1. California Energy Commission 1 Liquefied Natural Gas Informational Hearing Senate Energy, Utilities, and Communications Committee October 27, 2005 Joseph Desmond Chairman California Energy Commission

2. California Energy Commission 2 Presentation Topics Overview of LNG Proposals CEC Role in LNG Permitting Process Safety Advisory Report Governor’s Decision for Offshore Projects Background Information Available on: –Natural gas supply and demand –Natural gas prices this winter

3. California Energy Commission 3 LNG Proposals California: 3 active applications Oregon: 5 active proposals Washington: none Canada: 2 active applications Baja Norte: 3 active projects

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6. 6 California Proposal Status Offshore: BHP Billiton Cabrillo Port: DEIR/DEIS issued and hearings held. DEIR to be reissued in early 2006 Crystal Clearwater Port: Application submitted, but deemed information deficient Onshore: SES Port of Long Beach: DEIR/DEIS just released; FERC workshop Nov 14

7. California Energy Commission 7 Permitting Onshore vs. Offshore Different Federal Laws Onshore –FERC –Exclusive jurisdiction –Limited state decision making –Land lease decisions by port/city Offshore –MARAD / USCG –Joint jurisdiction –Gov decision at end –Land lease decisions by state

8. California Energy Commission 8 Why Consider LNG? California connected to US NG markets U.S. NG supply not keeping up with demand NG prices are rising very rapidly California imports 87% of its supply

9. California Energy Commission 9 US NG Supply Forecast by US DOE

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11. California Energy Commission 11 California Energy Policies 1.Maximize energy efficiency 2.Maximize cost effective renewable energy resources 3.Support distributed energy resources 4.Create new opportunities through R&D 5.Increase infrastructure 6.Diversify energy supply sources

12. California Energy Commission 12 CEC Role in LNG Permitting Policy Coordination Public Information Limited permitting role

13. California Energy Commission 13 CEC Policy Integrated Energy Policy Report –Diversify supply sources –Increase infrastructure as needed –Support LNG on the West Coast –Support coordinated state response to applications

14. California Energy Commission 14 CEC Coordination LNG Interagency Working Group –21 federal, state, local agencies –Federal: US EPA, US CG, US AF, US MC –State: CARB, CCC, CEC, CPUC, CSLC, CDF&G, CDF&G/OSPR, OES, DGS, BCDC, Ca Coastal Conservancy, EOB, OPR –Local: PoLB, PoHB, County of Ventura, City of Oxnard Meets monthly Provide common information to all agencies

15. California Energy Commission 15 CEC Public Information Website on energy, NG, and LNG Reports on NG and LNG Safety Public workshops Public forums US DOE LNG Forums

16. California Energy Commission 16 Safety Advisory Report Federal Energy Policy Act of 2005 Governor designated CEC to lead state effort CEC prepared a Safety Advisory Report on the PoLB –Coordinated with other agencies –Only state to accept offer FERC working on response –Many issues already covered in new EIS –FERC’s ex parte contact rules limit dialogue

17. California Energy Commission 17 Governor’s Decision on Offshore Projects Federal law allows Governor to: –Approve, approve with conditions, veto, or take no action –Offshore projects only CEC will provide information to Governor to support his decision Governor’s decision independent of agency permitting decisions CEC working with MARAD to ensure coordination Decision on BHP expected mid 2006

18. California Energy Commission 18 Decision Coordination AGENCYACTIVITY U.S. Coast Guard & California State Lands Commission EIS/EIR FEDERAL PROCESS U.S. Coast Guard/ MARADFederal Hearing/Decision on Deepwater Port License Other Federal AgenciesU.S. EPA Air & Water Permits, etc. GOVERNOR'S DECISION Governor's Decision Approve, Approve With Conditions, Deny, or No Action (presumed approved) STATE / LOCAL PROCESS California State Lands Commission (CSLC) Certify Final EIR CSLC Hearing on Lease California Coastal Commission (CCC) Federal Consistency Coastal Development Permit (CDP) Appeal of Local Gov’t CDP State Coastal Conservancy (SCC)Lease, if applicable Local Government CDP for shore crossing/onshore pipeline within coastal zone not retained by CCC

19. California Energy Commission 19 Thank you Questions?

20. California Energy Commission 20 California’s Natural Gas Context Supply/Demand Outlook and Concerns for this Winter Joseph Desmond Chairman California Energy Commission

21. California Energy Commission 21 California’s NG Outlook Good news: –Current reliability good –Recent infrastructure improvements help –Current NG storage inventories good –Broad public energy dialogue more focused on NG issues –CA has aggressive energy efficiency and renewable programs –CA NG R&D program is helping –Greater NG use has helped “clear the air”

22. California Energy Commission 22 California’s NG Outlook Bad news: –NG prices are much higher than before –Prices will be even higher this winter –NG is the dominant fuel for power plants Up to 50% of generation –CA imports 87% of its NG –CA is at the end of the pipeline –CA competes with all other major US markets for NG –The US long term supply/demand balance outlook is pessimistic

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24. California Energy Commission 24 California NG Storage Inventories

25. California Energy Commission 25 US NG Storage Inventories

26. California Energy Commission 26 US NG Supply Forecast by US DOE

27. California Energy Commission 27 Well Depletion Rates

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29. California Energy Commission 29 CA Efficiency Gains

30. California Energy Commission 30 California NG Demand Projection

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32. California Energy Commission 32 California NG Consumption

33. California Energy Commission 33 Effects of Hurricanes on Future Prices

34. California Energy Commission 34 Future Contract Price Trends

35. California Energy Commission 35 CA Utilities Weighted Average Cost of Gas

36. California Energy Commission 36 Prices Around the US

37. California Energy Commission 37 Price Projection for Residential Customers

38. California Energy Commission 38 Natural Gas Commodity Costs to California Consumers in $Billions

39. California Energy Commission 39 CA Consumers’ Cost of NG At $5/mmBtu, Californian’s pay about $11 billion for just the molecules. At $10/mmBtu, Californian’s pay about $22 billion for the molecules. Actions that result in a 10% savings will keep an extra $1-2 billion in our state.

40. California Energy Commission 40 California’s Energy Policy Governor’s energy policy priorities 2005 –Aug 23 response to 2003/2004 IEPR Energy Action Plan II –Loading Order 2005 Draft Integrated Energy Policy Report (Energy Report)

41. California Energy Commission 41 Broad Policy Priorities Energy efficiency—NG programs Energy efficiency—NG standards Energy efficiency—electric Renewable electric energy programs Distributed generation Increase fuel type diversity Increase fuel supply diversity Additional NG infrastructure

42. California Energy Commission 42 Policies on NG Increase energy efficiency efforts Diversify sources of supply Develop alternative supplies –Biogas from ag operations –Landfill gas –Instate stranded gas Support molecules from LNG on West Coast

43. California Energy Commission 43 What Can Residential Consumers Do? Turn down your thermostat to 68 degrees Replace or clean furnace filters once a month Reduce hot water temperature Seal up the leaks Consider replacing your old gas appliances with an ENERGY STAR® water heater or furnace For more tips check the web at – www.energy.ca.gov/consumerfuels/