BILL ANALYSIS
AB 2643
Page 1
Date of Hearing: March 22, 2004
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Sarah Reyes, Chair
AB 2643 (Canciamilla) - As Introduced: February 20, 2004
SUBJECT : Energy: natural gas
SUMMARY : Requires the California Energy Resources Conservation
and Development Commission (CEC) to prepare a report regarding
the costs and benefits of siting liquefied natural gas
facilities within the state by April 1, 2005.
FISCAL EFFECT : Unknown.
COMMENTS : Since the year 2000, retail and wholesale natural gas
prices in California have been extremely volatile. While the
wholesale cost of natural gas in California remained stable
during the 1990's, prices began to spike in the winter of
2000-2001, peaking at more than four times the highest costs of
natural gas in the 1990s. Prices spiked again in both the
winter and summer of 2003 and are running well above historic
averages this winter.
The natural gas price swings are the result of an increased
demand for natural gas by electric generators, a limited supply
of natural gas within California, and limitations on the ability
of natural gas pipelines to deliver gas to California. Growing
demand for natural gas in California will likely continue to put
upward pressures on natural gas prices. According to the CEC,
natural gas demand in California is predicted to increase by at
least 10% over the next ten years.
While natural gas demand continues to rise, there are few
existing options for additional supply in California. Over 85%
of natural gas consumed in the state is piped into California
from Texas, the Rocky Mountains, and Canada. Although pipeline
capacity to California has increase by over 20% since 2001,
increased natural gas demand in other western states will
ultimately limit the available of natural gas from these
pipelines.
One alternative to meet the growing pressures on California's
natural gas markets is Liquefied Natural Gas (LNG). LNG is
natural gas that has been turned into a liquid by cooling it to
AB 2643
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minus 259 degrees Fahrenheit. Once the gas is turned into a
liquid it can be transported overseas by tanker then regassified
for use on the other end. Building LNG receiving terminals in
or near California would open the state up to other sources of
natural gas beyond the range of overland pipelines.
Currently there are several proposals for LNG facilities in or
near California. Private companies have proposed building
receiving terminals in Long Beach, in the ocean off Ventura
County, in Eureka and in Baja California. None of these
proposals have received final approval to begin construction and
each one still must address numerous environmental and safety
concerns that have been raised by the local communities and
governmental regulators. Additionally, at this time there is a
dispute between the Federal Energy Regulatory Commission (FERC)
and the California Public Utilities Commission (PUC) as to the
scope of each agency's jurisdiction over LNG facilities in
California.
What is the objective of the Report?
According to the author's office, the report to be prepared by
the CEC will help the Legislature to better provide guidance to
the state's energy agencies regarding the safety and
environmental risks associated with LNG, methods to evaluate its
price-competitiveness, and the coordination of the agencies on
siting and regulation issue. This bill, however, only calls on
the CEC to prepare a report on the "costs and benefits of siting
liquefied natural gas within the state." If the intent of this
bill is to provide the Legislature with a broad range of
information ranging from the safety issues to the coordination
of agencies with regulatory authority, the committee may want to
consider giving the CEC more specific instructions in preparing
the report.
One more CEC report?
The CEC is already mandated to annually provide the Legislature
with natural gas supply and demand forecasts as part of the
Integrated Energy Policy Report (IEPR). Additionally, the CEC
released a white paper on the risks and benefits of LNG in July
of 2003. Instead of requiring the CEC to prepared yet another
LNG report, it may want to consider asking to CEC to address the
costs and benefits of LNG within its 2005 IEPR.
AB 2643
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Spot Bill
Given the limited scope and description of the report in this
bill, the bill could be viewed as a spot bill. Although the
author has stated that this bill is not a spot bill, the
committee may wish to ask for the assurance from the author that
he will not oppose this bill being returned to the committee if
it is amended in the future.
REGISTERED SUPPORT / OPPOSITION :
Support
Pacific Gas and Electric Company
Opposition
None on file
Analysis Prepared by : Edward Randolph / U. & C. / (916)
319-2083