Large headlines and cries of joy from environmentalists and consumer advocates greeted Gov. Arnold Schwarzenegger’s mid-May decision to veto construction of a large liquefied natural gas plant 14 miles off the Ventura County coast south of Oxnard and just beyond the Malibu city limit.
But for both consumers and environmentalists, that joy may be premature.
At least three and perhaps four LNG proposals remain active along the California coast, from Ventura County to the waters off the Camp Pendleton Marine Corps base in San Diego County. Approving any of them would raise prices for all gas consumers across the state.
In itself, Schwarzenegger’s move was anticlimactic and probably meaningless, except for the commentary that came with it. For two state agencies – the Lands Commission and the Coastal Commission – had already rejected California’s first LNG proposal in 25 years. Except in the highly unlikely event that courts would overturn both decisions, even a Schwarzenegger okay would have meant nothing.
So this was a safe veto for the governor to exercise. But his veto message made it clear that either he still does not really understand the issue or that he’s ready to play along with former staffers in his administration now working for LNG companies and/or big contributors who have an interest in LNG.
LNG is natural gas supercooled to a subfreezing liquid state near wellheads in faraway locales and then carried by tanker to receiving plants, where it is re-warmed into a gaseous state and distributed to homes and businesses.
“Liquefied natural gas can and must be an important addition to California’s energy portfolio,” Schwarzenegger said while nixing the well-publicized plan of Australian energy giant BHP Billiton LLP to build near Malibu and Oxnard. “However,” he added, “any LNG import facility must meet the strict environmental standards California demands to continue to improve our air quality, protect our coast and preserve our marine environment.”
The underlying assumption of both Schwarzenegger’s statement and others from the California Manufacturers and Technology Association and similar business lobbies in Sacramento was that California needs LNG.
But that has never been proven. Yes, the state Energy Commission issued a report in 2005 claiming California would need LNG, but its chair at the time was a longtime natural gas industry consultant who now works as a top executive of NorthernStar Energy, which is attempting to build LNG receiving plants both in Ventura County and near the mouth of the Columbia River at Astoria, Oregon.
By contrast, the federal Energy Information Administration, a wing of the Department of Energy, forecasts virtually no increase in California consumption of natural gas despite population increases and construction of more gas-fired power plants.
The LNG lobby constantly points out that California produces only about 13 percent of the natural gas consumed here. But that’s largely irrelevant because the state holds reserved space on three major pipelines bringing gas here from the major fields of North America. Similarly, the industry’s argument that domestic and Canadian gas supplies are drying up would become completely moot if a proposed pipeline from the North Slope of Alaska to the upper Midwest goes forward.
Who is right? For sure Californians should be assured there is a need before allowing construction of any LNG receiving plant in the state. Billiton estimated its receiving plant alone would cost $800 million, not including the fleet of supertankers needed to keep it supplied, each one of which costs about $1 billion to build. Those costs, and a decent profit margin on them, would be added to the monthly gas bills of all Californians for decades to come if a LNG plant were treated like all other energy facilities usually are.
What’s clearly lacking is a solid process to determine whether LNG is needed. Only after that determination has been made should anyone even begin looking at potential sites and their environmental impacts. That’s what Schwarzenegger doesn’t appear to get.
But the state has no fair process to arrive at any conclusion about LNG. When the Public Utilities Commission – presided over by a former utility company president – voted to allow LNG into the California pipeline system, it did not even bother taking public testimony on the need issue. Neither did the Energy Commission.
Schwarzenegger himself twice vetoed a bill by Democratic state Sen. Joe Simitian of Palo Alto that would set up a process where sworn testimony about LNG can be taken and witnesses cross-examined. That idea is once again before the Legislature.
“We desperately need a reliable process to settle the need question,” said Lt. Gov. John Garamendi, chairman of the Lands Commission, while explaining his vote against the Billiton project off Ventura County. He later said he mostly likely would vote to disapprove any LNG proposal until need for such projects is proven.
He’s right, for as long as a suspect state report is the only real evidence that LNG is needed, there’s no excuse for socking it to consumers. The bottom line: unless this stuff is really needed, any LNG plant will be nothing more than a corporate boondoggle.