BILL ANALYSIS
AB 2643
Page 1
Date of Hearing: April 19, 2004
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Hannah-Beth Jackson, Chair
AB 2643 (Canciamilla) - As Amended: March 26, 2004
SUBJECT : Energy: natural gas.
SUMMARY : This bill requires the California Energy Commission
(CEC) to prepare, as a component of the 2005 integrated energy
policy report, an assessment of the costs and benefits of siting
Liquefied Natural Gas (LNG) facilities within California.
EXISTING LAW : Requires the CEC, every two years, to adopt an
integrated energy policy report that contains an overview of
major energy trends and issues facing the state, including, but
not limited to, supply, demand, pricing, reliability,
efficiency, and impacts on public health and safety, the
economy, resources, and the environment. The report is broken
down into three sections; electricity and natural gas markets;
transportation fuels, technologies, and infrastructure; and
public interest energy strategies.
THIS BILL requires, as a component of the 2005 integrated energy
policy report, an assessment regarding the costs and benefits of
siting LNG facilities within the state.
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
AB 2643
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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 LNG. LNG is natural gas that has been
turned into a liquid by cooling it to minus 259 degrees
Fahrenheit. Once the gas is turned into a liquid its volume is
reduced by a factor of 600 and it can effectively 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 at the Port of Long Beach, two proposals in
the ocean off Ventura County, and in Baja California. None of
these proposals has 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 and the California Public Utilities
Commission as to the scope of each agency's jurisdiction over
the LNG facility proposed at the Port of Long Beach.
REGISTERED SUPPORT / OPPOSITION :
Support
Pacific Gas & Electric
Opposition
None on file
AB 2643
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Analysis Prepared by : Kyra Emanuels Ross / NAT. RES. / (916)
319-2092