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Sempra Piles Up Profits, Sets Gas Storage Well Leak Costs at $330M

Reporting more than a billion dollars in profits last year, Sempra Energy senior executives last Friday forecast continued growth in the company's utility and non-utility operations in California and Mexico while minimizing the potential for financial fallout from a recently sealed natural gas storage well leak in Southern California.

CEO Debra Reed said the current estimate for the costs of dealing with the prolonged gas well leak at Southern California Gas Co.'s (SoCalGas) 86 Bcf Aliso Canyon underground storage field is $330 million, 90% of which covers operations to plug the leak, mitigate emissions, and pay for relocating thousands of families living in homes in the Porter Ranch residential community near the 3,600-acre facility.

Reed said insurance is expected to cover most of the costs, including ongoing litigation and any eventual regulatory fines and penalties. The idled facility is stable, with 15 Bcf of gas in storage presently. It is the subject of an independent root cause investigation being carried out by Blade Energy Partners for state regulatory agencies.

"While we do not know how long the independent investigatory process will take, we will cooperate on the investigation and share publicly available information," Reed said. "Also under new rules [for storage fields] being developed, we are implementing enhanced well inspection and leak detection activity.”

SoCalGas attorneys last week pushed back against a court ruling that extends the period of time displaced Porter Ranch residents have to return home. "Given these independent health findings, we were disappointed by the court's order as it conflicts with the science and health assessments made by the county's own health experts over the last few months and even as recently as Feb. 18," said a SoCalGas spokesperson, adding that in the meantime, the utility is complying with the court order to extend its temporary relocation benefits.

Until the appeal is decided, however, residents who have not returned home will be covered by the Sempra gas utility, as has been the case for months now, the spokesperson said (see Daily GPI, Feb. 17).

Reed said the storage facility, the state's largest, was "integral to the electric grid in California."

Reed and SoCalGas CEO Dennis Arriola emphasized that California's policymakers all recognize the importance of continuing to have "safe, reliable natural gas storage" available in the state. And new rules from the state Division of Oil, Gas and Geothermal Resources are very close to the utility's own proposed "storage integrity management program" (SIMP) outlined in a general rate case that is expected to be completed soon.

"There are steps and procedures that we have already advocated that will allow us to safely operate the field," Reed said. Arriola said SoCalGas already began a pilot version of SIMP last year, before the storage well leak occurred last October.

Sempra's two California utilities reported strong earnings for all of 2015: $419 million for SoCalGas, compared to $332 million in 2014, and $587 million for San Diego Gas and Electric Co., compared to $507 million in 2014.

Sempra reported  full-year 2015 profits of $1.35 billion ($5.37/share), compared with $1.16 billion ($4.63) in 2014. For 4Q2015, earnings were $369 million ($1.47), compared to $297 million ($1.18) in the same period in 2014.

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