BILL ANALYSIS Ó 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
AB 1257 - Bocanegra Hearing
Date: July 2, 2013 A
As Amended: June 25, 2013 FISCAL B
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DESCRIPTION
Current law requires the California Energy Commission (CEC) to
conduct assessments and forecasts of all aspects of energy
industry supply, production, transportation, delivery and
distribution, demand, and prices. The CEC uses these assessments
and forecasts to develop energy policies that conserve
resources, protect the environment, ensure energy reliability,
enhance the state's economy, and protect public health and
safety. The CEC is required to adopt and publish a comprehensive
assessment of energy markets, trends, forecasts, and impacts on
the public and the environment every two years in the Integrated
Energy Policy Report (IEPR). (PRC §§25301-25302)
Current law requires the CEC to develop and adopt a state plan
to increase the use of alternative transportation fuels,
including natural gas. (HSC §43866)
This bill directs the CEC to conduct an analysis every four
years of natural gas use and consider its potential in regards
to various aspects of the energy industry and including an
analysis of economic and environmental costs and impacts. The
report will identify both near- and long-term policy strategies
to maximize the benefits of natural gas.
BACKGROUND
A study by Massachusetts Institute of Technology from June 2011
examined the natural gas market in the U.S.<1> Unlike other
fossil fuels, natural gas plays a significant role in most
sectors of the modern economy, including power generation,
industrial, commercial, and residential. The report found that
natural gas can play a significant role in supporting efforts to
reduce greenhouse gasses nation-wide. This conclusion should be
modified slightly for the case of California, because as
explained below, California has a different power mix and energy
use profile from the U.S. as a whole.
CEC Assessments - The CEC conducts regular assessments of energy
markets and issues, including natural gas, which are adopted and
published every two years as part of the IEPR. In May 2012, the
CEC published a supplemental report specifically on natural gas
market trends<2> in which it examined trends related to natural
gas supply, pricing, demand, and infrastructure.
Supply has increased in recent years, driving prices lower.
Natural gas production in the lower 48 United States has
increased from 50 billion cubic feet per day in 2005 to 63
billion cubic feet per day in 2011, as production has shifted
from conventional sandstone basins to shale and tight sandstone
formations. The monthly spot-price for natural gas increased by
an average of 29 percent per year between 2000 and 2008.
However, from January 2009 to April 2012, spot prices decreased
at an average annual rate of 19 percent.
Demand, however, has remained relatively constant over the last
10 years. Demand in the commercial sector increased, while
decreasing in the industrial sector. There is also an emerging
issue in California related to natural gas demand in the
transportation sector. Natural gas continues to be a major
contributor to electricity generation, but varies from year to
year depending on the availability of hydroelectric resources
and weather.
Natural Gas Electric Generation - Natural gas has significant
benefits over coal in terms of its emissions profile when
combusted. While coal combustion releases large amounts of black
carbon (ash), particulate matter, and other toxins into the
atmosphere, natural gas is primarily composed of methane.
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<1> The Future of Natural Gas: An Interdisciplinary MIT Study.
June, 2011.
<2> 2012 Natural Gas Market Trends, CEC-200-2012-004
Natural gas produces far fewer pollutants than coal when burned.
California has largely removed coal from its generation
portfolio. Current law prohibits long term contracts for power
from plants with emissions profiles worse than combined cycle
natural gas power plants (PUC §§8340-8341). This statute
effectively prohibits future contracts with coal plants. The CEC
reports that in 2011, coal made up 8.2% of the California power
mix, while natural gas contributed 35.6%.
The Renewables Portfolio Standard is also having a significant
impact on natural gas powered electric generation. Major
renewable sources (e.g., wind, solar) are intermittent in
nature, and the power output depends on season, weather, and
time of day. Modern natural gas plants have quick start times,
and can be ready to deliver power in as little as 15 minutes.
This makes them an attractive resource to balance the needs of
renewables as they come online. Additionally, the recent closure
of the San Onofre Nuclear Generation Station leaves a 2200
megawatt deficit in power capacity. While some of this power
deficit may be filled by renewable energy, quick-start natural
gas plants are another option for providing baseload generation
in the region.
COMMENTS
1. Author's Intent . The author argues that natural gas
holds a great deal of potential for use in multiple sectors
and that the current IEPR from the CEC does not
sufficiently consider this potential. The author notes that
California lacks a long-term strategy to maximize the
benefits of natural gas as part of its portfolio of energy
sources in a low-carbon future. As a result, no agency is
pursuing a clear set of actions to optimize those benefits,
and state agencies are not collaborating to ensure
consistency on a natural gas policy.
2. Cleaner than coal, not exactly spotless . It is important
to reiterate that natural gas is not a renewable resource.
It is still a fossil fuel, and using it as a power source
emits greenhouse gasses to the atmosphere, a significant
cause of global climate change. This bill proposes to study
the best uses of natural gas as a compliment to other
resources within California, and to develop a policy to
inform the state-wide usage of natural gas. As part of this
study, the CEC is directed to consider the environmental
and economic impacts of natural gas use using a lifecycle
perspective. Thus, the CEC should consider natural gas
production methods, including hydraulic fracturing,
distribution methods, and greenhouse gas emissions of
natural gas combustion and their effects on the environment
and economy.
ASSEMBLY VOTES
Assembly Floor (77-0)
Assembly Appropriations Committee (17-0)
Assembly Natural Resources Committee
(9-0)
POSITIONS
Sponsor:
Author
Support:
American Handforge
American Lung Association, California
Antelope Valley Board of Trade
Association of California Cities, Orange County
Breathe California
Breathe California of Los Angeles County
California Asian Pacific Chamber of Commerce
California Chamber of Commerce
California Contract Cities Association
California Die Casting
California Manufacturers & Technology Association
California Municipal Utilities Association
California Natural Gas Vehicle Coalition
Calpine
CALSTART
City of Beaumont
City of Murrieta
Coachella Valley Association of Governments
Coachella Valley Economic Partnership
Congress of California Seniors
David Couch, 4th District Kern County Supervisor
Economic Development Collaborative-Ventura County
Support: (Cont.)
Environmental Defense Fund
Fontana Wood Preserving Inc
Foothill Transit
Glendale Chamber of Commerce
Industry Manufacturers Council
Inland Empire Economic Partnership
John C. Zaragoza, 5th District Ventura County Supervisor
Kern Economic Development Corporation
Kings County Economic Development Corporation
Latin Business Association
Los Angeles Conservation Corps
Los Angeles County Business Federation
Miguel A. Pulido, City of Santa Ana Mayor
Millennium Biltmore Hotel, Los Angeles
Mojave Desert Air Quality Management District
Mothers of East Los Angeles
Natural Resources Defense Council
Orange County Business Council
Orange County Hispanic Chamber of Commerce
San Diego Gas & Electric Company
San Gabriel Valley Economic Partnership
San Gabriel Valley Regional Chamber
San Joaquin Valley Air Pollution Control District
Santa Barbara Technology and Industry Association
Southeast Community Development Corporation
Southern California Gas Company
Southern California Minority Supplier Development Council
Southern California Public Power Authority
Southwest Gas Corporation
The Valley Economic Alliance
United Chambers of Commerce
Waste Management
Western States Petroleum Association
Zack Scrivner, 2nd District Kern County Supervisor
Oppose:
Sierra Club California
Kyle Hiner
AB 1257 Analysis
Hearing Date: July 2, 2013