BILL ANALYSIS
SB 1003
Page 1
Date of Hearing: August 17, 2005
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Judy Chu, Chair
SB 1003 (Escutia) - As Amended: July 13, 2005
Policy Committee: UtilitiesVote:6-4
Natural Resources 7-2
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill requires the California Energy Commission (CEC) to
establish a permitting process for the siting and construction
of liquefied natural gas (LNG) facilities. Specifically, this
bill:
1)Precludes the construction of an LNG terminal without the
developer first obtaining a permit from the CEC.
2)Requires all state agencies to cooperate with, and assist the
CEC in evaluating an LNG site.
3)Requires the permit application to include specified elements.
4)Requires the CEC to charge each applicant a fee sufficient to
cover the costs for reviewing the application.
5)Requires the CEC to issue a decision regarding an application
for a permit to construct and operate an LNG terminal, but
prohibits the CEC from issuing a permit for a site that has
not been evaluated and ranked, pursuant to ranking provisions
defined in SB 426 (Simitian).
6)Requires the CEC, if it issues a permit, to do so for the
highest ranked site, with specific exceptions.
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7)Prohibits the CEC from issuing a permit for a LNG terminal
unless the terminal has received all other approvals otherwise
required by federal, state, and local law.
8)Establishes that issuance of a permit by the CEC does not
invalidate any LNG project approval by any other state agency
or a local agency.
9)Requires any responsible agency to consider an application for
the construction or operation of a LNG terminal within 180
days from the date of receipt of a completed application.
10)Is co-joined with SB 426 (Simitian), which requires the CEC
to conduct a LNG needs assessment study to determine the
number of LNG terminals needed to meet the state's projected
natural gas demand, and to compare and rank every proposed
site. SB 426 authorizes the CEC to issue a permit to build
and operate a LNG terminal only if it makes specific findings.
FISCAL EFFECT
The CEC would incur costs up to $750,000 in staff and consulting
contracts to review each LNG facilities applications. These
costs would be reimbursed by each applicant.
COMMENTS
1)Purpose . This bill is intended to provide a comprehensive
siting process for LNG facilities. This bill, as co-joined
with SB 426, requires the CEC to issue a permit to construct
and operation a LNG facility only after ensuring the public
health, safety, and welfare are provided.
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.
Building LNG receiving terminals in or near California would
increase supplies of natural gas, and should have the effect
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of decreasing prices.
3)Six LNG terminals have recently been proposed in California:
onshore in Long Beach, and offshore of Ventura County and in
Baja California. 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 operating
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.
4)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.
5)Opposition . The California Business Roundtable believes 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