BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Carole Migden, Chair
1003 (Escutia)
Hearing Date: 5/26/05 Amended: 4/13/05
Consultant: Lisa Matocq Policy Vote: E, U & C 6-0
Judiciary - Not relevant
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BILL SUMMARY: SB 1003 enacts the Liquefied Natural Gas (LNG)
Evaluation and Terminal Permitting Act, which authorizes the
California Energy Commission (CEC) to establish a permitting
process for the construction and operation of LNG terminals.
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Fiscal Impact (in thousands)
Major Provisions 2005-06 2006-07 2007-08 Fund
CEC Several hundred thousand
dollars to Special*
$1,000+. Costs should be
offset by
fee revenues
PUC Probably under $150 annually,
Special**
offset by fee revenues
*Unspecified
**Public Utilities' Reimbursement Account (PURA)
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STAFF COMMENTS: SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
According to the CEC, California's total annual natural gas
consumption is 2.2 trillion cubic feet, making the state the
tenth largest natural-gas consuming "country" in the world. The
state imports about 85 percent of that. Since July 2001,
wholesale natural gas prices in the state have doubled. The CEC
has proposed a number of strategies to address California's
natural gas supply, demand, and price challenges, one of which
is to import natural gas from remote reserves in Pacific Rim
regions, such as Alaska, Australia, Indonesia, and Russia. In
order to do so, however, the West Coast must have LNG receiving
terminals to deliver the natural gas to existing pipelines. Only
a handful of LNG facilities have been proposed for California:
in Long Beach Harbor, offshore of Port Hueneme, and offshore of
Oxnard.
Existing law authorizes the CEC to issue permits for thermal
power plants. Prior law (which was repealed in 1988) authorized
the Public Utilities Commission (PUC) to issue a permit for the
construction and operation of a LNG terminal to be located at a
remote site determined by the Coastal Commission. The project
was cancelled when LNG became too costly. Today, the process
for permitting a LNG terminal varies depending on the project's
location, and may involve local agencies, federal agencies, the
PUC, U.S. Coast Guard, Coastal Commission, etc.
This bill:
SB 1003
Page Two
authorizes the CEC to establish a LNG permitting process and
prohibits the construction or operation of a LNG terminal
without a CEC permit;
provides that a CEC permit shall be in lieu of all other
permits or licenses required by any state or local agency, and
to the extent permitted, any federal agency;
requires the CEC to adopt regulations governing the safety and
construction of a terminal and hold at least one public
hearing on a permit application;
requires the CEC to establish a monitoring system to ensure
that a terminal is constructed and operated in compliance with
the regulations adopted;
requires the PUC to monitor costs incurred by a person or
entity subject to its regulation in the construction of a LNG
terminal in order to determine if the costs are in the best
interests of the ratepayers;
requires the CEC to charge a permit fee sufficient to cover
the costs of processing the application;
requires all state agencies to cooperate with the CEC and, if
requested, to assist in the evaluation of a site. Costs
incurred by a state agency are to be paid by the commission
and reimbursed from permit fee revenues;
provides that the bill shall only become operative if SB 426
(Simitian) is enacted on or before January 1, 2006.
The CEC's 2004-05 budget for siting and compliance related to
thermal power plants is $615,000. SB 426 (Simitian), a
companion measure also being heard in this committee today,
expands the LNG permitting process by requiring that projects be
ranked, in order of priority and based on specified criteria,
such as environmental and safety effects. Due to the
interrelatedness of SB 426 and this bill, it is difficult to
distinguish the permitting costs. However, there are likely to
be significant start-up costs to the CEC for additional
professional, technical and administrative staff to develop a
LNG program, research LNG terminals (possibly in other states
as there are none in California), and hold public hearings. In
addition, CEC staff estimate that the costs to permit one LNG
facility could be as much as $1 million. Although this bill
requires the CEC to charge a permit fee sufficient to cover the
costs of processing the application, it does not appear that
costs associated with the monitoring program, holding public
hearings, adopting regulations, or the study required in SB 426
are recoverable. Therefore, STAFF RECOMMENDS that (1) this bill
and SB 426 (Simitian) be amended to clarify that the CEC shall
charge a permit fee sufficient to cover all related costs, and
(2) this bill be amended to make a correction on page 3, line 8,
strike "6.7" and insert "6.5".
Increased costs to the PUC are probably under $150,000 annually.
PURA revenues are derived from an annual fee imposed on public
utilities. Therefore, any increased costs should be recovered
from fee revenues.
STAFF NOTES that if pending federal legislation is enacted, the
state could be preempted from permitting LNG facilities.
AS PROPOSED TO BE AMENDED, the bill clarifies that the permit
fee shall be sufficient to cover all costs of the chapter.