BILL ANALYSIS
AB 2098
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 2098 (Migden)
As Amended August 7, 2000
Majority vote
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|ASSEMBLY: |54-23|(May 30, 2000) |SENATE: |26-8 |(August 28, |
| | | | | |2000) |
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Original Committee Reference: TRANS.
SUMMARY : Requires the State Energy Resources Conservation and
Development Commission (CEC) to study the feasibility of
financing, constructing, and maintaining a new pipeline or using
an existing pipeline to transport motor vehicle fuel.
The Senate amendments :
1)Provide that the CEC study the transporting of either motor
vehicle fuel or the components of motor vehicle fuel into
California.
2)Provide that the study shall be conducted in conjunction with
other gasoline price studies required by acts enacted in 2000.
3)Extend the date from January 1, 2002, to January 31, 2002, by
which the study shall be submitted to the Legislature and the
Attorney General.
EXISTING LAW requires CEC to develop contingency plans to deal
with possible shortages of electrical energy or fuel supplies.
AS PASSED BY THE ASSEMBLY , this bill required:
1)CEC, in consultation with the State Fire Marshall, to study
the feasibility of financing, constructing, and maintaining a
new pipeline or using or expanding the capacity of existing
pipelines to transport motor fuel from the Gulf Coast to
California.
2)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 this would have on gasoline prices
AB 2098
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and the environment as well as other issues identified by CEC.
3)The study to include a discussion of ways in which the state
might facilitate the use of a pipeline to transport motor fuel
into California, including any federal or state funds or tax
credits that could be used to assist in constructing the new
pipeline or expanding the capacity of existing pipelines.
4)The study to be submitted to the Legislature and the Attorney
General (AG) by January 1, 2002.
FISCAL EFFECT : According to the Assembly Appropriations
Committee analysis, one-time costs of about $200,000 to CEC to
conduct the study and report to the Legislature and the AG.
COMMENTS : California has experienced a number of gasoline price
spikes since 1996. Usually, these spikes are the result of
problems at California refineries. There are 12 California
refineries (owned by eight companies) producing California's
unique Air Resources Board-approved reformulated gasoline
(CaRFG). These refineries must operate at total capacity in
order to meet California's demand for gasoline. Californians use
approximately 42 million gallons of gasoline per day. If there
is even a 10% shortage in supply of gasoline, that represents a
loss in gasoline supply of 4.2 million gallons per day.
Therefore, when there is a gasoline supply problem, such as a
refinery shutdown, the price of gasoline can rise dramatically.
California refineries do not currently maintain sufficient
inventories to cover gasoline supply shortages.
When there is a supply disruption, short-term reserves become
more valuable, and bidding wars to secure these supplies ensue.
The result can be gasoline prices that are 25 cents higher in
California than in the rest of the United States. During the
last gasoline supply shortage, California imported approximately
10% of its fuel. Out-of-state CaRFG comes from refineries in
the Gulf Coast or in Europe. These supplies take approximately
four to six weeks to reach California.
Last year Attorney General Bill Lockyer convened a task force to
discuss the high price of gasoline in California and to develop
possible approaches to solving the problem of high prices. This
bill is a product of those discussions.
There are several potential options for pipeline connection to
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California, including the completion of an existing pipeline
that currently runs from El Paso, Texas to Phoenix, Arizona, the
reversal of the flow of an existing pipeline that currently
transports fuel from Los Angeles to Phoenix, the conversion of
existing pipelines intended to bring natural gas into
California, or construction of a new pipeline. All of these
scenarios would be studied under this bill.
In order for a pipeline to be economically viable, there must be
a sufficient demand for the fuel, and the delivered cost of
the fuel must be competitive with in-state sources. According
to CEC, California's gasoline demand will outpace California's
in-state supply by 2003. This means that California will need
to import additional gasoline every day.
It is estimated that transportation costs for a pipeline from
Texas to California could range from $0.08 to $0.10 per gallon,
possibly more if a new pipeline is constructed. On a regular
basis, potential buyers/shippers would probably not find the
pipeline to be economically attractive given the increased cost
of producing California-standard gasoline, tariffs, and
transport costs. However, during periods of supply outages and
in future years when California needs to import additional
gasoline, pipeline-delivered gasoline could become a competitive
option.
AB 2076 (Shelley), in the Assembly pending concurrence in Senate
Amendments, would require CEC to establish and administer a
strategic fuel reserve.
AB 2666 (Battin), held under submission in the Assembly
Appropriations Committee, would allow for the import and sale of
federal reformulated gasoline, and imposes a surcharge on this
gasoline.
Analysis Prepared by : Emily Chang / TRANS. / (916) 319-2093
FN: 0006788