Federal officials are now in the midst of their legally required 60-day periods for soliciting public comments on permits for emissions of both air pollutants and wastewater from a huge new coastal project called the Cabrillo Deepwater Port.
When a project reaches this phase, it is generally almost locked in.
This means that unless a lone consumer lawsuit against it succeeds, the Australian energy giant BHP Billiton Ltd. will soon begin building California’s first liquefied natural gas import terminal 14 miles off the coast of Ventura County. It would be the first LNG terminal on America’s West Coast.
And yet, recent testimony from the president of the state Public Utilities Commission indicates regulators don’t have any idea whether it’s needed.
This project – which would guarantee high natural gas costs in perpetuity for almost every business and consumer in this state – could only get as far as it has because every regulating authority involved says there’s a need for the gas it would provide. Some of the same regulators also have said they believe LNG will bring gas prices down despite costs of more than $5 billion to build each terminal and the massive ships to serve it.
Despite all this, there is no firm evidence of any need at all for LNG, gas which is super-cooled to a liquid state at its faraway foreign sources and then reheated to a gaseous state after giant tankers have carried it halfway around the world.
How flimsy is the evidence? Before Gov. Arnold Schwarzenegger appointed a long-time natural gas industry lobbyist to head the state Energy Commission, that agency never reported any need for LNG. The federal Department of Energy projected three years ago that California’s consumption of gas would not rise significantly in the next 15 years despite population increases.
The only major study reporting an impending shortage and coming need for LNG was from Sempra Energy, the San Diego-based owner of both the Southern California Gas Co. and the San Diego Gas & Electric Co. But Sempra has a conflict of interest: it is now building an LNG receiving terminal in Baja California that will supply gas to border regions of Mexico and to the Sempra-owned utilities in California. When one part of Sempra is buying natural gas from another, who will control the price?
That task belongs to the Public Utilities Commission. But those commissioners meekly fell in line when big utilities, including the Sempra subsidiaries, asked permission early last year to give up about one-fourth of their reserved space on the two major pipelines now bringing gas here from Texas, Oklahoma and Colorado.
Let’s get this right: The assumption behind LNG is that a shortfall is coming soon, but the PUC is also allowing utilities to give up gas coming from the major domestic sources. The PUC has never explained how this computes.
The assumption of both the Schwarzenegger administration and many others is that the PUC knows what it’s doing. But recent sworn testimony from PUC President Michael Peevey indicates that may not be true.
In an early spring state Senate hearing, Democratic Sen. Martha Escutia of eastern Los Angeles County asked PUC President Peevey (a former president of the Southern California Edison Co.) if the commission would develop a state master plan on natural gas, including an assessment of need.
“We are not equipped to do an analysis,” responded Peevey, who added that he prefers to let the market decide the matter. He did not say how there can be a free market when two of the state’s three biggest gas utilities belong to the same company that will be supplying the gas and setting its price.
Does this mean the state agency most vital in authorizing the biggest coastal projects in decades (LNG terminals are also proposed at three other sites besides Cabrillo) did no analysis before authorizing LNG to be added to the state’s natural gas supplies and letting the utilities give up pipeline space? Peevey did not respond to multiple requests for a telephone interview on these subjects.
Meanwhile, the assumption of need appears almost pervasive. Example: In a letter to the editor, the chief executive of the Ventura County Economic Development Association wrote in April that “California will need additional sources of natural gas beginning as early as 2008.” His letter cited a report issued by the state Energy Commission while ex-gas lobbyist Joe Desmond was its chairman. That report contradicted earlier ones indicating domestic supplies would be adequate.
The bottom line: LNG is almost a done deal, without so much as a single public hearing on the issue of need and price.
Only a year-old lawsuit by a consumer group called Ratepayers for Affordable Clean Energy now stands between California consumers and perpetual high natural gas prices.