BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 1350
                                                                  Page  1

          Date of Hearing:   May 7, 2001

                    ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
                              Roderick D. Wright, Chair
                  AB 1350 (Canciamilla) - As Amended: April 25, 2001
           
          SUBJECT  :  Natural gas: producers.

           SUMMARY  :  States legislative findings and declarations regarding  
          the need for increased natural gas production in California, and  
          an expedited arbitration process to oversee and resolve any  
          disputes arising from implementation of a process governing the  
          connection of natural gas wells.

           EXISTING LAW  :

          1)Requires the California Public Utilities Commission (CPUC) to  
            encourage as a first priority the increased production of gas  
            in this state, as specified.

          2)Makes it the policy of the state that natural gas produced in  
            this state is not placed at an unfair economic disadvantage  
            relative to gas from sources outside of the state as the  
            result of any transportation tariffs or conditions of service.

           FISCAL EFFECT  :  Unknown.

           COMMENTS  :

           In-State Natural Gas Production.
           
          The purpose of this bill is to increase in-state natural gas  
          production.  Currently, only 16 percent of the natural gas  
          consumed in California is produced in-state.  While the state  
          has numerous gas reserves, much of the gas contained in these  
          reserves fails to meet the minimum pipeline quality standards  
          established by gas utilities.  This means that the producers of  
          the natural gas cannot connect their wells with utility  
          pipelines and therefore cannot sell the gas. 

           Legislative Vehicle for Memorandum of Understanding.
           
          In-state gas producers and Pacific Gas and Electric (PG&E) are  
          presently involved in negotiations to establish set guidelines  
          and procedures regarding the connection of in-state gas  








                                                                  AB 1350
                                                                  Page  2

          production wells with utility pipelines.  According to the  
          author, this measure is a legislative vehicle to implement any  
          Memorandum of Understanding between in-state producers and PG&E.  


           Staff recommends  :

          This measure states the Legislature's intent to establish an  
          expedited arbitration process to oversee and resolve any  
          disputes resulting from the implementation of a process  
          governing the timely connection of in-state gas wells.   
          Arbitration is a civil process, separate and distinct from  
          CPUC's dispute resolution process.  The author may wish to  
          consider amending this bill to state the Legislature's intent to  
          utilize CPUC's existing dispute resolution process to resolve  
          disputes arising from implementation of an MOU.  This would  
          avoid constitutional issues relating to arbitration outside  
          CPUC's control and provide parties with greater flexibility in  
          resolving disputes.  Additionally, the author may wish to  
          consider amending this bill to delete the intent language  
          defining standard and non-standard gas wells.  These types of  
          wells are currently defined in tariffs of gas corporations in  
          California.  Gas quality measures may vary over time and tariffs  
          can be updated to reflect these changes.

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          California Independent Petroleum Association

           Opposition 
           
          None on file.
           

          Analysis Prepared by  :    Joseph Lyons / U. & C. / (916) 319-2083