BILL ANALYSIS                                                                                                                                                                                                    Ó


          |SENATE RULES COMMITTEE            |                       AB 1257|
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                                    THIRD READING

          Bill No:  AB 1257
          Author:   Bocanegra (D)
          Amended:  6/25/13 in Senate
          Vote:     21

           SENATE ENERGY, UTIL. & COMMUNIC. COMMITTEE  :  8-0, 7/2/13
          AYES:  Fuller, Corbett, De León, DeSaulnier, Hill, Knight,  
            Pavley, Wolk
          NO VOTE RECORDED:  Padilla, Cannella, Wright
          SENATE APPROPRIATIONS COMMITTEE  :  7-0, 8/30/13
          AYES:  De León, Walters, Gaines, Hill, Lara, Padilla, Steinberg
          ASSEMBLY FLOOR  :  77-0, 5/29/13 - See last page for vote

            SUBJECT  :    Energy:  State Energy Resources Conservation and  
                      Development Commission:  natural gas

           SOURCE  :     Author

           DIGEST  :    This bill requires the California Energy Commission  
          (CEC) to prepare a report on or before January 1, 2015, and  
          every four years thereafter, regarding natural gas, as  

           ANALYSIS  :    

          Existing law:

           1. Requires CEC to conduct assessments and forecasts of all  


                                                                    AB 1257

             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). 

           2. Requires the CEC to develop and adopt a state plan to  
             increase the use of alternative transportation fuels,  
             including natural gas. 

          This bill: 

          1. Requires CEC, on or before January 1, 2015 and every four  
             years after, prepare and submit a report to the Legislature  
             on natural gas use and its potential in regards to various  
             aspects of the energy industry including an analysis of  
             economic and environmental costs and impacts. 

          2. Requires the report to identify both near- and long-term  
             policy strategies to maximize the benefits of natural gas.

          A study by Massachusetts Institute of Technology from June 2011  
          examined the natural gas market in the United States.  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 study 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  in which it examined trends related to natural  



                                                                    AB 1257

          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% per year between 2000 and 2008.  However, from  
          January 2009 to April 2012, spot prices decreased at an average  
          annual rate of 19%. 

          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.   
          Natural gas produces far fewer pollutants than coal when burned.  
          California has largely removed coal from its generation  
          portfolio.  Existing law prohibits long term contracts for power  
          from plants with emissions profiles worse than combined cycle  
          natural gas power plants.  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. T  
          his 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  



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          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.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No

          According to the Senate Appropriations Committee, on-going costs  
          of at least $140,000 from the Energy Resources Programs Account  
          (General) for developing the information required in a  
          quadrennial report.

           SUPPORT  :   (Verified  8/30/13)

          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
          Cities of Beaumont and 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
          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



                                                                    AB 1257

          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 and 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

           OPPOSITION  :    (Verified  8/30/13)

          Sierra Club California

           ASSEMBLY FLOOR  :  77-0, 5/29/13
          AYES:  Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,  
            Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown,  
            Buchanan, Ian Calderon, Campos, Chau, Chávez, Chesbro, Conway,  
            Cooley, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox,  
            Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon,  
            Gorell, Gray, Grove, Hagman, Hall, Harkey, Roger Hernández,  
            Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal,  
            Maienschein, Mansoor, Medina, Melendez, Mitchell, Morrell,  
            Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan, Patterson,  
            Perea, V. Manuel Pérez, Quirk, Quirk-Silva, Rendon, Salas,  
            Stone, Ting, Wagner, Waldron, Weber, Wieckowski, Wilk,  
            Williams, Yamada, John A. Pérez



                                                                    AB 1257

          NO VOTE RECORDED:  Holden, Skinner, Vacancy

          JG:k  8/31/13   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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