Who Pays to Fix the Aliso Canyon Methane Leak?

As nearly everyone has heard by now, on October 23, 2015, a leak at a Southern California Gas Company (“SoCalGas”) natural gas storage well was discovered by crews at the Aliso Canyon storage field in Los Angeles. In a Jan 18, 2016 press release, SoCalGas announced that it expected to finally be able to stop the leak by late February and possibly sooner.

While the question of the environmental impact of the leak has been widely discussed and debated in the media, significantly less attention has been focused on the question of who pays to fix it. The California Public Utilities Commission (“Commission”) through a December 14^th data request and subsequent December 23^rd letter has directed SoCalGas to track and periodically report its costs, including, at a minimum, costs related to well repair, remediation, emergency response, replacement fuel/fuel loss, community member relocation, and litigation.  Through a December 14^th joint directive with the California Department of Conservation, Division of Oil, Gas, and Geothermal Resources, the Commission has also required SoCalGas to hire an independent third party to perform a technical root cause analysis of the well failure and to “cover all related costs at no impact to ratepayers.”

Moreover, Governor Jerry Brown proclaimed in his January 6^th declaration of a state of emergency over the gas leak that the Commission “will ensure that [SoCalGas] covers costs related to the natural gas leak and its response, while protecting ratepayers.”

However, in response letters sent earlier this month to the cities of Los Angeles and Lancaster, among others, the Commission explains that it will take action at a later date to resolve the question of who pays for the costs caused by the leak. So while various public officials have suggested that SoCalGas may be on the hook, in reality the question of who will ultimately pay to fix the leak is for now still an open question. SoCalGas has a multitude of applications at the CPUC at any given time, and may seek to request different aspects of the costs associated with the leak through various applications.