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SoCalGas, Air Quality Board Pursue Capture/Burn Strategy at Storage Well Leak; Costs Hit $50M

Sempra Energy's Southern California Gas Co. (SoCalGas) and the regional air pollution regulators have agreed to pursue a plan to capture and burn at least part of the escaping emissions at SoCalGas' two-month-old natural gas storage well leak on the northern suburban fringe of Los Angeles (see related story), following an all-day public hearing last Saturday in the Porter Ranch residential area impacted by the leak.

Hundreds of residents created an overflow situation at a local high school where the South Coast Air Quality Management District (SCAQMD) unveiled the plan for the regional body and SoCalGas to deploy gas capture, piping and incineration equipment at the leak site at the 86 Bcf, 36,000-acre Aliso Canyon underground storage compound where leak response costs have totaled $50 million.

To be done simultaneous with the extraordinary work ongoing to plug the leak, SoCalGas also plans to fund and complete a health study on the potential long-term effects of the leak, provide additional air monitoring and continuously monitor the leak with infrared cameras.

Meantime, angry residents and elected officials alleged the long-term leaking well is having serious health impacts, despite pronouncements by state and local public health officials to the contrary.

SCAQMD officials said the capture and burning of the leaking gas will be done in two phases. The first part will involve using various third-party vendors' equipment to collect gas and rout it to control devices for treatment or destruction. The second phase would add SoCalGas' own control equipment to the existing capture system for which the gas utility is seeking permits to operate at the sprawling storage field, an old oilfield dating back to the early 1950s.

The magnitude of the community, economic, environmental, regulatory, political and operational impacts from the stubborn leak is still being assessed, but Sempra and SoCalGas both last Thursday filed 8K documents with the Securities and Exchange Commission (SEC) that shed more light on its overall impact, which seems to be growing by the day.

SoCalGas estimates that the leak response costs have hit about $50 million as of the end of last year, and it has four separate insurance policies that collectively could cover up to $1 billion in costs for the gas-only utility. In recent days, financial analysts have begun to take note and indicate this could end up a multi-billion-dollar problem for Sempra and its utility before the situation is fully resolved, given the legal and regulatory exposure that is mounting.

"To date, 25 complaints have been filed against the company, some of which have also named Sempra Energy, asserting causes of action for negligence, nuisance, and trespass, among other things, and additional litigation may be filed against the company in the future," the SoCalGas SEC filing notes. "The cost of defending the lawsuits, and any damages, if awarded, could be significant."

In the SEC filing, SoCalGas reiterated that it had about 77 Bcf of gas supplies in Aliso Canyon when the leak was spotted Oct. 23 last year, and since then it estimates that 33 Bcf of gas has been withdrawn from the facility. "Based on information from the California Air Resources Board [CARB], gathered by fly-overs of the site, the leak rate and estimated level of methane emissions appear to have declined significantly since CARB began providing preliminary estimates in November."

As of early this month, 2,500 households have been temporarily relocated with another approximately 1,460 requests pending, the SEC filing notes.

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