (commencing with Section 42710) is added to Part 4 of Division 26 of the Health and Safety Code, to read: CHAPTER 6. NATURAL GAS STORAGE FACILITY MONITORING 42710. (a) The state board, in consultation with any local air district and the Division of Oil, Gas, and Geothermal Resources in the Department of Conservation, shall develop a natural gas storage facility monitoring program that includes continuous monitoring of the ambient concentration of natural gas at sufficient locations throughout a natural gas storage facility or planned natural gas storage facility to identify natural gas leaks and the presence of natural gas emissions in the atmosphere. The continuous monitoring program may be supplemented by daily leak detection measurements. (b) The program shall include guidelines for the continuous monitoring which shall include, at minimum, optical gas imaging and accurate quantitative monitoring of natural gas concentrations. The program shall include protocols for both stationary and mobile monitoring, as well as fixed and temporary monitoring locations. (c) An operator of a natural gas storage facility shall develop and submit to the state board a facility monitoring plan that satisfies program requirements pursuant to subdivision (a). The state board shall review the plan and may approve or disapprove the plan. (d) Monitoring data shall be provided to the state board. All materials provided to comply with this section shall be posted and available to the public on the Internet Web site of the Division of Oil, Gas, and Geothermal Resources. SEC. 3. Section 3133 is added to the Public Resources Code, to read: 3133. (a) (1) As used in this article, "natural gas storage well" means an active or idlenatural gas storagewellserving or located in a naturalused solely to inject gas into or withdraw gas from an underground gas storage facility. (2) (A) For purposes of this section, a "low-risk natural gas storage well" means a natural gas storage well that meets all of the following: (i) The well is not subject to Section 3217. (ii) The well is located in a nonurban area. (iii) The well meets or exceeds current well construction standards for gas storage wells. (iv) The well was constructed specifically for natural gas storage and was constructed after January 1, 1997. (v) The well has a consistent and demonstrated record of mechanical integrity, as determined by the supervisor. (vi) The well is in compliance with all other applicable requirements imposed by this article and the division's regulations. (B) (1) The division may deem any natural gas storage well as ineligible for classification as a low-risk natural gas storage well to protect public safety and natural resources. (2) If the division exercises the authority provided in paragraph (1), the division shall make a written finding of that decision. (b) Before January 1, 2018, and annually thereafter, all natural gas storage wells shall be tested across their entire length for a loss of integrity resulting in a leak and the results of the testing shall be reported to the division. (c) (1) Except as provided in paragraph (2), all natural gas storage wells shall, on or before July 1, 2018, comply with both of the following:(c) A natural gas storage well shall have(A) Have an automatic downhole shutoff system, including, but not limited to, surface-controlled subsurface safety valves, deployed in order to limit leaks associated with a loss of the integrity of a well, well casing, or cementing. The shutoff system shall be tested and the results of the test shall be reported to the division no less than semiannually. (B) Conduct natural gas injection and production through tubing only and be isolated from contact with the well casing. (2) All low-risk natural gas storage wells shall comply with subparagraphs (A) and (B) of paragraph (1) on or before July 1, 2019. (d) The division shall review and update practices for the use of subsurface safety valves in natural gas storage wells to reflect the best practices established by independent experts pursuant to Section 3140. (e) All newly constructed natural gas storage wells shall have a cement barrier, as determined by the supervisor. (f) (1) The division may modify the requirements of subdivision (c) for low-risk natural gas storage wells to protect public safety and natural resources. (2) If the division exercises the authority provided in paragraph (1), the division shall make a written finding of that decision. (g) Nothing in this section shall be construed as limiting the supervisor's authority to take action to respond to a hazard. SEC. 4. Section 3134 is added to the Public Resources Code, to read: 3134. A natural gas storage well shall meet all of the following requirements: (a) (1) Baseline and follow-on proactive evaluations of the integrity of the well, well casing, and cementing across the entire length of the well shall be conducted to thoroughly, quantitatively, and accurately assess their condition. These assessments shall be performed using the best available technology. Based upon these assessments, the risks posed by erosion, corrosion, material deterioration, scaling, cracking, and any other process that may produce natural gas leaks shall be determined. (2) By January 1, 2018, the division shall develop a schedule for the completion ofbaseline-proactivebaseline proactive evaluations for all natural gas storage wells. (3) The division shall also develop a schedule for performing follow-on proactive evaluations for all natural gas storage wells in order to measure any changes in well condition after thebaseline-proactivebaseline proactive evaluations are completed. The schedule shall be determined based upon an assessment of risk. The natural gas storage wells at lowest risk of a loss of integrity shall be reevaluated pursuant to this paragraph at least once every four years and natural gas storage wells at high risk of a loss of integrity shall be reevaluated pursuant to this paragraph at least annually. (4) A natural gas storage well that has lost integrity or that is at risk of an imminent loss of integrity shall be immediately repaired before returning to service.(b) Natural gas injection and production shall be through tubing only and isolated from contact with the well casing.