Lingering leak woes: 'An extraordinary number of lawsuits' for SoCal Gas

The state decision clearing Southern California Gas Co. to resume limited operations at the Aliso Canyon gas storage field was touted Friday as good news during the company’s quarterly earnings call. But the legal and regulatory challenges from the massive gas leak at the facility are not over and could drag on for years.

Several government agencies have investigations and lawsuits pending against SoCal Gas over the release of about 109,000 metric tons of natural gas into the atmosphere and surrounding community. Thousands of plaintiffs who allege they suffered financial and other damages have filed hundreds of lawsuits for compensation.  And the very existence of the gas reservoir perched above the community of Porter Ranch is up for debate by state regulators.

All told, these challenges have incurred costs that continue to mount. 

Rising cost of the Aliso Canyon gas well blowout

In its report to shareholders for the second quarter of 2017, SoCal Gas said its costs responding to the gas leak have grown to $832 million. That’s up from the $799 million in the first quarter.

The amount does not include the cost of future legal claims or potential settlements or penalties.

About two-thirds of that cost was for relocating more than 8,000 households away from communities downwind from the gas leak -- the largest of its kind in the nation -- that erupted in October 2015 and lasted four months.

Sempra Energy is the parent company of SoCal Gas. And during Friday's earnings call, Sempra chairwoman Debra L. Reed repeatedly mentioned the resumption of limited natural gas operations at Aliso Canyon. On July 28th, the company got the go-ahead from state regulators to begin injecting new gas reserves into the underground reservoir. 

“While the recent approval to resume gas injections is positive news, we remain concerned about system reliability this summer and in the coming winter given the length of time it took to receive this decision as well as the limitations on targeted gas storage levels,” Reed said.

The gas storage field previously had a capacity of 86 billion cubic feet, and it had been drawn down to about 14 billion cubic feet following the leak. Gas and utility regulators cleared the company to add enough gas to bring the volume up to about 24 billion cubic feet, an amount deemed enough to supply gas-fired power plants over several days of high demand like during a heat wave or cold snap.

When the gas volume was lower, SoCal Gas and some state energy experts warned the lack of gas storage could lead to power outages if gas was not available to power plants when demand peaked. However,  state-imposed changes on the way large customers order and use gas have reduced the risk of shortages, and no gas-shortage related power outages have occurred.

'An extraordinary number of lawsuits'

As of Aug. 3, some 25,500 individuals, businesses and government agencies had filed 281 lawsuits against SoCal Gas to get compensation for alleged damages from the gas well blowout, according to an SEC filing published Friday. The  lawsuits allege, "negligence, negligence per se, strict liability, property damage, fraud, public and private nuisance (continuing and permanent), trespass, inverse condemnation, fraudulent concealment, unfair business practices and loss of consortium, among other things," the company said in its quarterly report.

That number of actions could rise because the statute of limitations allows those who say they were injured or financially damaged by the gas well blowout to sue as much as two years after the harm was done. The deadline is October 2017, said Paul Kiesel, an attorney who is coordinating the mass of lawsuits that have the first trial date set for December 2018.

Whether any of the cases reach trial depends on the evidence that is produced during the discovery period, and on the willingness of the parties to settle or take their chances at trial, said Alan Calnan, a professor at Southwestern Law School.

“It’s an extraordinary number of lawsuits,” Calnan said. “These are complicated cases that are expensive to litigate, so oftentimes there’s pressure to settle because the parties basically want to end the litigation.”

Some cases allege injuries from the chemicals that came out of the ruptured well. Others want to collect for alleged business losses that occurred as more than 8,000 families were relocated outside the area.

Although the cases have been consolidated into a single action under Superior Court Judge John Shepard Wiley, each still gets decided on its individual merits.

Class-action lawsuits have also been filed. One seeks to compensate all individuals who were affected by the gas leak. Another would compensate businesses for their losses.

SoCal Gas has filed an appeal to dismiss that the business-related class action. It said that businesses were not directly damaged by the gas leak, and that the company has no obligation to compensate businesses for revenue lost when their customer base relocated away from the leak.

SoCal Gas argues its case is supported by a legal principal known as the “economic loss rule,” which says a business that suffers economic harm may recover damages only if some contract is breached. Attorneys suing SoCal Gas on behalf of businesses say that rule does not apply in an environmental disaster like the gas well blowout at Aliso.

Shareholders of Sempra stock have also sued officers and directors of the company contending the company’s negligence caused shares to lose value.

Government lawsuits

The California Air Resources Board has also sued along with the city of Los Angeles to get  the company to pay for projects that would capture enough methane elsewhere in the state to offset the 109,000 metric tons lost in the gas well blowout. Methane is an even more potent greenhouse gas than carbon dioxide, though it stays in the atmosphere for a shorter time. 

Los Angeles County has also sued. It wants the company to conduct a far-ranging health study that could cost $35 million or more. The county also wants to force the gas field to remain closed until after the cause of the well failure is known. The county also wants the company to install subsurface safety valves on the wells.

The Los Angeles County Board of Supervisors formed a task force consider adding stricter zoning requirements on natural gas storage field operations. In its filings with the SEC, the company says changes like that could affect its operation at Aliso Canyon or other gas storage fields at Playa del Rey and near Santa Clarita.

Los Angeles city has also sued SoCal Gas in an effort to keep another gas leak from occurring and to impose fines or other penalties.

Legislative challenges

A state law passed last year known as SB380 requires the California Public Utilities Commission to undertake an evaluation of the Aliso Canyon facility to determine if it should be shut down or operate on an even more limited basis. That proceeding has begun, and is expected to be completed next year.

Right now, SoCal Gas can only withdraw gas from the facility during periods of high gas and electricity demand, like during a heat wave or cold snap. 

The South Coast Air Quality Management District reached a settlement with SoCal Gas valued at $8.5 million, which includes $1 million for a study into the health effects of the gas leak. Los Angeles County says that’s not nearly enough.

The Los Angeles County District Attorney’s office brought a misdemeanor criminal complaint against SoCal Gas, which was settled in a plea deal valued at $4 million. It included fines and penalties, plus a requirement that SoCal Gas install methane detection monitors around the Aliso gas field and hire six employees to maintain them.