June 29, 2017

Aliso Canyon Storage Leak

During a routine daily inspection on October 23, 2015, Southern California Gas Company (SoCalGas) employees discovered a gas leak at the Aliso Canyon natural gas storage facility located in the Porter Ranch neighborhood of Los Angeles. What followed was an environmental crisis that would persist for four months and release an estimated 94,500 tons of methane, a greenhouse gas significantly more potent than carbon dioxide, into the atmosphere.1 SoCalGas, a subsidiary of Sempra Energy, plugged the leak and permanently sealed the affected well on February 18, 2016, but not before the leak became the largest methane release event ever recorded in the United States. The leak brought concerns over aging infrastructure and inadequate oversight and regulation to the forefront, and efforts to mitigate the leak and prevent future leaks will continue far beyond the immediate aftermath.

Background: Natural Gas Storage

Approximately 120 entities operate nearly 400 natural gas storage facilities in the United States with Aliso Canyon being one of the largest in the country and by far the largest in California. Storage facilities that serve interstate commerce are subject to regulation by the Federal Energy Regulatory Commission (FERC), while those that serve wholly intrastate commerce are state-regulated. The U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) has authority to regulate the safety of storage facilities in or affecting interstate commerce, but to date has not exercised it.2 Recent events suggest this may change in the near future.

Storage facilities are composed of depleted natural gas and oil field reservoirs, salt formations, and depleted aquifers.3 Around 80 percent of the nation’s natural gas storage facilities are located in depleted natural gas or oil reservoirs. Storage facilities enable companies to inject excess gas during periods of low demand and withdraw gas to meet peak seasonal demand. Storage facilities thus play a critical role in maintaining service reliability and stable prices.

Aliso Canyon Natural Gas Leak and Immediate Aftermath

The Aliso Canyon storage facility is composed of 115 individual wells that descend into a main storage cavity between 7,100 and 9,400 feet below surface with a total storage capacity of 84 billion standard cubic feet. The leak formed in a pipe casing located hundreds of feet below the surface in well SS-25; gas migrated to the surface where it was released into the atmosphere. Thousands of local residents were affected by the release. Many experienced physical symptoms such as headaches, nosebleeds, respiratory problems, and vomiting, thought to be caused by the added odorant mercaptan. Many residents were evacuated and temporarily relocated outside the area while the leak continued for 118 days.

The California Department of Conservation’s Division of Oil, Gas, and Geothermal Resources (DOGGR) issued an emergency order in December 2015 prohibiting SoCalGas from injecting gas into the Aliso Canyon storage facility until authorized by DOGGR.4 In early January 2016, California Governor Jerry Brown declared a state of emergency and ordered DOGGR to issue emergency regulations for natural gas storage.5 The emergency regulations were issued in February 2016, and DOGGR in March ordered SoCalGas to complete a safety review process for each of the 114 remaining injection wells at the facility.6 Wells must either pass all safety tests within one year or be permanently sealed. DOGGR has indicated that it intends to undertake a rulemaking to build upon the emergency regulations’ requirements for natural gas storage.7

Governor Brown signed Senate Bill 380 into law on May 10, 2016. The new law maintains the moratorium on gas injections into Aliso Canyon until SoCalGas completes a comprehensive safety review process and DOGGR determines that well integrity is satisfied.8 DOGGR may not lift the prohibition on injection without the California Public Utilities Commission’s (CPUC) concurrence in writing. The law also requires the CPUC to consider by July 2017 whether it is feasible to minimize or eliminate the use of Aliso Canyon while maintaining energy reliability.

In addition to the moratorium on injections and the mandatory safety review process, SoCalGas faces class action lawsuits filed by Porter Ranch residents, city and county officials in Los Angeles, and the California attorney general.9 The lawsuits allege negligence and a willful disregard of public health as well as violations of state health, safety, and environmental laws. Los Angeles County prosecutors also have filed criminal misdemeanor charges against the company for failing to immediately report the leak to authorities and for discharging contaminants into the atmosphere.10 SoCalGas has pleaded not guilty.

Implications

The Aliso Canyon leak is likely to result in increased state and federal regulation of emissions and the safety of natural gas storage facilities. In addition to the effects to the environment and public health, the leak is expected to impact the state’s ability to meet energy demands during the summer of 2016.

