BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 1003|
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THIRD READING
Bill No: SB 1003
Author: Escutia (D)
Amended: 5/27/05
Vote: 21
SENATE JUDICIARY COMMITTEE : Not relevant
SENATE ENERGY, UTILITIES & COMMUN. COMM. : 6-0, 4/19/05
AYES: Escutia, Alarcon, Bowen, Dunn, Kehoe, Simitian
NO VOTE RECORDED: Morrow, Battin, Campbell, Cox, Murray
SENATE APPROPRIATIONS COMMITTEE : 8-4, 5/26/05
AYES: Migden, Alarcon, Alquist, Escutia, Florez, Murray,
Ortiz, Romero
NOES: Aanestad, Ashburn, Battin, Dutton
NO VOTE RECORDED: Poochigian
SUBJECT : Energy resources: liquefied natural gas
terminals
SOURCE : Author
DIGEST : This bill enacts the Liquefied Natural Gas (LNG)
Evaluation and Terminal Permitting Act, which authorizes
the California Energy Commission to establish a permitting
process for the construction and operation of LNG
terminals.
ANALYSIS : Existing law, the Warren-Alquist Act, grants
the California Energy Commission (CEC) exclusive authority
CONTINUED
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to permit thermal power plants 50 megawatts and larger.
The Act authorizes the CEC to override other state, local
or regional decisions and certify a power plant it
determines is required for "public convenience and
necessity." In approving a proposed power plant, the CEC
must find that the facility's construction and operation is
consistent with a variety of environmental standards
(Chapter 276, Statutes of 1974).
Existing law requires the CEC to assess electricity
infrastructure trends and issues facing California and
develop and recommend energy policies for the state to
address and resolve such issues as part of its biennial
Integrated Energy Policy Report (IEPR) (SB 1389 (Bowen),
Chapter 568, Statutes of 2002).
Prior existing law, the Liquefied Natural Gas Terminal Act
of 1977, authorized the California Public Utilities
Commission (CPUC) to issue a permit for the construction
and operation of a liquefied natural gas (LNG) terminal
pursuant to a prescribed permit procedure. The terminal
was to be at a remote site selected by the California
Coastal Commission (SB 1081 (Alquist), Chapter 855,
Statutes of 1977, repealed in 1987).
This bill:
1. Authorizes the CEC to issue a permit for the
construction and operation of a LNG terminal, including
receiving, storage, re-gasification and new pipeline
facilities necessary to deliver imported natural gas to
existing pipelines.
2. Requires such a permit prior to LNG terminal
construction and operation.
3. Provides that the CEC permit is in lieu of all other
state or local permits.
4. Requires the CEC to charge each applicant a fee
sufficient to reimburse the CEC for all costs of review
pursuant to the Chapter.
5. Requires all state agencies to cooperate with the CEC
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in reviewing proposed LNG terminals.
6. Requires issuance of any State Lands Commission lease
necessary for the construction and operation of a LNG
terminal approved by the CEC.
7. Requires proposed LNG terminals to be ranked according
to procedures specified in SB 426 (Simitian).
8. Prohibits issuance of a permit unless the CEC finds it
is consistent with the public health, safety and
welfare.
9. Provides that the CEC is lead agency for CEQA review.
10. Requires at least one public hearing in the city or
county where the terminal is proposed prior to issuance
of the permit and provides for review, hearings and
recommendations by the city or county.
11. Requires the CEC to adopt regulations governing safety
and construction of LNG terminals.
12. Requires the CPUC to monitor LNG terminal costs
incurred by entities subject to CPUC regulation to
determine if the costs are in the best interest of
ratepayers.
13. Is contingent on enactment of SB 426 (Simitian).
Background
The CEC's Current Energy Facility Siting Duties
In 1974, in response to a previous energy crisis, the
Warren-Alquist Act established an exclusive process to
permit thermal power plants 50 megawatts and larger. The
permitting process was intended to provide comprehensive
environmental review and predictable, one-stop permitting
of applications. It was also integrated with a planning
process that was intended to guard against under- or
over-building of power plants.
