BILL ANALYSIS                                                                                                                                                                                                    Ó


          |SENATE RULES COMMITTEE            |                       AB 1257|
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                                    THIRD READING

          Bill No:  AB 1257
          Author:   Bocanegra (D)
          Amended:  9/10/13 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), beginning November 1, 2015, and every four years  
          thereafter, to identify in conjunction with the integrated  
          energy policy report (IEPR) strategies to maximize the benefits  
          regarding natural gas, as specified.

           Senate Floor Amendments  of 9/10/13 clarify that the report  
          required by this bill will be a report separate from the IEPR,  
          and be prepared in conjunction with the IEPR, and not within the  


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           Senate Floor Amendments  of 9/5/13 narrow this bill by eliminate  
          the portion requiring the CEC to transmit the report to the  
          Governor for review and clarify that the natural gas report will  
          be included as part of the IEPR.   

           ANALYSIS  :    

          Existing law:

           1. Requires 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 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 the CEC, beginning November 1, 2015, and every four  
             years thereafter, to identify with the IEPR strategies to  
             maximize the benefits obtained from natural gas, including  
             biomethane as an energy source, helping the state realize the  
             environmental and cost benefits afforded by natural gas. 

           2. States that as part of this report, the CEC, at a minimum,  
             is required to identify strategies and options for each of  
             the following:

              A.    Making the best use of natural gas as a transportation  
                fuel, as appropriate, including for movement of freight,  
                vessels, mass transit, and other commercial and passenger  
                vehicle use and identifying methods to develop natural gas  
                refueling infrastructure.

              B.    Determining the role of natural gas-fired generation  



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                as part of a resource portfolio, including, but not  
                limited to, combined heat and power, and the impact of  
                that role on meeting greenhouse gas (GHG) targets.

              C.    Taking the best advantage of natural gas as a  
                low-emission resource, including potential zero and  
                near-zero GHG emissions, natural gas, and biogas options,  
                taking into account the impact on electric system  

              D.    Optimizing the role of natural gas as a flexible and  
                convenient end use energy source, including the efficient  
                use of natural gas for heating, water heating, cooling,  
                cooking, engine operation, and other end uses, and the  
                optimization of appliances for these uses.

              E.    Identifying effective methods by which the electric  
                and natural gas industries can facilitate implementation  
                of any of the strategies identified.

              F.    Determining the extent to which a long-term policy is  
                needed to ensure adequate infrastructure and storage and  
                developing strategies for pursuing additional  
                infrastructure development to maintain or enhance pipeline  
                and system reliability, including increased natural gas  

              G.    Determining the role that natural gas can play in the  
                development of zero net energy buildings.

              H.    Optimizing the methods by which the pursuit of these  
                strategies can facilitate jobs development in the private  
                sector, particularly in distressed areas.

              I.    Evaluating the incremental beneficial and adverse  
                economic cost and environmental impacts of proposed  
                strategies, including life-cycle GHG emissions from  
                production, transportation, and use of natural gas, based  
                on authoritative, peer-reviewed, and science-based  
                analysis or in consultation with the Air Resources Board.

          A study by Massachusetts Institute of Technology from June 2011  



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          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 GHGs 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  
          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  



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          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.   
          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.

           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  9/11/13)

          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 and Technology Association
          California Municipal Utilities Association
          California Natural Gas Vehicle Coalition



                                                                    AB 1257

          Cities of Beaumont and Murrieta
          City of Santa Ana Mayor, Miguel A. Pulido
          Coachella Valley Association of Governments
          Coachella Valley Economic Partnership
          Congress of California Seniors
          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
          Kern County Supervisor, 2nd District, Zack Scrivner
          Kern County Supervisor, 4th District, David Couch
          Kern Economic Development Corporation 
          Kings County Economic Development Corporation
          Latin Business Association
          Los Angeles Conservation Corps
          Los Angeles County Business Federation
          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
          Ventura County Supervisor, 5th District, John C. Zaragoza
          Waste Management
          Western States Petroleum Association
          ASSEMBLY FLOOR  :  77-0, 5/29/13
          AYES:  Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,  



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            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
          NO VOTE RECORDED:  Holden, Skinner, Vacancy

          JG:k  9/11/13   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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