BILL ANALYSIS
SCR 40
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Date of Hearing: June 27, 2005
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Lloyd E. Levine, Chair
SCR 40 (Lowenthal and Vincent) - As Amended: May 19, 2005
SENATE VOTE : 24-14
SUBJECT : Liquefied Natural Gas Facilities
SUMMARY : Memorializes the President and Congress to take necessary
action to preserve state and local authority over the siting of
liquefied natural gas facilities in California.
FISCAL EFFECT : Unknown.
COMMENTS : According to the author's office, the purpose of this
concurrent resolution is to memorialize state jurisdiction over the
siting of liquefied natural gas facilities in California.
1)The current debate is trigged by the proposed Long Beach Terminal:
The Long Beach
LNG project has generated controversy and a power struggle between
the California Public Utilities Commission (PUC) and the Federal
Energy Regulatory Commission (FERC). The PUC 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 PUC-issued Certificate of Public Convenience (CPCN). The FERC has
denied the PUC's claim, maintaining it has exclusive jurisdiction
under the federal Natural Gas Act and the PUC cannot require the
facility to obtain a state permit.
There is currently a pending court case between the PUC and the FERC
in the Ninth Circuit Court of Appeals. The basic question is
whether FERC has jurisdiction over a facility for importing natural
gas which is for intra-state commerce, rather than inter-state
commerce.
In order to proceed with construction and operation of LNG terminals
without further delay from the PUC and other state entities, FERC
and LNG developers pushed for a solution. H.R. 6 passed through the
House of Representatives on April 21, 2005 and is now pending on the
Senate Floor. This bill includes a provision stating that FERC has
exclusive jurisdiction over on-shore LNG facilities.
SCR 40
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2) Why LNG : LNG is a natural gas that has been turned into a liquid
by a cooling process. The process of liquefying the gas makes the
gas much denser, meaning more can be transported in a limited space.
Once the gas is liquefied, 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 natural
gas sources beyond the range of overland pipelines.
RELATED LEGISLATION : SB 426 (Simitian) is co-joined with SB 1003
(Escutia) and would establish a comprehensive process for the state
to evaluate, rank and permit LNG facilities.
SB 426 (Simitian) requires the CEC to conduct a needs assessment
study to determine the number of LNG terminals needed to meet the
state's projected natural gas demand.
SB 1003 (Escutia) identifies the elements of a LNG proposal and
require the proposal to use the highest ranked location as a site
for the plant.
Since 2000, retail and wholesale natural gas prices in California
have been extremely volatile. These 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 and
decreasing supplies will likely continue to put upward pressure on
natural gas prices. According to the CEC, natural gas demand in
California is predicted to increase by at least ten percent over the
next ten years.
Significant global trade in natural gas in developing and profitable
arbitrage has emerged in natural gas prices across international
markets. This is the result of escalated prices of domestic natural
gas to levels substantial enough and persistent enough to influence
business investment decisions, and facilities that require large
quantities of natural gas are searching for alternatives. In
addition, prices have significantly reduced for liquefaction and
transportation of LNG.
3) California LNG : 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.
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Several developers have proposals to construct LNG facilities in or
near California. Private companies have proposed building receiving
terminals in Long Beach, in the ocean off of Ventura County, and in
Baja California. At least one of the Baja California projects has
begun construction and other California and Mexico proposals are in
various stages of planning and environmental review. It is not
certain that all proposed projects will eventually be built.
4) State rights : Language within the Resolution argues in favor of
state rights. It is emphasized that the safety of LNG sites could
be compromised if there is lack of state input and control over the
siting process. The state has a much better understanding of
California geography and other natural physical aspects and could
effectively utilize this knowledge to prevent accidental release or
catastrophic event such as a terrorist attack upon a LNG terminal.
The pending federal legislation would prohibit state or local
officials from independently conducting safety inspections and
enforcing state violations. SB 426 (Simitian) and SB 1003
(Escutia), which are being heard in this committee today, would
provide the state the authority to protect public safety, health and
the environment by requiring the CEC the use of these criteria to
rank proposed LNG projects. SCR 40 would reaffirm the state's
rights to protect its environment and its citizens.
5) Public forum : Currently the PUC and FERC are required to permit
public participation in the power plan siting and the CPCN process.
The FERC process proposed by HR 6, although subject to public
participation, would impede California's ability to provide input
within its own borders. The CEC holds hearings in the affected
locations to encourage public participation. Since FERC is located
in Washington D.C. and uses unique procedural methods for public
intervention, general Californian citizens are virtually shut out.
REGISTERED SUPPORT / OPPOSITION :
Support
Sierra Club California
City of Long Beach
Opposition
SCR 40
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Analysis Prepared by : Alice Hu / U. & C. / (916) 319-2083