BILL ANALYSIS
AB 2098
Page 1
Date of Hearing: May 1, 2000
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Roderick D. Wright, Chair
AB 2098 (Migden) - As Amended: April 13, 2000
SUBJECT : Motor fuel pipeline study.
SUMMARY : Requires the California Energy Commission (CEC) to
study the feasibility of financing, constructing, and
maintaining a new pipeline or using an existing pipeline to
transport motor vehicle fuel. Specifically, this bill :
1)Requires CEC, in consultation with the State Fire Marshall, to
study the feasibility of financing, constructing, and
maintaining a new pipeline, or utilizing or expanding the
capacity of existing pipelines, to transport motor vehicle
fuel from the Gulf Coast to California.
1)Requires the study to assess the viability of pipeline
transportation to directly or indirectly increase California's
supply of gasoline that complies with California's fuel
specifications and the potential impact on gasoline prices,
the environment, and other issues identified by CEC.
1)Requires the study to include a discussion of ways in which
the state may facilitate the use of a pipeline to transport
motor vehicle fuel into California, including any federal or
state funds or tax credits that could be used to assist in
constructing the new pipelines or expanding the capacity of
existing pipelines.
1)Requires the study to be submitted to the Legislature and the
Attorney General by January 1, 2002.
EXISTING LAW requires CEC to develop contingency plans to deal
with possible shortages of electrical energy or fuel supplies.
FISCAL EFFECT : Unknown.
COMMENTS :
1)California has the highest gasoline prices in the nation,
except for Nevada and Hawaii. During the first eight months
of 1999, the retail price per gallon of regular grade gasoline
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was an average of 26.3 cents per gallon higher in California
than the rest of the nation. The following factors contribute
significantly to the difference between prices in California
and the rest of the U.S.: 1) the relative lack of competition
within the state's gasoline refining and marketing industry;
2) California's unique clean-burning gasoline formulation
standards; 3) the distance between California and major
refining centers outside the state; 4) higher state taxes
(approximately 5.3 cents higher in California than in the rest
of the nation).
1)California has 12 refineries producing California Air
Resources Board required (CARB) reformulated gasoline. These
refineries must operate at full capacity in order to meet the
state's demand for gasoline. Gasoline supply disruptions,
such as a refinery shutdown, can result in a dramatic increase
in gasoline prices. Reduced inventory levels in California
and on the West Coast mean that relatively small supply
disruptions can lead to significant price increases. CEC
estimates that by 2003, demand for gasoline within California
will exceed in-state supply, thus necessitating a reliable
supply of imported CARB gasoline to meet demand.
1)Importation of gasoline is fairly costly as it must be
transported via tanker rather than via pipeline. According to
Octane Week (8/2/99), transportation costs from refineries in
the Houston, Texas area range from 8 cents to 12 cents per
gallon. There are presently no pipelines transporting
gasoline into the state from other regions of the U.S.
1)This bill requires CEC to study the feasibility of financing,
constructing, and maintaining a new pipeline to transport
motor vehicle fuel. There are several possible options for
pipeline connection to California: 1) construction of a new
pipeline; 2) the conversion of one of the two existing
pipelines intended to bring natural gas into the state; and
3) the completion of the current Longhorn pipeline in Texas
combined with an expansion of the Kinder Morgan line running
from El Paso to Phoenix and reversal of the Kinder Morgan line
currently carrying gasoline from Los Angeles to Phoenix. All
of these options would be studied under this bill.
1)The Attorney General's office has been studying the California
gasoline market for over a year. After the price spikes that
occurred in the summer of 1999, Attorney General Bill Lockyer
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commissioned a report on gasoline pricing, which was released
in preliminary form in November, 1999. The report concluded
that one of the factors impacting California's gasoline prices
is supply, which is significantly impacted by the distance
between California and major refining centers outside the
state. Since the release of the report, the Attorney General
has convened a task force consisting of consumer, industry,
and environmental groups. This bill is a product of those
discussions.
1)Related legislation: AB 2076 (Shelley) requires CEC to
establish and administer a strategic fuel reserve. This bill
is currently before the Assembly Committee on Utilities and
Commerce. AB 2666 (Battin) would allow for the import and
sale of federal reformulated gasoline, and impose a surcharge
on this gasoline, pending the outcome of a study by the
University of California. This bill was recently approved in
the Assembly Committee on Transportation, and will be next
heard in the Assembly Committee on Appropriations.
REGISTERED SUPPORT / OPPOSITION :
Support
Office of the Attorney General
Opposition
None on file.
Analysis Prepared by : Joseph Lyons / U. & C. / (916) 319-2083