The Act required the CEC to develop long-term forecasts of
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state energy needs, which served as the basis for planning
and certification of individual power plants. Since the
advent of electrical restructuring, the planning and
permitting functions have been de-coupled, but the Act
still grants the CEC exclusive authority to certify power
plants and authorizes the CEC to override other state,
local or regional decisions and certify a power plant it
determines is required for "public convenience and
necessity."
The CEC's power plant review function strikes a balance
between project applicants' interest in certainty and the
public's interest in environmental protection and prudent
planning of energy resources. The CEC's process is a
CEQA-equivalent, requires consultation with other agencies,
and is intended to be rigorous and comprehensive. In
approving a proposed power plant, the CEC must find that
the facility's construction and operation is consistent
with a variety of environmental standards.
California's Reliance on Natural Gas
Compared to most other states, California uses less fossil
fuel. This lower reliance on fossil fuel is due to
moderate climate, the availability of hydroelectric and
nuclear power, and the continuing and growing use of
renewable energy. However, the predominant fuel for
electricity generation and heating in California remains
natural gas. Reductions in natural gas use can be achieved
through continued energy efficiency programs and further
developing and integrating renewable energy resources into
electricity supplies.
California imports approximately 85 percent of its natural
gas supply, primarily from gas fields in the Southwest,
Rockies and Alberta, Canada. The 15 percent of supply
derived from in-state sources is typically a lower quality
gas, which must be blended with higher BTU gas, such as
propane, to meet pipeline and end-use specifications.
Additional supplies of in-state gas are available, but
remain untapped. Not only is California's demand for
natural gas growing, demand for gas in other regions is
growing as well, and California lies at the end of the
pipeline "delivery route."
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LNG Proposed as Alternative Supply
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 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
percent 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
6. A few other projects have been announced, but not
formally proposed. Recent proposals to build terminals
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at Mare Island and Humboldt Bay have been withdrawn due
to community opposition.
D?j? vu
In the early 1970's, California's gas utilities identified
the Port of Los Angeles, Oxnard and Point Conception as
possible sites for an LNG import facility. However, the
three agencies involved in site approval could not agree on
a preferred site. To address the conflict, the project
proponents turned to the Legislature, which enacted the LNG
Terminal Act in 1977. Under the Act, the CPUC, with input
from the Coastal Commission and the CEC, could approve one
site. The site was to be remote from human population and
selected according to a ranking by the Coastal Commission.
Reflecting the utilities' plans, the statute limited the
terminal's capacity and specified the natural gas was to be
imported from Indonesia or south Alaska. The CPUC approved
a remote site at Point Conception, but the proponents
cancelled the project when LNG became uneconomical. In
1987, the Legislature repealed the Act. Since the Act's
repeal, the state process for evaluating and permitting LNG
facilities has been ill-defined.
Jurisdictional Dispute
The 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 Federal
Energy Regulatory Commission (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. The Energy Bill approved last week by the
House Energy and Commerce Committee 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
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Coastal Commission. If this provision is enacted in
federal law, the LNG permitting role contemplated in this
bill (or for that matter, any existing state role) may be
preempted.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According the to Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2005-06 2006-07
2007-08 Fund
CEC several hundred thousand dollars
to $1,000+. Costs should be
offset
by fee revenues
Special*
PUC probably under $150 annually,
Offset by fee revenues
Special**
*unspecified
**Public Utilities' Reimbursement Account (PURA)
SUPPORT : (Verified 4/19/05, unable to re-verify at time
of this writing.)
California Natural Gas Vehicle Coalition
City of Redlands
Colton Joint Unified School District
ET Energy
GreenField Compression, Inc.
Harris Farms Inc.
Kalmar Industries
New Flyer
NorthStar Inc.
Omnitrans
Southern California Edison (if amended)
Taormina Industries
OPPOSITION : (Verified 4/19/05, unable to re-verify at
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time of this writing.)
California Manufacturers and Technology Association
NC:nl 5/28/05 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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