Saturday, February 6, 2016

Implications of Closing Aliso Canyon Gas Storage in California

Subtitle:  Gas Storage Critical to Averting Electricity Shortages

A few days ago (Feb 1st), three California regulatory agencies sent a joint letter to Governor Brown, stating their concern over electricity availability in Southern California this summer, and for continued natural gas supplies for the remainder of the winter.   This concern is certainly valid if the gas injections, storage, and withdrawals at Aliso Canyon are not allowed to resume.   The letter is shown below in its entirety.  The three agencies are California Energy Commission, California Public Utilities Commission, and California Independent System Operator, CEC, CPUC, and CAISO, respectively.  CAISO operates the major electricity grid in California.  

For context, there are calls from many sides to shut down the Aliso Canyon gas storage facility because one well is leaking gas into the air.  The gas leak stinks, to put it bluntly, because the gas is already odorized with the sulfur compound that smells like rotten eggs.  Thousands of local residents have been temporarily relocated at gas company expense to escape the stink and related health issues.   There are public meetings of various types to discuss the many aspects of the leak, when it will stop, and what different parties can or should do.  see link to an earlier SLB article on the gas leak. 

From the big picture perspective, California uses natural gas for a substantial part of its basic energy needs.  Gas is used for power generation and for home and commercial space heating.  Having a generally mild climate with some hot summer weather, the demand for gas peaks in the summer, not winter.   The local gas production, plus gas imported via pipelines are not sufficient to meet the peak demand.   Therefore, quantities of natural gas are stored during slack demand, and withdrawn from storage in peak demand.  This is a common practice across the US.   One of the favored storage means is abandoned oil or gas wells.  Aliso Canyon has the abandoned oil wells as the storage means.

The three agencies are responsible for ensuring that California has safe, reliable, and cost-effective utilities - both natural gas and electricity.  An unplanned shortage sometimes occurs, as is mentioned in their letter regarding the sudden shut down of the nuclear power plant in 2012 that is located at San Onofre, and known as SONGS for San Onofre Nuclear Generating Station.   Today, the issue is natural gas and the electricity that gas produces.  

A few years ago, an artificial shortage of natural gas was created in the El Paso Natural Gas Company fiasco, and California experienced electrical shortages, rolling blackouts, and outrageously high electricity prices.   Part of that fiasco was due to the untimely shutdown of a natural gas pipeline that brings natural gas to California from Texas. ( see link to a copy of the settlement agreement between El Paso Corp and various parties.  This describes some, but not all, of the activities that created the electricity shortage.)

In short, a looming electricity shortage in California is a big issue.  There is always suspicion that someone is manipulating the market to obtain windfall profits.   The El Paso case from above alleged the gas pipeline was shut down, or partially shut down so that gas shipments did not occur.  Ostensibly, the shut down was for needed repairs.  The FERC, Federal Energy Regulatory Commission got involved, and sternly questioned the timing of the repairs.  

The analogous situation today might be, and I emphasize this is only a possibility, that a gas shortage occurs, electrical power shortages result in the summer, and the suspicious parties bring lawsuits.  For one thing, a lawsuit can bring facts to light via discovery.  

However, if the three state agencies CEC, CPUC, and CAISO can resolve the issue before any critical shortages occur, there would be no need for the kind of litigation that the El Paso fiasco created.  

The electricity demand in California has not increased as the climate change alarmists warned, with ever-increasing hot summers due to man-made global warming.   Indeed, the peak demand for electricity (see table below) has been remarkably constant between 45,000 MW and 47,000 MW for the past 8 years.  The claim of "hottest year ever" must be the result of other places getting warmer; California certainly is not.  These peak demands are flat, even though the population is growing as always (25 percent over the past 8 years).  

YR    MW     Date   Time
2008 46,897 June 20 16:21
2009 46,042 September 3 16:17
2010 47,350 August 25 16:20
2011 45,545 September 7 16:30
2012 46,846 August 13 15:53
2013 45,097 June 28 16:54
2014 45,089 September 15 16:53
2015 46,519 September 10 15:38

UPDATE 1:  The options the agencies may be considering include the following, and possibly others: 
1) repair and restore Aliso Canyon storage facility
2) increase storage capacity at other locations
3) import more natural gas when needed
4) produce more natural gas within state as needed
5) reduce the demand for natural gas during peak periods, i.e. summer hot days
6) find a replacement or substitute for natural gas
7) reduce the demand for electricity during peak periods

Each of the above options has ramifications.  
1) Repair and restoration of the Aliso Canyon storage facility is viable only if the leaking well is not a common occurrence.  However, if the oil formation underground has deteriorated, and other wells are likely to also leak, then repairs may be futile.  

2) Increasing the storage capacity at other locations may be possible given enough time, but must be studied carefully.  At least one other storage location is not far away at Playa del Rey near Santa Monica.  

3) Import more natural gas when needed may not be possible within the time available, that is, the hot summer when demand peaks in August and September.   Importing natural gas requires gas pipelines from other states, or an LNG import terminal.  Both are expensive, time-consuming, and have long environmental evaluations.  

4) Produce more natural gas within state as needed also requires more time.  It may be possible to obtain emergency drilling permits and drill now to bring in wells in the next few months.   Much is needed to accomplish this, including cleaning the raw natural gas to remove impurities.  

5) Reducing the demand for natural gas during peak periods, i.e. summer hot days, where the primary focus is gas-fired power plants.  There are not many ways to accomplish this, as the hydroelectric capability is low due to an extended drought, and solar power plants with adequate storage are not yet built in great number.   Wind energy without adequate storage is not sufficiently reliable. 