(c)(b) Annular pressure and production or injection flow rate shall be continuously monitored. SEC. 5. Section 3135 is added to the Public Resources Code, to read: 3135. (a) For the purposes of this section, "sensitive receptor"includes, but is not limited to, a school, hospital, and residential housing.means any living quarters, including private homes, condominiums, apartments, retirement homes, prisons, dormitories, or other housing; education resources, including preschools and schools operating kindergarten or any of grades 1 to 12, inclusive; daycare centers; and health care facilities, including hospitals, nursing homes, and long-term care and hospice facilities. (b) The Office of Environmental Health Hazard Assessment and the State Department of Public Health, in consultation with the division, shall perform a science-based risk assessment of natural gas storage wells. The goal of the risk assessment shall be to determine appropriate setback distances for natural gas storage wells from different locations, activities, and receptors. The risk assessment shall include, but is not limited to, all of the following information: (1) The construction, service history, and operating conditions of a well. (2) The potential impact of a leak on public and environmental health, safety, and welfare. Both acute and chronic exposures for a range of expected emissions and emissions rates shall be considered. (3) The factors relevant to determining setback distances including, but not limited to, population density, sensitive receptors, environmentally sensitive areas, emergency response times, evacuation times, leak duration, chemical species emitted, and local meteorology. (4) The data necessary to determine appropriate setback distances. (c) The risk assessment conducted pursuant to subdivision (b) shall be subjected to peer review by independent experts. (d) The findings of the risk assessment required by subdivision (b) shall be reported to the Legislature in accordance with Section 9795 of the Government Code. (e) Upon completion of the risk assessment required by subdivision (b), the division shall review and, as appropriate, revise its regulations. SEC. 6. Section 3136 is added to the Public Resources Code, to read: 3136. (a) The operator of a natural gas storage well shall submit for the supervisor's approval the following materials: (1) A regular maintenance program for the well and the portion of the facility within the division's jurisdiction. The maintenance program shall include training for site personnel and proactive replacement of equipment at risk of failure to ensure safe operation. (2) Design and operating conditions and parameters for the well and the portion of the facility within the division's jurisdiction. (3) An inspection, leak detection, and monitoring program for the well and the portion of the facility within the division's jurisdiction that includes monitoring of natural gas concentrations pursuant to Chapter 6 (commencing with Section 42710) of Part 4 of Division 26 of the Health and Safety Code. Ambient natural gas monitoring sufficient to include monitoring of a new or reworked well shall be in operation before a new well is drilled or a well is reworked. (4) A site-specific risk management plan to identify and plan for mitigation of all threats and hazards and potential threats and hazards associated with natural gas storage well operation in order to ensure internal and external mechanical integrity of a well. The risk management plan shall provide for regular review and revision, as needed, to ensure the plan appropriately reflects current conditions. The risk management plan shall include, but is not limited to, all of the following: (A) A natural gas leak prevention and response program that addresses the full range of natural gas leaks possible at the facility with specific response plans that provide for immediate control of the leak. The prevention and response program shall include, but is not limited to, all of the following: (i) A protocol for public notice of the leak to the community by the operator. (ii) Prepositioning, as feasible, and identification of materials and personnel necessary to respond to leaks. This shall include materials and equipment to respond to and stop the leak itself as well as to protect public health. (iii) A training program to ensure site personnel are prepared to respond to a leak, consistent with the requirements of Section 3144. (B) A plan for corrosion monitoring and evaluation. (C) A schedule for regular well and reservoir integrity assessments. (D) An assessment of the risks associated with the natural gas storage well and its operation. (E) Planned risk mitigation efforts. (b) All of the materials described in subdivision (a) shall be approved by the supervisor, at his or her discretion, and in the possession of the division before the supervisor or district deputy approves a notice required pursuant to Section 3203. (c) All of the materials described in subdivision (a) shall be reported to the division annually. The operator shall not deviate from the programs, plans, and other conditions and protocols contained in the materials without prior written approval by the supervisor. SEC. 7. Section 3137 is added to the Public Resources Code, to read: 3137. The public has a right to review the location of a natural gas storage well or conversion of an existing well to a natural gas storage well before the approval of any notice required pursuant to Section 3203. SEC. 8. Section 3138 is added to the Public Resources Code, to read: 3138. In the event of a loss of the integrity of a natural gas storage well, well casing, or cementing resulting in a large ongoing leak of natural gas and associated gases and materials that pose a significant present or potential hazard to public health and safety, property, or to the environment, preparations for the drilling of a relief well shall begin within 24 hours of the discovery of the leak regardless of any other activities undertaken to stop the leak. SEC. 9. Section 3139 is added to the Public Resources Code, to read: 3139. In the event of a leak of any size from a natural gas storage well, the operator shall notify the division immediately. Within 24 hours of notification, the division shall post information about the leak on its Internet Web site and provide regular updates to the public until the leak is stopped. SEC. 10. Section 3140 is added to the Public Resources Code, to read: 3140. (a) The division shall convene an independent panel of recognized experts to develop best practices for natural gas storage facilities. The panel shall consider