BILL ANALYSIS � 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
SB 37 - Simitian Hearing Date:
April 5, 2011 S
As Amended: March 14, 2011 FISCAL B
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DESCRIPTION
Current law 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).
Current law , the Liquefied Natural Gas Terminal Act of 1977
(since repealed in 1987), authorized the California Public
Utilities Commission (CPUC) to issue a permit for the
construction and operation of a liquefied natural gas (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1977, repealed in 1987).
This bill would require the CEC to conduct a study of need for
LNG imports as part of the periodic IEPR and require the CEC to
update this study at least 60 days prior to a hearing by the
State Lands Commission or the California Coastal Commission
prior to issuing a lease or permit to license a LNG facility on
the California coast if an IEPR has not been issued within 180
days of the hearing.
This bill would require the CEC, on or before July 1, 2012, to
create a matrix on its Internet web site that describes each
existing or proposed LNG terminal located onshore or offshore in
California and information on facilities from Alaska south
through Baja California, including information on location,
ownership, description, capacity, cost, and links to
environmental impact reports, to the extent that such data is
publicly available.
This bill requires a LNG project applicant to provide evidence
that it has consulted with the United States Department of
Defense on the impact of its project.
This bill would require, for a LNG project onshore or offshore
California for which an application submitted to the Federal
Energy Regulatory Commission (FERC) or the United States
Maritime Regulatory Commission has not been deemed data adequate
by January 1, 2012, that the environmental impact report include
a comparative analysis of feasible alternatives, an analysis of
potential disproportionately high and adverse human health or
environmental effects on minority and low-income populations,
and a full life-cycle analysis of the impacts of the resulting
greenhouse gas emissions.
This bill would require the CEC to impose a fee upon a LNG
terminal project applicant to cover the costs of implementing
the provisions of this bill.
BACKGROUND
California's Reliance on Natural Gas - The predominant fuel for
electricity generation in California is natural gas, which
provides 45% of California's electricity. Reductions in natural
gas use can be achieved through continued energy efficiency
programs and further developing and integrating renewable energy
resources into electricity supplies.
California imports approximately 85% of its natural gas supply,
primarily from gas fields in the Southwest, Rockies 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. Industry experts expect modest
growth in demand for natural gas in California for the
foreseeable future.
LNG as Alternative Supply - LNG is a natural gas that has been
cooled and therefore liquefied. Liquefaction reduces the 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.
According to information on the FERC web site, there are nine
LNG receiving and re-gasification terminals in the United
States, but none are located on the West Coast and able to serve
California. Nationwide, seven terminals have been proposed but
not approved, including one in Astoria, Oregon, and the others
in the eastern and southern United States. In late 2008 an LNG
plant owned by Sempra Energy commenced operation in Baja
California. Seven LNG terminals have previously been proposed
for California but none have plans for moving forward, although
FERC still lists an Esperanza Energy site offshore southern
California as a potential site but not formally proposed.
Current Permitting Process - The current permitting process for
offshore projects where the terminals are outside of California
waters makes the U.S. Coast Guard the lead federal agency and
gives the Governor authority to reject a project. The
California Coastal Commission has the responsibility to review
the project impacts in the coastal zone and on state lands. The
State Lands Commission has authority to issue coastal
development permits and leases for state lands.
COMMENTS
1. Needs Analysis . This bill requires a needs assessment.
It does not condition the permitting of an LNG plant on the
demonstration of need. The CEC needs assessment is
intended to inform the State Lands Commission and Coastal
Commission permitting process.
By way of contrast, powerplant siting does not require a
needs assessment. Prior to 1999, powerplant siting
included an analysis of need. This analysis was crucial
because once a powerplant was approved, utility customers
were responsible for all the reasonable construction and
operation costs, even if the plant sat idle. The
deregulation of electric markets was intended to shift the
risk of powerplant investment onto unregulated powerplant
operators. Because utility customers were theoretically
not saddled with the cost of idle or underused powerplants
a needs analysis was deemed unnecessary, and this provision
was repealed (SB 110, Chapter 581 of 1999; Peace).
2. Need for the Bill . This bill establishes requirements
related to approval of LNG terminals even though there is
little to no prospect of locating LNG facilities in
California in the near future. The state's aggressive push
for meeting energy demand with renewable energy sources
further diminishes the likelihood of need for LNG.
Nonetheless, future changes in energy consumption or access
to natural gas through pipelines could renew interest in
pursuing LNG terminals, and this bill would ensure that
California has an application process in place and timely
and relevant information for review of project proposals.
As stated by the Sierra Club, given the "unique and serious
public safety concerns and ? potential for catastrophic
consequences" posed by LNG facilities, the needs assessment
required by this bill will ensure an informed determination
of whether the needs justifies the risks involved with
future projects.
POSITIONS
Sponsor:
Author
Support:
Sierra Club California
Oppose:
None on file
Jacqueline Kinney
SB 37 Analysis
Hearing Date: April 5, 2011