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California Regulators Split on Adding Gas Storage

Following a long discussion by California regulators on Thursday it became clear that there's no agreement about whether the state needs additional underground natural gas storage or whether it is too risky to site storage in a depleted gas field in a populated area, given the lessons emerging from the San Bruno, CA, pipeline explosion two years ago.

At issue is a long-delayed decision on a proposal to develop an underground gas storage field in a residential neighborhood in Sacramento. The project was originally recommended for approval by an administrative law judge, but it has drawn two alternative decisions from two commissioners on the five-member California Public Utilities Commission (CPUC). And the proposed 7.5 Bcf project by Sacramento Natural Gas Storage LLC has drawn its share of local opposition (see NGI, March 19).

Commissioner Timothy Alan Simon, who is assigned to the case, recommended approving the facility, while Commissioner Mike Florio, a former consumer advocacy attorney, signaled that he is opposed to the project in the wake of heightened gas safety sensitivities.

Simon called the five-year-old project "highly technical" and emphasized that the project was needed for more reliable energy operations and for its economic benefits locally and statewide. He said part of the project will be a "poster child" for pipeline safety.

Noting that two years ago he would have voted for the project, Florio said recent events have caused him to rethink projects like the Sacramento proposal from both a need and safety standpoint. He does not think the project meets criteria in either of those areas. Neither regulator disputes the fact that there are some significant environmental effects that cannot be mitigated, but only Florio sees that as a game-breaker.

CPUC members are scheduled to vote on the project at their next business meeting June 21.

The proposed facility is slated for acreage that falls within the city boundaries and partly within an adjacent unincorporated area of Sacramento County, all of which is served by the Sacramento Municipal Utility District (SMUD), a countywide public power entity. SMUD relies heavily on gas-fired generation and would take about half of the proposed storage capacity (see NGI, Oct. 19, 2009).

Florio said he has been working in the gas industry for more than 30 years and is not "unduly alarmist about gas safety." San Bruno has given him a new mindset. "Two years ago if you would have asked me could an event like happened in San Bruno have occurred, I would have said no," he said. "These low-probability but high-impact events are a reality."

Two other commissioners expressed concerns for different reasons. Catherine Sandoval lived as a child in the Los Angeles suburb of Montebello near an abandoned oilfield and an operating Southern California Gas Co. (SoCalGas) underground storage field that allegedly leaked under some nearby homes causing them to be abandoned and torn down. Mark Ferron, a former investment banker with expertise in risk management, said he is unsure of the project's need.

"I think this is a pivotal decision and one that warrants lots of discussion," Ferron said. "It is very telling that all three proposed decisions note that there are significant environmental impacts and yet Commissioner Florio's proposed decision comes to the opposite conclusion of the other two that recommend approval. The fact that the same facts lead to different outcomes indicates to me that what we have before us is a critical policy decision."

CPUC President Michael Peevey said there is nothing in life that doesn't have risk. "So the question is what is a reasonable quantification of risk," Peevey said. He asked his colleagues "how one balances risks" and received varying answers.

With a request that CPUC staff research the experiences with SoCalGas's Montebello underground storage facility, which has been closed for more than a decade, to see if the experience there can shed any light on the current proposal, the CPUC members ended their discussion.

The project has been in the development stages for several years, and the environmental impact report has been criticized since a CPUC hearing was held nearly three years ago. Subsequently, Simon conducted more local hearings. Potential leakage from the repressurizing of the depleted gas field, potential impacts on groundwater quality and temporary noise pollution at wellhead sites during construction of the project were all cited.

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