California’s planning process for siting a coastal liquefied natural gas (LNG) terminal and using the state’s significant underground storage capabilities for LNG is on track, but issues surrounding gas quality and gathering need immediate attention, according to a draft integrated energy report update by the California Energy Commission (CEC).

The CEC report anticipates that the U.S. Coast Guard and state Lands Commission soon will release an environmental assessment of a proposed offshore LNG terminal.

Aside from recent California Public Utilities Commission actions to triple gas-savings goals and spend more on gas research and development programs, the state needs to begin addressing gas quality and gathering issues. “The state has made little progress in this area,” said the draft report by the CEC staff of its 2004 update to the state Integrated Energy Policy Report, which is expected to go to the governor and legislature this month.

Although various state agencies have been at an “impasse” on gas quality issues, the CEC report said, Southern California Gas Co. has filed an application with the CPUC dealing with future gas production in the state, standards for use of compressed natural gas in vehicles are being looked at, and the CPUC has three separate proceedings that touch on the issue.

The CEC report recommends that state legislative hearings be convened as soon as possible to: (1) examine gas quality/gathering issues as they relate to in-state natural gas production; and (2) determine if additional legislative action is needed to resolve the issues.

Meanwhile, the CEC report concluded that California is “on track” in implementing proceedings and policies to “encourage the construction of LNG facilities and infrastructure and coordinate permit reviews with all entities to facilitate their development on the West Coast.”

A statewide inter-agency LNG working group supposedly has been “effective” in creating permit coordination from the various state, local and federal agencies involved in LNG siting proposals.

Similarly, the draft report said that California is on track for assuring that its existing natural gas storage capacity is “appropriately used” to provide both adequate supplies and enhance the chances for getting reasonable prices. The CPUC has scheduled a major proceeding for next year to examine several major gas issues, and storage will be one of the subjects covered, the draft CEC report said.

The CEC staff currently is compiling a white paper on natural gas storage issues that is expected to be released early next year.

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