BILL ANALYSIS
SB 376
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Date of Hearing: June 14, 2010
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
SB 376 (Simitian) - As Amended: June 10, 2010
SENATE VOTE : 25-9.
SUBJECT : Natural gas.
SUMMARY : This bill enacts the Liquefied Natural Gas (LNG)
Market Assessment Act and requires the California Energy
Commission (CEC), on or before July 1, 2011, to create a matrix
on its website containing information related to the building
and operation of a liquefied natural gas terminal project, and
requires quarterly updates. Specifically, this bill :
1)Requires a LNG terminal project applicant to include in the
application evidence that it has consulted with the United
States Department of Defense and its impacted service
components.
2)Requires that an Environmental Impact Report for LNG projects
include a comparative analysis of feasible alternative project
technologies, an analysis of potential disproportionately high
and adverse human health or environmental effects on minority
and low-income populations, and a full life-cycle cost
analysis of the impacts of greenhouse gas emissions. Exempts
LNG projects which were found to be data adequate before
January 1, 2011.
3)Requires the CEC to conduct a study of the need for LNG
imports to meet the state's energy demand as a component of
the Integrated Energy Policy Report (IEPR).
4)Requires the CEC to update its study of the need for LNG
imports at least 60 days prior to the hearing conducted by the
State Lands Commission or the California Coastal Commission
prior to issuing a permit to license a LNG facility on the
California coast, if the CEC has not issued an IEPR within 180
days of the hearing.
5)Requires the CEC on or before July 1, 2011, to create a matrix
on its website containing information related to the
construction and operation of a liquefied natural gas terminal
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project and quarterly updates.
EXISTING LAW:
1)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.
2)As part of the IEPR, requires the CEC to conduct a natural gas
forecast and assessment that includes supply and demand
forecasts, with an assessment of the availability,
reliability, and efficiency of the natural gas, and an
identification of impending or potential problems or
uncertainties in the natural gas markets, potential options,
solutions, and recommendations.
3)Requires the CEC to certify sufficient sites and related
facilities that are required to provide a supply of electric
power sufficient to accommodate projected demand.
4)Federal law declares that the transportation and sale of
interstate and foreign natural gas falls under federal
jurisdiction.
5)Section 311 of the Federal Energy Policy Act of 2005 ("EP Act
2005"), provides exclusive jurisdiction to the Federal Energy
Regulatory Commission (FERC) to regulate the siting of onshore
LNG import terminals and approve applications for such
terminals (15 U.S.C. 717b(e)(1)).
FISCAL EFFECT : Unknown.
COMMENTS : According to the author, several years ago there was
a major push for LNG terminals in California. There were
approximately four projects proposed on the West Coast from
Oregon to Baja California. This effort was driven by the oil
industry which attempted to influence various permitting
entities at the state and local level. Conversely, a missing
component from the permitting process was a comparison between
the projects and an evaluation of the need for imported natural
gas supplies. Although natural gas prices are currently low,
they will rise at some point and the author expects a renewed
effort by the industry at that time.
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Background : The LNG Terminal Act of 1977 (since repealed in
1987), authorized the California Public Utilities Commission
(PUC) to issue a permit for the construction and operation of a
terminal pursuant to a prescribed permit procedure. The
terminal was to be at a remote site selected by the California
Coastal Commission. The goal was to let the State determine
need and choose a site, then companies could bid on the project.
(SB 1081 (Alquist), Chapter 855, Statutes of 1977).
What is LNG : LNG is natural gas in its liquid form. When
natural gas is cooled, it becomes a clear, colorless, odorless
liquid. Natural gas is primarily methane, with low
concentrations of other hydrocarbons, water, carbon dioxide,
nitrogen, oxygen, and some sulfur compounds. During the process
known as liquefaction, natural gas is cooled below its boiling
point, removing most of these compounds. Additionally, this
process makes the gas much denser and more easily transported.
California's Reliance on Natural Gas : Natural gas provides
almost one-third of the state's total energy requirements and
will continue to be a major fuel in California's supply
portfolio. California's supplies of natural gas come from four
areas: in-state production, Southwestern United States, Canada,
and the Rocky Mountain Region.
Natural gas from out-of-state production basins is delivered
into California via the interstate natural gas pipeline system.
The five major interstate pipelines that deliver out-of-state
natural gas to California consumers include: the Gas
Transmission Northwest Pipeline, Kern River Pipeline,
Transwestern Pipeline, El Paso Pipeline, and Mojave Pipeline.
Where's the LNG in CA : According to the CEC, in the past there
were as many as four LNG projects proposed in California that
are no longer active. The lack of LNG projects in California
can be interpreted as a reaction of prospective applicants to
current natural gas market conditions. Further, the CEC states
that California's demand for natural gas is currently being met
reliably by domestic sources at relatively low prices.
Who has jurisdiction : For on-shore LNG projects, the FERC has
exclusive jurisdiction. For off-shore projects where the
terminal would reside outside California waters, the U.S. Coast
Guard is the lead. The California State Lands Commission and
the California Coastal Commission have discrete roles. However,
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the Governor may exercise ultimate veto power.
Project Needs Assessment : This bill would require the CEC to
update its needs study for LNG imports on the California coast,
solely at the expense of the applicant, prior to the hearing of
lead state agency issuing a permit only if the CEC has not
issued an IEPR within 180 days of the hearing. This provision
would exempt projects that have already been proposed and have
met the specified criteria before January 1, 2011.
Current law already requires the CEC to assess future demand and
supply and develop long-term forecasts of the state's energy
needs. Most companies can expend tens of thousands of dollars
to evaluate prospective ventures. After a company selection is
determined, the private entity evaluates different sites for the
venture, considering transportation costs, pollution mitigation
costs, and other important criteria to determine the optimal
location, given demand and supply assumptions. Since the
developer assumes the financial risk and not the ratepayers, the
state may not be the appropriate entity to decide which
proposals succeed and which do not. Additionally, there are
numerous assumptions to be made, such as the probability that
certain pipelines would be built, whether or not they would be
used and at what level of capacity, and other extreme weather
events, in addition to the declining supplies of North American
natural gas.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
None on file.
Analysis Prepared by : DaVina Flemings / U. & C. / (916)
319-2083