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Overview of Natural Gas in California

Natural gas is the second most widely used energy source in California. Depending on yearly conditions, 40 to 45 percent of the total is burned for electricity generation; 10 percent is consumed in facilitating the extraction of oil and gas, while the rest is used for everything from space heating to fuel for bus fleets. Table 1 shows the 2012 shares of natural gas consumed by end-use sectors and in-state electricity generation.

Table 1: Natural Gas Burned in California in 2012*

Million Therms Percent of End Use Percent of Total
Residential 4,854 38.3% 20.8%








Mining Extract Oil/Gas












End-Use Subtotal




Electricity Generation








Source: California Energy Commission staff, compiled from Quarterly Fuel and Energy Reports.
* Does not include out-of-state natural gas used to produce electricity that is imported into California.
** Includes transportation sector natural gas demand.

Natural Gas to Generate Electricity

Natural gas-fired generation has been the dominant source of electricity in California for many years, as it fuels over half of electricity consumption, both from in-state and imported sources. Because natural gas is a dispatchable resource that fills in the gaps from other resources, use varies greatly from year to year. The availability of hydroelectric resources, the emergence of renewable resources for electricity generation, and overall consumer demand are the variables that shape natural gas use in generation. Gas use was lower in 2011, which experienced above average hydro availability compared to the gas use in 2010 and 2012, which had average hydro availability. Gas demand variability has also been affected by the widespread additions of variable wind and solar resources.

The thermal efficiency of California's gas-fired generation improved more than 21 percent between 2001 and 2011. An additional 24 newer combined cycle plants and a reduced dependence on generation from aging power plants are the chief reasons. The average heat rate of all gas-fired generation, excluding cogeneration, has declined from 9,997 Btu/kWh to 7,855 Btu/kWh (British thermal units per kilowatt hour) from 2001 to 2011. The less efficient generation is retained in the system to serve peaking, ramping, and reliability purposes.

California Natural Gas Supplies

California receives its gas from regionally diverse sources. The majority of its natural gas supply comes from the American Southwest, the Rocky Mountains, and Canada, making up roughly 85 percent of total supplies. The remaining 15 percent is produced in-state, both off-shore and onshore.

Back in 2007, California faced key challenges as the conventional sources of its gas supply appeared to be dwindling and the production costs were increasing. Importing liquefied natural gas (LNG) looked promising and several potential facility sites were proposed. Fast forward to 2012, and the national boom in shale gas has reversed the picture. Unlike electricity which is regional, the natural gas market is continental or even global in scope, so what happens in the wider market dictates California's supply and prices. The biggest change in continental gas supply has been the expansion of total natural gas production in the Lower 48 United States, which increased 20 percent from 2005 to 2011.

Pipelines and Storage

Six major interstate pipelines deliver natural gas to the California border, and from there, intrastate pipelines take the natural gas to customers for immediate consumption or to storage facilities for later use. The latest interstate pipeline additions are the Ruby Pipeline, LLC, which began operation in July 2011, and the Kern River Expansion, which came on-line in October 2011.

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