As mentioned above, it is estimated that the Aliso Canyon leak added at least 94,500 metric tons of methane to the atmosphere with some estimates reaching almost 100,000 metric tons. The California Air Resources Board (CARB) currently estimates that the Aliso Canyon leak contributed an additional 20 percent to statewide methane emissions.11 CARB expects to release a final estimate of the leak’s methane emissions this summer. Because one ton of methane is estimated to have the equivalent global warming potential of 84 tons of carbon dioxide over twenty years, the approximately 100,000 tons of methane emitted by the Aliso Canyon leak is equivalent to around 8 million metric tons of carbon dioxide. Thus, regardless of the final estimate, the leak will have a significant impact on the state’s efforts to reduce greenhouse gas emission levels to those existing in 1990, as called for by the state’s 2006 California Global Warming Solutions Act (AB 32).12

In an effort to mitigate the detrimental effects to the atmosphere caused by the leak, CARB developed a mitigation program, to be funded by SoCalGas, that aims to reduce greenhouse gas emissions by an amount at least equivalent to the leak’s emissions. The program’s focus is on reducing emissions primarily from the agriculture and waste sectors, which generate the majority of California’s greenhouse gas emissions. CARB also recently issued proposed regulations that would set greenhouse gas emissions standards for oil and natural gas facilities, including storage facilities.13 A public hearing was scheduled for July 2016 to discuss the proposal. CARB’s proposals coincide with the U.S. Environmental Protection Agency’s (EPA) final regulations to reduce methane emissions from new and modified oil and gas infrastructure.14

State legislation currently pending in the California Assembly would require operators of natural gas storage facilities to inspect and test the integrity of wells and comply with new safety standards by January 1, 2018.15 Operators would be required to report the results of such inspections to DOGGR; install automatic shutoff systems that would limit the potential for leaks; and develop and submit maintenance, operating, monitoring, leak prevention, and training programs to DOGGR. Any wells experiencing a loss of integrity would be required to be immediately repaired before returning to service. Preparations for drilling a relief well would be required to begin within twenty-four hours of the discovery of a large, ongoing gas leak, regardless of other activities undertaken to stop the leak. DOGGR also would be required to incorporate any future federal regulations of natural gas storage into the state regulations.

In addition to state regulation, the Aliso Canyon leak has prompted increased federal regulation governing the safety of natural gas storage facilities. In early February, PHMSA issued a non-binding advisory bulletin recommending actions, including inspections for corrosion and damage to piping and other key components, that operators of underground natural gas storage facilities should take to ensure the integrity of those facilities.16 The Department of Energy and PHMSA also announced the formation of an interagency task force, which will include representatives from several government agencies and coordinate local- and state-level efforts to inspect and conduct risk assessments of storage infrastructure to prevent future release incidents.

Additionally, PHMSA has announced that it intends to issue proposed rules to regulate the safety of natural gas storage facilities by the end of 2016. Recent federal legislation, the Protecting Our Infrastructure of Pipelines and Enhancing Safety Act (PIPES Act), signed into law by President Obama on June 22, 2016, reauthorizes appropriations for PHMSA’s pipeline safety programs through fiscal year 2019 and requires PHMSA to undertake a rulemaking to establish minimum federal regulations for natural gas storage safety within two years of the legislation’s enactment.17 Under the Act, states are permitted to adopt additional or more stringent regulations for intrastate storage facilities provided that such regulations are compatible with the federal regulations.

In the near term, the complete shutdown of Aliso Canyon is likely to impact the state’s ability to meet its summer energy demands. The state has historically relied on Aliso Canyon to supply natural gas to seventeen power plants during peak periods of high electricity demand, such as when temperatures soar in the summer months and when variable renewable sources create load changes. Officials and technical experts have stated that Southern California should anticipate rolling summer blackouts on hot days when power supplies will be inefficient to meet demand, estimating there could be fourteen such days; the supply problem may last into the winter heating months as well. FERC recently approved a series of interim measures requested by the California Independent System Operator, which operates the state’s electrical grid, to assist in the prevention of power outages this summer. Combined with energy efficiency and conservation campaigns, increased demand response participants, and the development of renewable energy sources, officials hope the measures will mitigate the impacts on energy supply.

Conclusion

SoCalGas faces a myriad of civil lawsuits as well as criminal charges for failing to immediately report the leak to authorities, while California is confronting a serious energy supply situation and an environmental crisis, the ramifications of which will span decades. On a larger scale, state and federal lawmakers are reacting by drafting safety and environmental regulations aimed at preventing future incidents and releases at natural gas storage facilities. State lawmakers and regulators should be aware that if PHMSA proceeds to issue federal minimum standards for storage facilities, state regulation of intrastate facilities would have to be compatible with the federal standards, and any state attempt to regulate storage facilities that serve interstate pipelines may risk preemption by federal law.

