BILL ANALYSIS
SB 376
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Date of Hearing: August 4, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 376 (Simitian) - As Amended: August 2, 2010
Policy Committee: Utilities and
Commerce Vote: 9-3
Natural Resources 6-3
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill requires the California Energy Commission (CEC) to
undertake several tasks regarding the development of liquefied
natural gas (LNG) terminals in California. Specifically, this
bill:
1)Requires the CEC to conduct a study, as specified, of the need
for LNG imports to meet the state's energy demand, as a
component of the biennial Integrated Energy Policy Report
(IEPR).
2)Requires the CEC to update the above study at least 60 days
prior to a State Lands Commission (SLC) or California Coastal
Commission (CCC) hearing regarding issuing a lease or permit
to license an LNG facility on the California coast, if the CEC
has not issued an IEPR within 180 days of the hearing.
3)Requires the CEC on or before July 1, 2011, to create a matrix
on its website containing information regarding existing and
proposed LNG terminal projects, as specified, with updates at
least quarterly.
4)Requires the CEC to impose a fee on LNG project applicants to
cover the costs of implementing all of the above, with fee
revenue subject to appropriation by the Legislature.
5)Requires the Environmental Impact Report for LNG
projects-except those projects deemed data adequate before
January 1, 2010-to include an analysis of alternative project
technologies, an analysis of disproportionate human health or
SB 376
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environmental effects on minority and low-income populations,
and a life-cycle cost analysis of the impacts of greenhouse
gas emissions.
FISCAL EFFECT
The CEC's cost for the LNG needs study, to be incorporated into
the IEPR, as well as development of the matrix, will be
absorbable within existing resources. CEC costs to update the
study and the matrix-if necessary due to the timing of an SLC or
CCC hearing on a proposed LNG facility-would be about $100,000,
or $200,000 if updates were required in response to two
different proposals. Per the bill's provisions, these costs
would be covered by LNG project applicants.
COMMENTS
1)Background . 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 and Alberta, Canada.
LNG is natural gas that has been turned into a liquid by a
cooling process. The process of liquefying the gas makes the
gas much denser, meaning more can be transported in a limited
space. Once the gas is liquefied it can be transported
overseas by tanker and regassified for use at its destination.
LNG infrastructure would enable California consumers to draw
gas from major reserves around the world.
2)Prior Legislation . This is the author's third attempt at
legislation similar to SB 376. In 2006, SB 426 died on the
Assembly floor. In 2007, SB 412 was held on this committee's
Suspense file.
3)Purpose . Since the author's last effort at establishing an LNG
facility approval process, the outlook for LNG developers has
soured considerably, likely due to falling natural gas prices,
diminishing energy demand, and the global credit shortage. The
seven LNG facilities proposed in California as recently as
2007 have dwindled to one (Port Esperanza, off Long Beach) and
that project is on hold and in search of investors. The
Ensenada project in Baja-the first West Coast terminal, which
was recently completed-is reportedly operating far below
capacity. LNG imports collapsed nationwide by two-thirds from
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2007 to 2008.
According to the author, 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 to site
LNG facilities. The author asserts that a missing component
from the permitting process is a comparison between the
projects and an evaluation of the need for imported natural
gas supplies.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081