SECTION 1. Chapter 164 of the General Laws, as appearing in the 2016 Official Edition, is hereby amended by inserting after Section 144 the following section:-

Section 144½.

(a) As used in this section, the following words shall have the following meanings:

“Grade 3 leak” shall have the meaning set forth in Section 144(b)(4) of this chapter.

(b) The department shall have the authority to fine gas distribution companies for Grade 3 leaks, and the proceeds from such fines shall be used to fund projects to mitigate the effects of such gas leaks on public health and public infrastructure and to, and reduce communities’ exposure to such gas leaks. Without further appropriation, and for purposes consistent with this section, the department shall use such fines to administer this program, with the balance of any funds distributed to municipalities, in proportion to the impact gas leaks have on their municipality, for the purposes described above.

(c) Within twelve months of the effective date of this section, the department shall begin the imposition of fines for Grade 3 leaks and shall issue regulations governing the imposition of such fines, including the allocation of the proceeds of such fines to efforts to reduce communities’ exposure to leaks, and the process of auditing the Grade 3 leaks reported by gas distribution companies to the department. The regulations shall address at least the following:

(1) The regulations shall set forth a schedule of fines for Grade 3 gas leaks, setting forth an annual amount to be paid by a gas distribution company for leaks reported to the department. The department may impose a fine for any Grade 3 leak, provided that it shall impose a fine for each Grade 3 leak greater than one year old. The department may vary the fine amount for a leak based on the age of a leak, the volume of gas released by a leak, or other factors in the judgment of the department;

(2) The regulations shall set forth parameters for the use and disbursement of the proceeds of such fines by the department. The regulations shall provide that all proceeds be used to reduce communities’ exposure to gas leaks, and the department may allocate proceeds to projects projects to replace trees and other resources impacted by gas leaks, measures by the department to audit or check a gas distribution company’s annual reporting of Grade 3 leaks, or such other activities which reduce communities’ exposure to gas leaks and potential to suffer harm from such leaks. The regulations may provide that proceeds of fines may be used directly by the department to enhance its operations, may be distributed to municipalities for purposes consistent with this section. The regulations shall ensure that the proceeds of fines are distributed so that the projects and work funded by the fines are directed to municipalities or regions in approximately the same proportion as fine revenue is derived from said municipalities or regions over time;

(3) The regulations shall set forth a process and standards for auditing the annual report of Grade 3 leaks reported by gas distribution companies to the department as part of the annual service quality standards report required by sections 1I and 144. These standards shall address how the department will review and consider any report of Grade 3 leaks provided to it by third parties, including municipalities and community organizations. The department shall also consider whether and how its audit process and standards can identify the volume of gas being released by Grade 3 leaks, and in particular how it can identify which leaks are likely to release significantly greater than average volumes of gas;

(4) The regulations shall set forth the appeals process through which a natural gas company may appeal to the department the issuance of a fine for a Grade 3 leak.

SECTION 2. This Act shall take effect on January 1, 2020.