BILL ANALYSIS                                                                                                                                                                                                            1
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                 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
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                                       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