BILL ANALYSIS 1 1 SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE MARTHA M. ESCUTIA, CHAIRWOMAN SCR 40 - Lowenthal/Vincent Hearing Date: May 3, 2005 S As Introduced: April 7, 2005 Non-FISCAL C R 4 0 DESCRIPTION This resolution calls on the President and Congress to preserve state and local authority over the siting of liquefied natural gas (LNG) facilities in effect opposing provisions of H.R. 6, the energy bill recently approved by the U.S. House of Representatives, which would vest exclusive authority over LNG siting with the Federal Energy Regulatory Commission (FERC) and therefore preempt existing state and local authority. BACKGROUND LNG is natural gas that has been liquefied by cooling it to minus 259 degrees Fahrenheit. Liquefaction reduces its 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 California Energy Commission (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. There are four LNG receiving and re-gasification terminals in the U.S., but none are located on the West Coast and able to serve California. The existing U.S. LNG terminals are located in Louisiana, Georgia, Maryland and Massachusetts. Currently, there are several proposals to develop LNG facilities in or near California which would serve in-state gas demand. Private companies have proposed building receiving terminals at the Port of Long Beach, offshore of Ventura County and in Baja California. Proposed California/Baja terminals: 1. Sound Energy Solutions (Long Beach Harbor) - Mitsubishi 2. Cabrillo Deepwater Port (offshore of Port Hueneme) - BHP Billiton 3. Clearwater Port (offshore of Oxnard) - Crystal Energy and Woodside Energy 4. Energia Costa Azul (onshore near Ensenada) - Sempra and Shell 5. Terminal Mar Adentro (offshore of Tijuana) - Chevron/Texaco A few other projects have been announced, but not formally proposed. Recent proposals to build terminals at Mare Island and Humboldt Bay have been withdrawn due to community opposition. The California Public Utilities Commission (CPUC) has asserted jurisdiction over the terminal now proposed at Long Beach, finding that the terminal owner is a public utility and the project requires a Certificate of Public Convenience and Necessity (CPCN). The FERC has resisted the CPUC's claim, maintaining it has exclusive jurisdiction under the federal Natural Gas Act. The CPUC/FERC dispute is pending in the 9th Circuit Court of Appeals. The basic question is whether FERC has jurisdiction over a facility for importing natural gas which is for intrastate commerce (as the Long Beach terminal would be), rather than interstate commerce. Meanwhile, opponents of state review have taken the fight to Congress. H.R. 6, approved April 21 by the House, contains a provision intended to give FERC exclusive jurisdiction over all LNG import facilities. This gambit has been driven by FERC and developers anxious to proceed with LNG terminals without interference from state authorities like the CPUC and the Coastal Commission. If this provision is enacted in federal law, existing or proposed state and local roles in LNG permitting may be preempted. The current process for permitting an LNG terminal in California depends on the project's location. For the Long Beach project, the Port of Long Beach is the lead agency for CEQA review, the FERC is the lead federal agency, and the CPUC may be responsible for the environmental, safety and economic review associated with a CPCN, depending on the outcome of the 9th Circuit case and/or H.R. 6. For the offshore projects, where the terminal itself is to be outside California waters, the U.S. Coast Guard is the lead federal agency, although federal law grants the Governor authority to determine consistency with coastal protection policies. For all projects, the Coastal and State Lands Commissions have discreet roles associated with project impacts in the coastal zone and on state lands and authority to issue coastal development permits and leases for state lands, respectively. COMMENTS 1. Technical amendments. The author and the committee may wish to consider updating this resolution to reflect actions since its introduction, such as House approval of H.R. 6, as well as minor technical amendments to correct spelling. 2. Related legislation. SB 426 (Simitian) and SB 1003 (Escutia) were approved by this committee April 19 and are pending in the Senate Appropriations Committee. The two bills lay out a three-step process for the CEC to evaluate and permit LNG terminals: Step 1 - Assessment of need for LNG, due November 1, 2006 (SB 426). Step 2 - Comparison and ranking of proposed LNG terminals (SB 426). Step 3 - Selection and permitting of best project(s) (SB 1003). POSITIONS Support: Sierra Club California Oppose: None on file Lawrence Lingbloom SCR 40 Analysis Hearing Date: May 3, 2005