BILL ANALYSIS
SB 376
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Date of Hearing: June 28, 2010
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
SB 376 (Simitian) - As Amended: June 10, 2010
SENATE VOTE : 25-9
SUBJECT : California Energy Commission: natural gas market
assessment
SUMMARY : Requires the California Energy Commission (CEC) to
conduct and update, as specified, a needs assessment of
liquefied natural gas (LNG) to meet the state's energy demand;
imposes analytical requirements of an environmental impact
report (EIR) for the construction or operation of an onshore or
offshore LNG terminal in California. Imposes a fee on an LNG
project applicant to cover the CEC's costs.
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 Integrated Energy Policy Report (IEPR).
As part of the IEPR, the CEC is required to forecast natural
gas supply, demand and prices and evaluate a wide range of
related factors. (SB 1389 (Bowen), Chapter 568, Statutes of
2002)
2)The Liquefied Natural Gas Terminal Act of 1977 authorized the
California 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(SB 1081 (Alquist), Chapter 855, Statutes of 1977, repealed in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)
3)The California Environmental Quality Act (CEQA) requires lead
agencies with the principal responsibility for carrying out or
approving a proposed project to prepare a negative
declaration, mitigated negative declaration, or environmental
impact report (EIR) for this action, unless the project is
exempt from CEQA. CEQA requires significant effects on the
environment to be identified and mitigated.
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4)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)).
THIS BILL:
1)Requires an EIR for an onshore or offshore LNG terminal in
California for which an application submitted to FERC or the
United States Maritime Administration has not been deemed data
adequate on or before January 1, 2011 to 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 (GHG) emissions.
2)Requires CEC to conduct a needs assessment of LNG imports to
meet the state's energy demand as a component of the IEPR.
The study must assess:
a) The future demand for natural gas in California,
including, but not limited to, natural gas as an
alternative transportation fuel.
b) The future supply of natural gas in California available
from domestic and imported sources.
c) All supplemental sources of natural gas and natural gas
alternatives that can be reasonably expected to be
available to meet projected energy demand, including, but
not limited to, conservation, energy efficiency programs,
and renewable energy resources.
d) Projections of the price for natural gas under
reasonable supply and demand circumstances.
3)Requires CEC to update its assessment 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.
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4)Requires CEC on or before July 1, 2011, to create a matrix,
updated quarterly, on its website containing comparative
information on existing or proposed LNG terminals on the west
coast of North America, summary of environmental impacts and
mitigation measures.
5)Requires an LNG terminal project applicant to include in the
application evidence that it has consulted with the United
States Department of Defense regarding potential impacts on
national security.
6)Authorizes CEC to impose a fee on project applicants to cover
its costs, upon appropriation by the Legislature.
7)Authorizes a private right of action to challenge the needs
assessment in a court of law as specified.
FISCAL EFFECT: According to the Senate Appropriations
Committee, $300,000 in FY 09-10, and $600,000 in FYs 10-11 and
11-12 for CEC reporting.
COMMENTS : This is the author's third attempt at this bill. SB
426 in 2006 died in the Assembly Utilities and Commerce
Committee, and SB 412 in 2007 was held in Assembly
Appropriations. According to the author's office:
Before we decide to license a new fossil fuel facility on the
California coast we must determine whether the energy produced
is needed. To do this we need a basic understanding of
supply, demand and conservation and efficiency potential. One
of the fatal flaws of the previous [environmental impact
statement] submitted to the State Lands Commission was its
lack of a true analysis of the "no build" review required by
Federal Law. You can not analyze 'no-build' without studying
need.
1)Background: Compared to most other states, California uses
less fossil fuel. This lower reliance on fossil fuel is due
to moderate climate, the availability of hydroelectric and
nuclear power, and the continuing and growing use of renewable
energy. However, the predominant fuel for electricity
generation and heating in California remains natural gas.
California imports approximately 85% of its natural gas
supply, primarily from gas fields in the Southwest, Rockies
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and Alberta, Canada. The 15% 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. Not only is
California's demand for natural gas growing, demand for gas in
other regions is growing as well, and California lies at the
end of the pipeline "delivery route."
LNG has been proposed as an alternative supply. LNG is
natural gas that has been liquefied by cooling it to minus 259
degrees Fahrenheit. Liquefaction reduces its 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.
In the early 1970's, California's gas utilities identified the
Port of Los Angeles, Oxnard and Point Conception as possible
sites for an LNG import terminal. However, the three agencies
involved in site approval could not agree on a preferred site.
To address the conflict, the project proponents turned to the
Legislature, which enacted the LNG Terminal Act in 1977.
