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 The leaking well’s owner, Southern California Gas Co, warned state
utility regulators in 2014 of “major failures” without a rate hike
to pay for comprehensive inspections of 229 storage wells.
Twenty-six of its wells were “high risk” and should be abandoned -
even though they complied with state regulations, the utility wrote
in a rate filing.
The previous year, Pacific Gas & Electric pointed to an absence of
safety standards for storage wells as reason to launch its own
monitoring program that went beyond state rules, according to an
internal document obtained by Reuters.
The industry’s rising concern underscores the scant oversight of 400
underground natural gas storage facilities in 30 U.S. states. Most
storage fields are regulated by states, but national industry groups
have pushed for federal oversight - unusual in an industry better
known for fighting regulation.
Jurisdiction over facilities storing gas to be transported across
state lines falls to the U.S. Pipeline and Hazardous Materials
Safety Administration. But the agency has never written rules for
gas storage despite two decades of sporadic calls for regulation -
and at least two deadly explosions.
 Agency spokeswoman Artealia Gilliard declined comment on the
agency’s hands-off posture.
Under state oil and gas regulations, Southern California Gas faces a
maximum penalty of $25,000 for the leak near Los Angeles, which is
unprecedented in scale. The well has spewed methane - a potent
greenhouse gas - since October and displaced thousands of people in
nearby Porter Ranch.
A bill introduced Tuesday by State Senator Fran Pavley calls for
penalties of up to $25,000 per day for active leaks. It would also
require the installation of automatic shutoff systems on all wells
and continuous monitoring of wells within 10,000 feet of homes and
schools.
Utilities and regulators have been “gambling” with wells that in
many cases were drilled in the 1950s, Pavley said. She described
their standard practice as, “Don’t fix it until it leaks or cracks
or breaks.”
METHANE CLOUD
Southern California Gas, a division Sempra Energy <SRE.N>, said it
has inspected wells more rigorously since 2014, even though state
utility officials have not approved a rate hike to cover the cost,
said company spokeswoman Kristine Lloyd. The inspections, she said,
“exceed traditional industry practices and regulatory requirements.”
Lloyd said she did not know if the leaking well in Aliso Canyon was
among the 26 wells the company said should be abandoned because they
are too old or “mechanically unsound,” as the rate filing described
them.
A month before the well failed, the nation’s leading oil and gas
lobbying group, the American Petroleum Institute, published 60 pages
of guidelines for monitoring and maintenance of storage wells. Other
industry groups have supported having the API standards adopted as
federal regulation.
It’s telling that the industry is inviting more oversight, said Tim
O'Connor, director of California oil and gas programs for the
Environmental Defense Fund.
“Up and down, the general consensus is that the regulations that
exist in California are wholly insufficient.”
The fracking boom has intensified pressure on the nation’s aging
system of underground storage. About 20 percent of gas used in the
U.S. during winter now comes from storage fields, according to the
American Gas Association.
 Many of the facilities are depleted oil or gas reservoirs that have
been converted to store natural gas, which is then pulled from the
ground by wells.
The Aliso Canyon leak increased the state’s methane emissions by 25
percent in its first month, estimated the California Air Resources
Board. Methane is 72 times more potent as a greenhouse gas than
carbon dioxide in the 20 years after it is emitted, according to
CARB.
Initial efforts to plug the well with mud and brine failed. The
utility is now drilling two relief wells more than 8,500 feet below
the surface and planning to pump in water and cement. The utility
said on Monday that it expects to stop the leak by late February.
WARNING SIGNS
In its 2014 rate filing, the utility sought $180 million in rate
increases over six years to evaluate its storage wells. The
California Public Utility Commission has made no decision in the
rate case.
The CPUC also has not decided on a request from PG&E for more than
$1 billion in rate increases to finance maintenance of its gas
pipeline and storage infrastructure.
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The commission did not respond to repeated requests for comment for
this story.
PG&E, in a 2013 internal document, expressed little faith in state
monitoring of gas storage wells, noting “an absence of industry
standards.”
The company said it was working to fill this “gap” by helping API
develop its guidelines. The industry group’s recommendations go into
minute detail on matters including how storage facility data should
be collected, how staff should be trained and how emergencies should
be handled.
PG&E is working to incorporate those practices into its operations,
spokesman Greg Snapper said.
Concerns about the nation’s natural gas infrastructure have
intensified since 2010, when a PG&E pipeline exploded, leveling an
entire neighborhood in San Bruno, California and killing eight
people.
The National Transportation Safety Board later blamed PG&E for lax
pipeline safety and faulted both the California PUC and the federal
pipeline regulator for weak oversight.
SELF-REGULATION
California's oil and gas regulator - the Division of Oil, Gas and
Geothermal Resources - acknowledged problems with oversight but
pointed to an effort launched before the leak to update regulations.
The industry also has an incentive to police itself, said agency
spokesman Don Drysdale.
"Regardless of the regulations, it's in an operator's interest not
to have leaks, because that means they're losing their product," he
said.
Earlier this month, Governor Jerry Brown ordered the agency to issue
emergency safety regulations for underground gas storage. Last week,
it proposed requiring facilities to submit plans for inspections and
leak detection and to test all safety valve systems every six
months.
The lack of federal oversight has been debated sporadically for more
than two decades.
Federal regulators declined to assume authority over gas storage
facilities after three people were killed in a 1992 explosion at an
underground cavern operated by Seminole Pipeline Co near Brenham,
Texas.
That decision was criticized after a 2001 gas leak in underground
salt caverns in Kansas caused explosions that killed two people.
The facility fell under federal jurisdiction, but federal and state
regulators hit legal snags when they explored how to penalize the
facility's operator, El Paso Corp, which sent its gas across state
lines.
Kansas was forbidden from regulating interstate commerce - and the
federal agency had not written rules it could enforce.
A decade later, in 2011, the federal Pipeline and Hazardous
Materials Safety Administration asked industry groups whether they
supported federal regulation of storage facilities in such cases.
The industry supported oversight, but the agency has still not
crafted regulations.
Last year, U.S. Senator Pat Roberts, a Republican from Kansas,
introduced a bill targeting "a dangerous lapse in the oversight” and
proposing that states take over regulating all stored gas, even when
it is slated for interstate transport.
A separate safety bill including the same provision passed a key
Senate committee in December. It also directs the federal government
to craft national safety standards for underground gas storage
within two years.
(Reporting by Nichola Groom; Editing by Terry Wade and Brian
Thevenot)
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