BILL ANALYSIS Ó
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THIRD READING
Bill No: SB 1496
Author: Simitian (D)
Amended: 5/25/12
Vote: 21
SENATE ENERGY, UTIL. & COMMUNIC. COMM. : 11-2, 4/17/12
AYES: Padilla, Berryhill, Corbett, De León, DeSaulnier,
Emmerson, Kehoe, Pavley, Rubio, Simitian, Wright
NOES: Fuller, Strickland
SENATE APPROPRIATIONS COMMITTEE : 5-2, 5/24/12
AYES: Kehoe, Alquist, Lieu, Price, Steinberg
NOES: Walters, Dutton
SUBJECT : Energy: State Energy Resources Conservation
and
Development Commission: natural gas
SOURCE : Author
DIGEST : This bill requires the California Energy
Commission (CEC), on and after January 1, 2013, as a part
of its Integrated Energy Policy Report (IEPR), to include a
compilation and discussion of data on worldwide liquefied
natural gas market prices and flows as well as imports and
exports to onshore or offshore liquefied natural gas
terminals located on the west coast of the United States,
Mexico, and Canada. This bill also requires any proposed
LNG terminal project that is subject to the California
Environmental Quality Act to have specified information in
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its environmental impact report.
ANALYSIS : Existing law requires the CEC to assess
electricity infrastructure trends and issues facing
California and develop and recommend energy policies for
the state to address and resolve such issues as part of its
biennial IEPR.
The Liquefied Natural Gas Terminal Act of 1977 authorized
the Public Utilities Commission (PUC) to issue a permit for
the construction and operation of an LNG terminal pursuant
to a prescribed permit procedure. The terminal was to be
at a remote site selected by the California Coastal
Commission. (SB 1081 (Alquist), Chapter 855, Statutes of
1977, repealed in 1987).
This bill:
1. Requires the CEC, on and after January 1, 2013, as a
part of its Integrated Energy Policy Report, to include
a compilation and discussion of data on worldwide
liquefied natural gas market prices and flows as well as
imports and exports to onshore or offshore liquefied
natural gas terminals located on the west coast of the
United States, Mexico, and Canada.
2. Requires the CEC, on or before July 1, 2013, to create a
matrix on its Internet web site that describes each
existing or proposed LNG terminal located onshore or
offshore in California and information on facilities
from Alaska south through Baja California, including
information on location, ownership, description,
capacity, cost, potential export capacity, and links to
environmental impact reports, to the extent that such
data is publicly available.
3. Requires an LNG project applicant to provide evidence
that it has consulted with the United States Department
of Defense on the impact of its project.
4. Requires, for an LNG project onshore or offshore of
California for which an application submitted to the
Federal Energy Regulatory Commission (FERC) or the
United States Maritime Regulatory Commission has not
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been deemed data adequate by January 1, 2013, to include
in the environmental impact report a comparative
analysis of feasible alternatives, an analysis of
potential disproportionately high and adverse human
health or environmental effects on minority and
low-income populations, and a full life-cycle analysis
of the impacts of the resulting greenhouse gas
emissions.
Background
California's Reliance on Natural Gas . The predominant fuel
for electricity generation in California is natural gas,
which provides 45% of California's electricity. Reductions
in natural gas use can be achieved through continued energy
efficiency programs and further developing and integrating
renewable energy resources into electricity supplies.
California imports approximately 87% of its natural gas
supply, primarily from gas fields in the Southwest, Rockies
and Alberta, Canada. The 13% of supply derived from
in-state sources is typically a lower quality gas, which
must be blended with higher BTU gas, such as propane, to
meet pipeline and end-use specifications. Additional
supplies of in-state gas are available, but remain
untapped. Industry experts expect modest growth in demand
for natural gas in California for the foreseeable future.
LNG as Alternative Supply . LNG is a natural gas that has
been cooled and therefore liquefied. Liquefaction reduces
the volume by a factor of 600, allowing it to be
transported overseas by tanker then re-gasified. LNG
infrastructure would enable California consumers to draw
gas from major reserves around the world - e.g., Alaska,
Russia, Venezuela, Bolivia, Indonesia, Australia and the
Middle East. The CEC has suggested that importing natural
gas from other continents may help reduce Canadian and U.S.
natural gas prices. One LNG terminal could supply
approximately 10% of California's total natural gas demand.
According to information on the FERC Web site, there are
nine LNG receiving and re-gasification terminals in the
United States, but none are located on the West Coast and
able to serve California. Nationwide, seven terminals have
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been proposed but not approved, including one in Astoria,
Oregon, and the others in the eastern and southern United
States. In late 2008, an LNG plant owned by Sempra Energy
commenced operation in Baja California. Seven LNG
terminals have previously been proposed for California but
none have plans for moving forward, although FERC still
lists an Esperanza Energy site offshore southern California
as a potential site but not formally proposed.
LNG Export a New Focus for Terminals . LNG terminals in the
United States originated as import terminals when gas
prices were high and proven U.S. gas reserves were
declining. Today, the ability to extract natural gas from
hydraulic fracturing has greatly increased the ability to
harvest natural gas, with U.S. shale gas production
doubling in the past two years, according to industry data.
At the same time, natural gas prices in the U.S. have
continued to drop, creating an incentive for companies to
look to exporting LNG if better prices are available
abroad. International demand for LNG is rising, in large
part due to Japan relying less on nuclear energy since the
Fukushima disaster and increasing LNG imports by about a
third.
As a result, a growing number of LNG terminals are seeking
approval to operate as export terminals. As of February
2012, FERC reported three proposed LNG export terminals -
one in Louisiana and two in Texas.
Current Permitting Process . The current permitting process
for offshore projects where the terminals are outside of
California waters makes the U.S. Coast Guard the lead
federal agency and gives the Governor authority to reject a
project. The California Coastal Commission has the
responsibility to review the project impacts in the coastal
zone and on state lands. The State Lands Commission has
authority to issue coastal development permits and leases
for state lands.
Related and Prior Legislation . This bill is substantially
similar to four prior bills by the same author: SB 37
(2011) - held in the Senate Appropriations Committee, SB
376 (2010) - held in the Assembly Appropriations Committee,
SB 412 (2007) - held in the Assembly Appropriations
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Committee, and SB 426 (2005) - failed in the Assembly. The
principal difference between this bill and past efforts is
that this bill requires the CEC to consider the impacts of
both imports and exports of LNG instead of just imports.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
One-time costs of $300,000 from the Energy Resources
Program Account (General Fund) in 2013 to develop a study
on the effect of imports or exports of LNG.
Unknown costs in the future to update the LNG study when
there is a permit application for an LNG terminal
submitted to the CEC. All costs would be reimbursed by
applicant fees.
RM:mw 5/25/12 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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