6) Finding  a replacement or substitute for natural gas has potential, but not in the short time-frame required.  Producing renewable forms of methane also is not a large-volume activity, such as methane from farm waste, and landfills.  One long-term solution is the conversion of human waste to synthetic methane, the patented process of Dr. Chan Park of University of California at Riverside.  Dr. Park's process produces pipeline-quality methane from the sludge from waste treatment plants, but it is not yet in commercial production.  see link to SLB coverage of this fascinating chemical engineering research. 

7) Reducing the demand for electricity during peak periods is last on the list, and will likely be the decision if all of the above fail.   California already has a program in place to encourage consumers to reduce electrical load (Flex Alerts), and gives financial incentives to many consumers to shut off their power during high-demand periods.   Demand can also be reduced via rolling blackouts, if needed.  

--end update 1. --- 

--- (Agencies joint letter to Governor Brown) ------

February 1, 2016

The Honorable Edmund G. Brown Jr.
State Capitol Building, 1st Floor
Sacramento, CA 95814

Dear Governor Brown:

Shaping a Renewed Future

The California Energy Commission, California Public Utilities Commission, and the California Independent System Operator are writing regarding the Emergency Proclamation you issued on January 6,2016, relating to the gas leak from the Aliso Canyon gas storage facility. The Proclamation called on us to work together and "take all actions necessary to ensure the continued reliability of natural gas and electric supplies during the moratorium on gas injections into Aliso Canyon."

The immediate issue has been gas system reliability for core customers, which we are working to ensure reliable gas for the rest of winter given the field's current 15 billion cubic feet of working gas. Our shared concern is electric system reliability for this summer, and both gas and electric system reliability for next winter and beyond in the event injections cannot resume.

The nexus between the gas and power systems in the Los Angeles Basin is a complex
problem to assess given the constraints on gas deliveries, rapid changes in electricity demand that occur every day, and electric transmission constraints that limit electricity imports into the area. We have created a team to perform the studies that includes our experts and those of the Los Angeles Department of Water and Power and SoCalGas Company. There is good reason to be concerned that reliability of supply may be critical for electric generators in the LA Basin, especially those serving LADWP. We expect to complete the work related to summer 2016 by April when we will hold a public, joint agency workshop in Los Angeles to describe the reliability risks and present a reliability action plan for mitigating them. Of course, we will take action immediately as effective mitigation is identified. We look forward to working with the City of Los Angeles, South Coast Air Quality Management District, and other public agencies affected by this issue. 

The Honorable Edmund G. Brown Jr.
February 1, 2018
Page 2 of 3

This matter is critical to public health and safety, and has our full attention. We are bringing
the same urgency and attention to this as we did when faced with the unexpected closure of
the San Onofre Nuclear Generating Station. Our organizations worked together effectively
then, and we will again.

Thank you for entrusting us with this responsibility.

Sincerely yours,

Chair                                                            President
California Energy Commission                    California Public Utilities Commission 

President and Chief Executive Officer
California Independent System Operator 

cc: Transmitted via email
Senator Pro Tempore, Kevin de Leon, 24th Senate District
Speaker of the Assembly, Toni G. Atkins, 78th Assembly District
Speaker-Elect of the Assembly, Anthony Rendon, 83rd Assembly District
Senator Fran Pavley, 27th Senate District
Assembly Member Wilk, 38th Assembly District
Senator Ben Hueso, Chair of Energy, Utilities and Communications Committee, 40th
Senate District
Mike Gatto, Assemblymember and Chair of Utilities and Commerce Committee, 43rd
Assembly District
Eric Garcetti, Los Angeles Mayor
Hilda L. Solis, First District Los Angeles Board of Supervisors
Mark Ridley-Thomas, Second District Los Angeles Board of Supervisors
Sheila Kuehl, Third District Los Angeles Board of Supervisors
Don Knabe, Fourth District Los Angeles Board of Supervisors
Michael D. Antonovich, Fifth District Los Angeles Board of Supervisors
Gilbert Cedillo, District 1 of Los Angeles City Council
Paul Krekorian, District 2 of Los Angeles City Council
Bob Blumenfield, District 3 of Los Angeles City Council 

The Honorable Edmund G. Brown Jr.
February 1,2016
Page 3 of 3

David E. Ryu, District 4 of Los Angeles City Council
Paul Koretz, District 5 of Los Angeles City Council
Nury Martinez, District 6 of Los Angeles City Council
Felipe Fuentes, District 7 of Los Angeles City Council
Marqueece Harris-Dawson, District 8 of Los Angeles City Council
Curren D. Price, Jr., District 9 of Los Angeles City Council
Herb J. Wesson, Jr., District 10 of Los Angeles City Council
Mike Bonin, District 11 of Los Angeles City Council
Mitchel Englander, District 12 of Los Angeles City Council
Mitch O'Farrell, District 13 of Los Angeles City Council
Jose Huizar, District 14 of Los Angeles City Council
Joe Buscaino, District 15 of Los Angeles City Council
Mary Nichols, Chairman, California Air Resources Board
Marcie L. Edwards, General Manager of Los Angeles Department of Water and Power
Dennis Arreola, Chief Executive Officer, Southern California Gas Company
Pedro Pizzaro, President, Southern California Edison
Barry Wallerstein, Ph.D, Executive Officer, South Coast Air Quality Management District 

----(end letter ) ----

Roger E. Sowell, Esq.
Marina del Rey, California

copyright (c) 2016 by Roger Sowell - all rights reserved

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