BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Carole Migden, Chair
426 (Simitian)
Hearing Date: 5/26/05 Amended: 4/13/05
Consultant: Lisa Matocq Policy Vote: E, U & C 6-1
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BILL SUMMARY: SB 426 (1) requires the California Energy
Commission (CEC) to conduct a liquefied natural gas (LNG) needs
assessment study, as specified, by November 1, 2006 to determine
the number of terminals, if any, necessary to meet the state's
projected natural gas demand, (2) requires that the CEC rank, in
order of priority and in accordance with specified criteria, LNG
terminal permits, (3) provides that the costs of the study are
to be recovered from permit fees, and (4) makes related changes.
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Fiscal Impact (in thousands)
Major Provisions 2005-06 2006-07 2007-08 Fund
CEC $150+ to several hundred
thousand Special*
dollars
annually. Costs should be
offset by fee
revenues.
PUC Probably not
substantial costs, Special**
offset by fee revenues
*Unspecified
**Public Utilities' Reimbursement Account
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STAFF COMMENTS: SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
According to the CEC, California's total annual natural gas
consumption is 2.2 trillion cubic feet, making the state the
tenth largest natural-gas consuming "country" in the world. The
state imports about 85 percent of that. Since July 2001,
wholesale natural gas prices in the state have doubled. The CEC
has proposed a number of strategies to address California's
natural gas supply, demand, and price challenges, one of which
is to import natural gas from remote reserves in Pacific Rim
regions, such as Alaska, Australia, Indonesia, and Russia. In
order to do so, however, the West Coast must have LNG receiving
terminals to deliver the natural gas to existing pipelines. Only
a handful of LNG facilities have been proposed for California:
in Long Beach Harbor, offshore of Port Hueneme, and offshore of
Oxnard.
Existing law authorizes the CEC to issue permits for thermal
power plants. Prior law (which was repealed in 1988) authorized
the Public Utilities Commission (PUC) to issue a permit for the
construction and operation of a LNG terminal to be located at a
remote site determined by the Coastal Commission. The project
was cancelled when LNG
became too costly. Today, the process for permitting a LNG
terminal varies depending
on the project's location, and may involve local agencies,
federal agencies, the PUC, U.S. Coast Guard, Coastal Commission,
etc.
SB 426
Page Two
Current law also requires the CEC to issue a biennial Integrated
Energy Policy Report that assesses the state's electricity
infrastructure needs and trends and makes recommendations. This
bill:
requires the CEC to conduct a LNG needs assessment, as
specified, and hold at least two public hearings on the
results of the study;
provides that the costs for conducting the study shall be
funded by LNG permit fee revenues;
requires the CEC to rank proposed LNG sites, based on
specified criteria, such as environmental and safety effects;
modifies the PUC's certificate of public convenience process
as it relates to LNG terminals;
provides that the bill shall only become operative if SB 1003
(Escutia) is enacted on or before January 1, 2006; and
makes related changes.
For the most part, the needs assessment study required by this
bill codifies current practice. However, there could be
relatively minor costs for expanding the scope of the study,
i.e., including an assessment of the number of LNG terminals
needed. SB 1003 (Escutia), a companion measure also being heard
in this committee today, establishes the LNG permitting process
and authorizes the CEC to charge applicants a permit fee
sufficient to cover the costs of processing the application.
Due to the interrelatedness of SB 1003 and this bill, it is
difficult to distinguish the permitting costs. However, there
are likely to be significant start-up costs to the CEC for
additional professional, technical and administrative staff to
develop a LNG program, research LNG terminals (possibly in other
states as there are none in California), and hold public
hearings. In addition, CEC staff estimate that the costs to
permit one LNG facility could be as much as $1 million (how much
of that relates to ranking projects, as is required by this
bill, is unknown at this time). Although this bill provides
that costs associated with conducting the study are to be funded
from permit fee revenues, SB 1003 only authorizes recovery of
the costs of processing an application. Therefore, STAFF
RECOMMENDS that this bill and SB 1003 (Escutia) be amended to
clarify that the CEC shall charge a permit fee sufficient to
cover all related costs.
Any increased costs to the PUC are likely to be minor and offset
by fee revenues.
STAFF NOTES that if pending federal legislation is enacted, the
state could be preempted from permitting LNG facilities.
AS PROPOSED TO BE AMENDED, the CEC would be authorized to impose
a permitting fee sufficient to cover all costs of implementing
the chapter (including the study, permitting, ranking, etc.)