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No Guarantee LNG Will Be Reliable Energy Source:

For many years, promoters of liquefied natural gas have billed their pet projects as a reliable new potential source of energy for California.

So far, they’ve been stymied in all their efforts to build receiving and rewarming facilities in California for the subfreezing liquid gas they’d like to import from faraway locales like Indonesia, Malaysia, Australia, and elsewhere.

But no one in California could prevent San Diego-based Sempra Energy from building an LNG plant on the west coast of Baja California, Mexico, just north of Ensenada. About half the gas coming through that facility is earmarked for use in Mexico, mainly to help fuel the many maquiladora factories near the border.

Sempra, parent company of both the Southern California Gas Co. and San Diego Gas & Electric Co., wants to bring much of the rest into California, and last summer won permission from state authorities to extend its North Baja pipeline to a point near El Centro, from which gas could enter existing lines for use in California and Arizona.

The basis of all this is an assumption of reliability. If California is to give up some of its existing supply of domestic natural gas, as the state Public Utilities Commission has authorized, and replace it with LNG, the fleets of tankers needed to bring LNG here must never stop churning. Gas being pumped from underground and undersea sources must keep coming here.

But it turns out that very basic assumption is not assured for about half of the supply due to come to Sempra’s Mexican facility. Half that gas will be supplied by Shell Oil Co., a full partner with Sempra in the project. But the other half is to come from a facility known as Tangguh on the Indonesian portion of the island of Papua New Guinea.

Tangguh, says Sempra, is “owned by BP (the former British Petroleum) and others.” Tangguh, adds Sempra spokesman Art Larson, “has the right to divert a portion of the cargoes to another market so long as they continue to pay our costs as described in the contract.”

Turns out one of those “others” co-owning Tangguh is the Japan Oil, Gas, and Minerals Natural Corp., whose mission is to “secure a stable supply of oil (and) natural gas…to Japan…” That Japanese government agency can compel Tangguh to ship its supplies to Japan instead of any contracted buyer, including Sempra. Sempra, as it reports, would be compensated in any such preemption.

So Tangguh’s LNG will be a reliable source of income for Sempra, but not even Sempra is willing to call it a reliable source of energy for California. In an exchange of emails over several days inviting Larson and Sempra to explain why their LNG should be considered a reliable source of energy for California, he consistently refused any direct response.

“Sempra Energy companies have been providing reliable energy…for more than a century,” Larson said, never mentioning that during almost all that time the Sempra companies were involved solely in getting energy for Californians and distributing it to them, rather than in speculative ventures like LNG plants. “When a contract calling for the reliable provision of natural gas from Baja California…is in place, we will be happy to discuss the facts,” Larson continued in a remarkable message admitting there is not yet such a contract.

Meanwhile, the Shell portion of the gas flowing to Mexico will come from Sakhalin, the large Russian island just north of Japan. That supply, of course, will be only as stable as Russian politics allow.

So now the question of whether to allow California to become dependent on this highly questionable energy supply ought to go back to the Public Utilities Commission, which already made one half-baked decision when it granted permission for California utilities to give up some of their reserved space on the El Paso and Transwestern pipelines bringing gas from Texas, Oklahoma, and Colorado. The federal Energy Information Agency has said once any part of the gas that flows here through those lines is diverted elsewhere (like gas-hungry New England), it will never come back here.

It’s easy enough to see why a company like Sempra would push for California authorities like the PUC to allow LNG supplies in. After all, Sempra gets paid regardless of whether any gas comes here. For the company, it’s plainly a win-win situation.

But it’s hard to see why the PUC and others would accede to the firm’s LNG blandishments without far greater assurances of reliability than Sempra is willing or able to provide.

Which means it’s high time for that commission to revisit its four-year-old decision on giving up pipeline space. Failure to reverse that decision will mean the PUC has abdicated its basic responsibility of making sure California always gets the energy it needs, and at a fair price.

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