Endnotes

1. Cal. Envtl. Prot. Agency, Air Res. Bd., Aliso Canyon Natural Gas Leak, Preliminary Estimate of Greenhouse Gas Emissions (as of Apr. 5, 2016), http://www.arb.ca.gov/research/aliso_canyon/aliso_canyon_natural_gas_leak_updates-sa_flights_thru_April_5_2016.pdf (last accessed June 2, 2016). A study published in the journal Science estimates that the leak resulted in the release of 97,100 metric tons of methane. Stephen Conley et al., Methane Emissions from the 2015 Aliso Canyon Blowout in Los Angeles, CA, 351 Science 317–20 (Mar. 18, 2016), available at http://science.sciencemag.org/content/351/6279/1317.

2. 49 U.S.C. §§ 60102(a)(2); 60101(a)(19); 60101(a)(21)(A); 60101(a)(8)(A)(ii). PHMSA’s jurisdiction extends to the full extent of the Commerce Clause of the U.S. Constitution. See Five Flags Pipe Line Co. v. U.S. Dep’t of Transp., 1992 WL 78773, at *6 (D.D.C. Apr. 1, 1992), S. Union Co. v. Lynch, 321 F. Supp. 2d 328, 339 (D.R.I. 2004).

3. U.S. Energy Info. Admin., The Basics of Underground Natural Gas Storage (Nov. 16, 2015), https://www.eia.gov/naturalgas/storage/basics/ (last accessed June 2, 2016).

4. DOGGR, Emergency Order No. 1106 (Dec. 10, 2015).

5. Press Release, Office of the Governor, Governor Brown Issues Order on Aliso Canyon Gas Leak (Jan. 6, 2016), https://www.gov.ca.gov/news.php?id=19264.

6. DOGGR, Order No. 1109 (Mar. 4, 2016).

7. DOGGR, Pre-Rulemaking Discussion, http://www.conservation.ca.gov/index/Documents/Gas%20Storage%20Regulatory%20Goals%20and%20Submission%20Info.pdf.

8. S.B. 380, Natural Gas Storage–Moratorium, 2015–2016 Sess. (Cal. 2016).

9. See, e.g., Cal. v. S. Cal. Gas Co., Nos. BC602973, 601844 (consolidated cases) (Cal. Sup. Ct. Feb. 1, 2016). It has been reported that at least sixty-seven civil lawsuits have been filed against SoCalGas. See Corina Knoll & Alice Walton, With Porter Ranch-Area Leak Halted, Gas Company Prepares for the Legal Battle, LA. Times (Feb.  3, 2016), http://www.latimes.com/local/california/la-me-porter-ranch-legal-20160213-story.html.

10. Cal. v. S. Cal. Gas Co., No. 6SC00433 (Cal. Sup. Ct. Feb. 2, 2016).

11. Cal. Envtl. Prot. Agency, Air Res. Bd., Aliso Canyon Methane Leak Climate Impacts Mitigation Program (Mar. 31, 2016), http://www.arb.ca.gov/research/aliso_canyon/arb_aliso_canyon_methane_leak_climate_impacts_mitigation_program.pdf.

12. A.B. 32, California Global Warming Solutions Act of 2006.

13. Proposed Regulation Order, Greenhouse Gas Emissions Standards for Crude Oil and Natural Gas Facilities, http://www.arb.ca.gov/cc/oil-gas/Oil%20and%20Gas%20Appx%20A%20Regulation%20Text.pdf.

14. Oil and Natural Gas Sector: Emission Standards for New, Reconstructed, and Modified Sources, Final Rule, 81 Fed. Reg. 35823 (June 3, 2016).

15. S.B. 887, Natural Gas Storage Wells, 2015–2016 Sess. (Cal. 2016) (passed Senate on June 1, 2016, referred to Assembly).

16. Pipeline Safety: Safe Operations of Underground Storage Facilities for Natural Gas, Advisory Bulletin, 81 Fed. Reg. 6334 (Feb. 5, 2016).

17. Protecting Our Infrastructure of Pipelines and Enhancing Safety Act of 2016, Pub. L. 114-183, 130 Stat. 514 (2016).