Under the Act, the PUC, with input from the Coastal Commission
and the CEC, could approve one site. The site was to be
remote from human population and selected according to a
ranking by the Coastal Commission. Reflecting the utilities'
plans, the statute limited the terminal's capacity and
specified the natural gas was to be imported from Indonesia or
south Alaska. The PUC approved a remote site at Point
Conception, but the proponents cancelled the project when LNG
became uneconomical. In 1987, the Legislature repealed the
Act. Since the Act's repeal, the state process for evaluating
and permitting LNG facilities has been ill-defined.
The current process for permitting an LNG terminal in
California depends on the project's location. For a
previously proposed Long Beach project, the Port of Long Beach
was the lead agency for CEQA review and FERC the lead federal
agency. For an offshore project, where the terminal itself is
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to be outside California waters, the U.S. Coast Guard is the
lead federal agency, although federal law grants the Governor
a say in project approval. For all projects, the Coastal
Commission and State Lands Commission have discreet roles
associated with project impacts in the coastal zone and on
state lands.
There are four LNG receiving and re-gasification terminals in
the U.S., but none are located on the West Coast and able to
serve California. The existing U.S. LNG terminals are located
in Louisiana, Georgia, Maryland and Massachusetts. The first
West Coast terminal was recently completed near Ensenada, Baja
California.
2)Short history of proposed LNG projects in California : There
have been several other proposals to develop LNG facilities in
or near California which would serve in-state gas demand.
Recent proposals to build onshore terminals at Mare Island and
Humboldt Bay have been withdrawn due to community opposition.
A third onshore terminal at the Port of Long Beach, a
partnership between Mitsubishi and ConocoPhillips called Sound
Energy Solutions, was derailed by the Port in January 2007,
though the Port's actions have been challenged in court by the
applicant. Of the offshore projects, the only one to go to
decision has been the Cabrillo Deepwater Port, offshore of
Port Hueneme, proposed by BHP Billiton. In April and May
2007, the State Lands Commission, Coastal Commission and the
Governor rejected necessary approvals for this project<1>.
Since the author's last effort at establishing an LNG facility
approval process, the outlook for LNG developers has soured
considerably. The seven LNG facilities proposed in California
as recently as 2007 has dwindled to one (Port Esperanza,
offshore Long Beach) and that project is on hold, according to
the CEC, and in search of investors. The Ensenada project in
Baja is reportedly operating far below capacity. Nationwide,
LNG imports have collapsed by 2/3 from 2007 to 2008.
Enthusiasm for LNG plants seems to have suffered from falling
--------------------------
<1> In a May 18, 2007 letter, the Governor denied BHP's Cabrillo
Port LNG Deepwater Port application for construction of a
floating storage and regasification unit 14 miles offshore
Venture County. The Governor wrote that "Although I strongly
support building an offshore LNG facility in California, based
on the unmitigated and significant environmental impacts
associated with [the project], I disapprove the application."
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natural gas prices, diminishing energy demand, and the global
credit shortage.
3)What will this bill add? Observers and participants in the
LNG debate in California have identified the lack of overall
assessment of need and comparison of proposed projects within
the existing, project-specific review process. This bill
attempts to fill these gaps, in an informational sense, by
requiring the CEC to study need and publish detailed
information regarding proposed projects. It should noted,
however, that the CEC already publishes most of the "matrix"
information required by the bill on its Website. While the
results of the CEC's work are not specifically linked to the
approval of an LNG terminal, the CEC must update its study at
least 60 days prior to a State Lands Commission or Coastal
Commission hearing to approve a project if the CEC has not
issued the IEPR within 180 days of the hearing.
The bill requires any EIR analyzing the impacts of an LNG
project to conduct a comparative analysis of feasible
alternative project technologies, life-cycle greenhouse gas
impacts, and disproportionate environmental justice impacts.
This extraordinary EIR requirement would apply to a project
for which an application to FERC or the U.S. Maritime
Administration has not been deemed data adequate on or before
January 1, 2011. The Port Esperanza project would likely
trigger this requirement.
4)Basis for judicial review unclear : The appeal provisions in
this bill are unusual in that the "decision" to be challenged
isn't a formal rulemaking or project approval. More
importantly, the provisions permit a person to challenge the
"findings" of the assessment that were required in a previous
version of this bill but are no longer retained in this bill.
The author and the committee may wish to consider whether
these provisions are appropriate or should be deleted.
5)Technical amendments :
a) The word "lease" should be added to page 5, line 34
before "permit."
b) On page 6, line 5, "have" should read "has."
c) On page 6, line 40, "submittal" should replace
"filing.
d) On page 7, line 14, "and ranked" should be deleted.
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REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
None on file
Analysis Prepared by : Dan Chia / NAT. RES. / (916) 319-2092