BILL ANALYSIS
SB 426
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Date of Hearing: August 17, 2005
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Judy Chu, Chair
SB 426 (Simitian) - As Amended: July 13, 2005
Policy Committee: UtilitiesVote:6-5
Natural Resources 7-2
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill requires the California Energy Commission (CEC), to
assess the need for liquefied natural gas (LNG) terminals and to
compare and rank proposed terminal projects. Specifically, this
bill:
1)Requires the CEC, once a LNG project application has been
submitted for approval, to assess the future demand and supply
of natural gas and to determine the number of LNG terminals,
if any, needed to meet the projected natural gas demand.
2)Requires the CEC, by November 1, 2006, to compare and rank
proposed LNG terminal proposals, based on applications
received by January 1, 2006, according to specified
environmental, safety, and economic criteria. (For any
applications received after January 1, 2006, the CEC must
complete its evaluation of the proposal by December 31st of
the year of receipt if the commission is able to within that
time constraint.)
3)Requires the CEC to issue a permit to construct and operate a
LNG terminal only if it determines that the technology chosen
for a particular site will have the least adverse public
health, community, safety, and environmental impacts.
4)Requires a fee on applicants sufficient to cover the CEC's
costs of performing the above.
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5)Is co-joined with SB 1003 (Escutia), which prohibits the
construction or operation of a LNG terminal without a CEC
permit, requires that specific information be included in the
application, and precludes the CEC from issuing a permit if
the site has not been evaluated and ranked by the CEC.
FISCAL EFFECT
1)For the initial assessment and ranking in 2006, the CEC would
need three staff ($250,000) and up to $1 million for
consulting contracts.
2)For evaluation of subsequent LNG proposals, the CEC would
likely need one staff position ($85,000) and about $100,000
for consulting.
The bill requires the above costs to be covered by project
applicants. However, it is not clear how the cost of a
statewide needs assessment would be allocated among the
various applicants. Moreover, it is questionable as to whether
the state could charge an applicant seeking approval of a
specific LNG project for the costs of the state's general
needs assessment.
COMMENTS
1)Purpose . This bill, as co-joined with SB 1003, is intended to
provide a comprehensive siting process for LNG facilities.
This bill requires the CEC to issue a permit to construct and
operate a LNG facility only after first evaluating the state's
need for LNG and ranking the proposed facilities sites.
2)Background on LNG . LNG is 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. Since 2000, natural gas prices have been
volatile, and growing demand coupled with decreasing supplies
will likely continue to put upward pressure on prices.
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Building LNG receiving terminals in or near California would
increase supplies of natural gas, and should have the effect
of decreasing prices.
Six LNG terminals have recently been proposed in California:
onshore in Long Beach, and offshore of Ventura County and in
Baja California. At least one of the Baja California projects
is under construction. Draft environmental impact reports for
one of the Ventura County projects and the Long Beach project
should be completed within the next month. This bill would
pertain to every LNG terminal to be constructed or operated in
California, regardless of whether a proposal has been
submitted to a federal agency or whether the proposed terminal
resides on-shore or off-shore.
3)Current LNG Permitting Process . Regarding facilities located
onshore, President Bush signed a comprehensive energy bill on
August 8th, which in part states that the Federal Energy
Regulatory Commission (FERC) has "the exclusive authority to
approve or deny an application for siting, construction,
expansion, or operation of facilities located onshore or in
State waters." This action appears to make moot a
jurisdictional dispute pending in the federal Ninth Circuit
Court of Appeals between FERC and the California Public
Utilities Commission (PUC) regarding citing LNG facilities
within the state.
For offshore projects, where the terminal would reside 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 and the
power to reject the project.
For all projects, the California Coastal Commission and the
State Lands Commission have discrete 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.
4)Opposition . The California Business Roundtable believes that
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the two bills would needlessly delay the permitting of
proposed LNG facilities, which they indicate are currently
undergoing multi-level government reviews. Similar concerns
were expressed by the California Chamber of Commerce and the
Western States Petroleum Association.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081