Dive Brief:

• Southern California Gas (SoCalGas) on Monday announced it will record an after-tax charge of around $1.1 billion this month, after reaching settlement agreements related to a 2015 leak at its Aliso Canyon natural gas storage facility.
• The agreements, which are subject to court approval and other factors, could resolve "substantially all material civil litigation" brought against SoCalGas for the leak, the utility said in a press release. However, it will not cover a separate investigation by the California Public Utilities Commission (CPUC) to determine whether the utility should face fines related to the leak.
• "These agreements are an important milestone that will help the community and our company work toward putting this difficult chapter behind us," SoCalGas CEO Scott Drury said in a statement, adding that since the leak, the utility has worked with regulators, experts and others to increase safety at its underground storage facilities.

Dive Insight:

The Aliso Canyon storage field in Southern California has an 86 billion cubic feet capacity, making it one of the largest natural gas storage facilities in the country. In 2015, a leak occurred at the facility that released more than 100,000 tons of methane into the air. In the wake of the leak, SoCalGas and parent company Sempra have faced approximately 396 lawsuits, including from roughly 36,000 individual and business plaintiffs, a class action on behalf of property owners and lessors, and a class action on behalf of businesses located within five miles of the leak. 

This past weekend, the companies reached an agreement with counsel representing more than 80% of the individual plaintiffs, Sempra reported in a filing with the U.S. Securities and Exchange Commission, which would pay out up to $1.8 billion to resolve the claims of around 36,000 plaintiffs. The agreement is conditional on the acceptance of at least 97% of plaintiffs by next June, according to the company, and the settlement amount may be reduced depending on how many of them accept.

In addition, the companies reached a $40 million settlement to resolve the property class action, and a $100,000 settlement in the business class action. The former is subject to court approval.

On Tuesday, some of the plaintiffs and members of the community around Aliso Canyon gathered to respond to the settlement, saying that the proposed payout, split among 36,000 plaintiffs, is inadequate, once attorneys' fees and expenses are taken into account, and given the losses and ongoing health issues the community has suffered. Residents called on the state and Gov. Gavin Newsom, D, to shut the Aliso Canyon facility down. 

The CPUC is currently in the midst of a proceeding to investigate the feasibility of doing that.

From an energy policy perspective, it is surprising that the Aliso Canyon facility is still open, said Tyson Siegele, energy analyst with the Protect Our Communities Foundation.

"California has used Aliso Canyon as a fossil fuel crutch, and it no longer needs that crutch — so it shouldn't continue using it. The commission has many levers that it can pull to close Aliso Canyon immediately," he added. 

The CPUC proceeding is not tied to the recently announced settlement, and will continue in parallel, according to Siegele. External consultants hired by the commission to study alternatives to the storage field are currently assessing four options: investing in new pipeline infrastructure, gas demand-side strategies, building out more renewables, and adding transmission to the system. It's likely, said Siegele, that the commission will select a combination of those four options.