BILL ANALYSIS SB 426 Page 1 SENATE THIRD READING SB 426 (Simitian) As Amended August 31, 2005 Majority vote SENATE VOTE :24-14 UTILITIES AND COMMERCE 6-5 NATURAL RESOURCES 7-2 ----------------------------------------------------------------- |Ayes:|Levine, Pavley, De La |Ayes:|Hancock, Ruskin, Laird, | | |Torre, | |Nava, Saldana, Wolk, | | |Jerome Horton, Montanez, | |Lieber | | |Jones | | | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Bogh, Baca, Blakeslee, |Nays:|La Malfa, Harman | | |Keene, Wyland | | | | | | | | ----------------------------------------------------------------- APPROPRIATIONS 12-4 ----------------------------------------------------------------- |Ayes:|Chu, Bass, Berg, | | | | |Karnette, Klehs, Leno, | | | | |Nation, Oropeza, Laird, | | | | |Saldana, Yee, Mullin | | | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Sharon Runner, Emmerson, | | | | |Nakanishi, Walters | | | | | | | | ----------------------------------------------------------------- SUMMARY : Requires the California Energy Commission (CEC) to evaluate and rank every proposed liquefied natural gas (LNG) terminal and directs the Governor to disapprove an application for a license to construct and operate an LNG terminal if the project does not meet identified criteria. Specifically, this bill : 1)Requires CEC to evaluate and rank each proposed LNG terminal and provide the results to the Governor and the Legislature by April 1, 2006. SB 426 Page 2 2)Requires the Governor to disapprove an application for a license to construct and operate a LNG terminal unless the facility is evaluated and ranked by CEC, and is one of the two highest ranked sites. 3)Provides that CEC may only require applicants to provide documents prepared to comply with federal licensing requirements, and precludes CEC from requesting confidential financial or market information from any applicant for the purpose of the evaluation and ranking. 4)Requires the State Lands Commission or legislatively designated grantee to consider an application for an LNG facility proposed on state tide and submerged lands, in accordance with the evaluation and ranking. EXISTING LAW : 1)The federal Deepwater Port Act of 1974 precludes the U.S. Secretary of Transportation from issuing a license for the construction and operation of an off-shore natural gas structure in federal waters without the approval of the Governor of each adjacent coastal state, and can condition the license on making the project consistent with state environmental, land-use, water, and coastal management programs. 2)The Energy Policy Act of 2005 provides the Federal Energy Regulatory Commission (FERC) exclusive authority to approve or deny an application for the siting, construction, or operation of an LNG facility located on-shore or in state waters. FISCAL EFFECT : According to the Assembly Appropriations Committee analysis, for the initial assessment and ranking in 2006, CEC would need $250,000 for 3.0 personnel years (PYs) and up to $1 million for consulting contracts. For evaluation of subsequent LNG proposals, CEC would likely need $85,000 for 1.0 PY and about $100,000 for consulting contracts. COMMENTS : The purpose of this bill is to ensure that state laws and regulations that address safety and environmental impacts of LNG facilities are not preempted by less-protective federal laws and regulations. Current law permits the Governor to approve or SB 426 Page 3 disapprove an off-shore LNG facility using discretion. This bill would limit the Governor's decision-making authority and require him to disapprove a project unless it is evaluated by CEC for, among other things, its effectiveness of meeting energy needs and its mitigation of environmentally damaging effects. There are currently three active proposals to build LNG terminals; two off-shore and one on-shore. Each is in various stages of development. Proponents of this bill would like to provide more state input into the LNG siting and certification process to ensure the three facilities are evaluated using specific criteria identified in this bill. Opponents assert that new supplies of LNG would decrease costs of energy, by increasing the supply of natural gas because natural gas fuels most California power plants. Analysis Prepared by : Gina Mandy / U. & C. / 319-2083 FN: 0012789