at least all of the following: (1) The proximity of a natural gas storage facility and wells to populations of people. (2) The conditions at which a well should be plugged and abandoned, and what standards the plugging and abandonment should meet. (3) The range of proactive methods to assess the integrity of a well, well casing, and cementing, and identifying the best available technology for these assessments. (4) A thorough analysis of the risks associated with the conversion of a well for use as a natural gas storage well. (5) Natural gas storage well design, operating, maintenance, and monitoring standards, including, but not limited to, placement of observation wells, soil monitoring, training, and well monitoring after plugging and abandonment. (6) Risk assessment and management tools for all threats and hazards and potential threats and hazards associated with natural gas storage wells, including identifying data requirements for those tools, with the goal of providing for a standardized and comparable approach to evaluate natural gas storage wells statewide. (7) Automatic shutoff systems including the location and placement of subsurface and surface safety valves, shutoff control systems, reliability, and appropriate use. (b) Upon completion of the panel's work pursuant to subdivision (a), the division shall review and incorporate best practices developed by the panel into its regulations for natural gas storage wells, if appropriate, and, to the extent those practices are applicable, for other wells under the division's jurisdiction. (c) The division shall periodically, and whenever necessary, review advances in relevant technologies and best practices for natural gas storage facilities and, if appropriate, shall incorporate changes in best practices into its regulations for natural gas storage wells and, to the extent those practices are applicable, for other wells under the division's jurisdiction. SEC. 11. Section 3141 is added to the Public Resources Code, to read: 3141. In order to facilitate consistency, standardization, and training, the division shall, as feasible, incorporate federal regulations applicable to natural gas storage facilities, including, but not limited to, Parts 190 to 199, inclusive, of Title 49 of the Code of Federal Regulations into the division's natural gas storage well regulations. SEC. 12. Section 3142 is added to the Public Resources Code, to read: 3142. To ensure that the division has all the records it needs to evaluate natural gas storage wells, the well history maintained pursuant to Section 3213 shall include all operations, injection, production, and emplacement of any materials into the well. The operator shall disclose the well history to the division for each operation, injection, production, and emplacement of any material into the well. SEC. 13. Section 3143 is added to the Public Resources Code, to read: 3143. The division shall perform unannounced randomon-siteonsite inspections of some natural gas storage wells annually. The results shall be posted and available to the public on the division's Internet Web site. SEC. 14. Section 3144 is added to the Public Resources Code, to read: 3144. An operator of a natural gas storage well shall develop and maintain a comprehensive gas storage well training and mentoring program for those employees whose job duties involve the safety of operations and maintenance of natural gas storage wells and associated equipment. The training program shall include, but is not limited to, gas storage well operations, including best practices to prevent leaks, maintenance and testing, gas storage well safety regulations, emergency response, and incident reporting. If employees are represented by a labor union, the operator shall consult with the union on safety issues and, when requested, establish a framework to provide training through a joint labor-management training program. SEC. 15. Section 3145 is added to the Public Resources Code, to read: 3145. All materials provided to the division to comply with Section 3133 to 3143, inclusive, shall be posted and available to the public on the Internet Web site of the division. SEC. 16. Section 3146 is added to the Public Resources Code, to read: 3146. A member of the public may bring suit for writ of mandate against the division for failure to enforce Sections 3133 to 3145, inclusive. SEC. 17. Section 3236.5 of the Public Resources Code is amended to read: 3236.5. (a) A person who violates this chapter or a regulation implementing this chapter is subject to a civil penalty not to exceed twenty-five thousand dollars ($25,000) for each violation. A person who commits a violation of Article 3 (commencing with Section 3150) or Section 3300 is subject to a civil penalty of not less than ten thousand dollars ($10,000) and not to exceed twenty-five thousand dollars ($25,000) per day per violation. An act of God and an act of vandalism beyond the reasonable control of the operator shall not be considered a violation. The civil penalty shall be imposed by an order of the supervisor pursuant to Section 3225 upon a determination that a violation has been committed by the person charged. The imposition of a civil penalty under this section shall be in addition to any other penalty provided by law for the violation. When establishing the amount of the civil penalty pursuant to this section, the supervisor shall consider, in addition to other relevant circumstances, all of the following: (1) The extent of harm caused by the violation. (2) The persistence of the violation. (3) The pervasiveness of the violation. (4) The number of prior violations by the same violator. (b) An order of the supervisor imposing a civil penalty shall be reviewable pursuant to Article 6 (commencing with Section 3350). When the order of the supervisor has become final and the penalty has not been paid, the supervisor may apply to the appropriate superior court for an order directing payment of the civil penalty. The supervisor may also seek from the court an order directing that production from the well or use of the production facility that is the subject of the civil penalty order be discontinued until the violation has been remedied to the satisfaction of the supervisor and the civil penalty has been paid. (c) Any amount collected under this section shall be deposited in the Oil, Gas, and Geothermal Administrative Fund. SEC. 18. 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.