With the perception growing in the industry that California won't site a liquefied natural gas (LNG) terminal anytime soon, the state legislature earlier this month moved Senate Bill (SB) 412 out of the Senate to the lower house Assembly, which would effectively delay for another year action on a proposed LNG receiving site pending a broad natural gas needs study by the California Energy Commission (CEC). Major energy utilities in the state are skeptical because of some of the bill's provisions. The Assembly will take up the bill later this month or in July before a summer legislative recess.

SB 412's author, Sen. Joe Simitian from the Silicon Valley area, has characterized the legislation as attempting to set a review and approval process for the pending LNG terminal proposals, of which there are four offshore and one slated for Long Beach harbor, but the onshore proposal and at least one of the offshore sites have been rejected by state or local authorities so far.

Gov. Arnold Schwarzenegger's rejection in May of a proposed offshore terminal along the Southern California coast underscores the "crying need" for a statewide LNG siting process, Simitian said.

Pacific Gas and Electric Co., among the major private-sector utilities, opposes the current version of SB 412 because of what one of its Sacramento representatives called a problem of a recent amendment that includes "prohibitions on contracting for LNG supplies," which create the possible problem of "placing restrictions on supply that eventually create market power issues and higher costs for other sources of gas."

Simitian said the bill would require the CEC to conduct a needs assessment of the state's energy market by "projecting future energy supply/demand," and having the CEC focus on projected demand while analyzing conservation, climate change impacts and efficiency potential, as well as the state's ability to replace fossil fuels with renewable energy sources longer term.

"LNG may well be part of California's energy future, but LNG development needs to be done in a way that protects California's environmental, public heath, and national security operations along our coast," Simitian said. "I also think we need to be concerned about the potential for market manipulation, which was so disastrous in the energy crisis of 2001."

California previously had an "LNG Siting Act" passed in 1977 but repealed it a decade later after affiliates Southern California Gas Co. and PG&E abandoned their joint plans for developing an onshore receiving terminal along the Southern California south-facing coastline, about 40 miles west of Santa Barbara. As a result, Simitian contends there is "no clear authority" at the state level for reviewing applications for LNG plants.

Noting that the proposed terminals all apply different technology and approaches, Simitian said the state needs to "make sure if we're going to move forward on LNG that we pick the safest, most sensible technology out there.

"The message for the LNG industry is: Be careful what you wish for, you just might get it. For the past two years, the LNG industry has, for the most part, opposed creation of a national process for consideration and approval of LNG at the state level. The end result was a system that served neither the public nor the industry well."

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