II. Background

California is actively seeking new and diverse energy resources, among them, natural gas supplies. This Commission recently opened a rulemaking (R.04-01-025) to pursue strategies for development of natural gas resources in California, finding:

Notwithstanding the projected increase in natural gas demand in California, recent developments seriously threaten California's supply of natural gas in the long-term ... there is uncertainty over whether California will have enough interstate pipeline capacity rights secured by firm transportation contracts in the future to meet California's long-term needs....Although it was previously assumed that there were ample proven natural gas reserves in Canada, which would be adequate to meet demand forecasts in Canada and for export to meet a substantial portion of the demand forecast in the United States, this assumption has been thrown into doubt by the most updated analysis of Canadian production of natural gas.

Because recent reports from the Department of Energy and the National Energy Board suggest natural gas produced in North America will not meet demand in the future, the state will need to import more gas from other sources. LNG is among the promising options we have identified for importing natural gas supplies. LNG requires local facilities either onshore or offshore to regasify the LNG in order to transport the natural gas in pipelines. Several entities have considered various sites around the country for installation of LNG facilities and four are already in operation. Indeed, in California, several projects are under consideration for various sites along the coast. Of particular interest to us at this juncture is a proposal by SES to construct an LNG facility at the Port of Long Beach (Port).

SES' plans are detailed in its application before the United States Federal Energy Regulatory Commission (FERC) for authority to construct an onshore LNG facility in the Port of Long Beach, filed January 26, 2004. In addition, the Port has initiated an environmental review of the project as the lead agency, pursuant to the California Environmental Quality Act (CEQA). The FERC is also conducting the environmental review required by the National Environmental Protection Act (NEPA). SES has not yet initiated construction.

The Commission has filed pleadings regarding SES' LNG proposal at the FERC addressing jurisdictional and public policy issues. The Commission is a "responsible agency" under CEQA, which implies certain obligations to protect the public. Significantly, the Commission has the exclusive statutory duty over safety and siting over natural gas facilities in California. (San Diego Gas and Electric Co. v. Superior Court (1996) 13 Cal.4^th 893; 924-925). This investigation formalizes our statutory obligation to oversee this proposed project and its impact on California customers, residents and businesses.