Sighs of relief from liquefied natural gas (LNG) promoters and Gov. Arnold Schwarzenegger greeted a unanimous state Lands Commission decision last month allowing expansion of a short natural gas pipeline that will soon bring LNG into the state from a receiving facility in Mexico.
But Schwarzenegger and the promoters appear to have missed the point of the move by the once-moribund Lands Commission, now being herded into prominence by its rancher chairman, Lt. Gov. John Garamendi.
“LNG has a place in our state’s future energy portfolio,” intoned Schwarzenegger, apparently pleasantly surprised at the action by a commission which boxed him into a corner last spring, forcing him to issue an after-the-fact, meaningless veto of a major LNG receiving plant intended for construction off the Ventura County coast.
Maybe LNG does have a place, but not much of a place and only under strict environmental regulation, suggests Garamendi, whose commission can veto any project using state lands, including tidelands everywhere along the coast.
LNG is gas cooled to a liquid state where it is drilled, then shipped thousands of miles across oceans to receiving facilities where it is warmed back to a gaseous state and placed into existing pipelines. Coastal or offshore facilities must use pipelines under or across state-owned tidelands for almost any such project.
One big reason Garamendi and fellow Democrat John Chiang, the state controller who also sits on the Lands Commission, nixed the Ventura County project was that there is no reliable forecast indicating any impending shortages of natural gas, either in California or anywhere in America.
In fact, a vast surplus would result if a putative $7 billion pipeline backed by leading Alaskan state officials were built to bring Alaskan gas to the upper Midwest.
So Garamendi sees the Lands Commission approval of expanding the existing North Baja pipeline into Southern California as a unique act, letting in a little bit of LNG so the state’s coast can stay clear of large natural gas developments.
“All of the estimates I have seen for natural gas indicate that the maximum we will need for at least 25 or 30 years is an additional billion cubic feet per year beyond what we have today,” the lieutenant governor said in an interview. That’s less than what’s needed to run one city the size of Fresno for one month.
Garamendi notes that the expansion of the North Baja pipeline, designed to bring LNG from a receiving plant San Diego-based Sempra Energy is building just north of Ensenada in Baja California, will provide much more gas than that. The Sempra plant will be completed in about six months.
“At that point, any other LNG facility is economically problematic,” Garamendi said. In short, if there’s no need for such a plant, Garamendi asks why one should be built. So companies like NorthernStar Natural Gas, Woodside Petroleum, Chevron and Mitsubishi, among those still wanting to construct LNG plants along the coast, will have to do some heavy convincing if they’re to get their plans past a skeptical Lands Commission chairman.
Yes, Lands Commission decisions can be reversed on procedural grounds by the courts, or by the Federal Energy Regulatory Commission on the basis of national emergency, but that is not very likely in the foreseeable future.
Meanwhile, all that Sempra, parent company of both Southern California Gas and the San Diego Gas & Electric Co., must do now is add a bit of nitrogen to the LNG it will import through its Mexican facility so that it will burn as cleanly as domestic gas supplies do, and it can bring as much from there as it wishes.
Adding the nitrogen required by the Lands Commission will cost about $24 million a year, the company says, adding less than $4 annually to the average gas bill of the almost seven million gas customers of all types it serves.
“We don’t believe the North Baja pipeline decision or the conditions it imposes on us will have any serious impact on our importation of natural gas,” says Sempra spokesman Doug Kline.
That’s just the way Garamendi intended it. By burning cooler than it otherwise would, the Sempra gas will not add to existing smog. But it should clear the air in future consideration of all other LNG terminals.
“The Sempra plant alone can supply all the future needs anyone responsible now forecasts for California,” Garamendi notes. “And there will be backup from other places. There are active proposals for five LNG plants in Oregon, and that state needs far less than they would bring in. A new Alaska pipeline would solve the whole thing for the entire nation, too.”
So look out, LNG companies, there’s a new economic cop on the beat, one determined not only to protect the environment, but also guard consumers from the additional cost always associated with LNG, whose infrastructure costs would surely be passed on to gas customers.