The poll numbers on liquefied natural gas this fall were startling, especially to individuals who attended the only large-scale public hearing ever held in California about LNG.
By a 63-19 percent margin, the usually reliable Field Poll found Californians favor importing LNG and using it as part of the state’s energy supply.
The result certainly did not reflect the feeling in an Oxnard civic auditorium just 18 months ago, when the state Lands Commission heard from almost 2,000 individuals overwhelmingly opposed to siting an LNG importing terminal off the coast of Ventura County.
LNG is natural gas cooled to a subfreezing liquid and shipped thousands of miles across oceans to receiving plants where it is rewarmed to a gaseous state and then inserted into existing gas pipelines for use in homes, buildings and power plants, among other places.
The Ventura County project did not go forward mostly because its sponsors could not prove any need for LNG in California. But if the poll finding is accurate, most Californians are so rattled by recent high prices for gasoline they are willing to let energy companies do almost anything, so long as those companies claim it will somehow add to fuel supplies.
But what if voters were to learn those supplies are unreliable? And at least half of the supply scheduled to come to the only LNG plant now prepared to supply California turns out to be precisely that – completely unreliable.
That plant is the Costa Azul facility opened last spring just north of Ensenada in the Mexican state of Baja California by a partnership of Shell Oil Co. and Sempra Energy, parent company of both the Southern California Gas Co. and San Diego Gas & Electric Co.
Half the gas set to come through Costa Azul comes from Shell’s natural gas fields off the shore of northern Australia. The other half is supposed to come via a Sempra contract with a gas operation in Tangguh, Indonesia that’s partially owned by the British oil company BP and by the Japanese government’s oil and minerals service.
This all sounded fine to the state Public Utilities Commission back in 2004, when it authorized SoCal Gas and SDG&E to give up one-fourth of their reserved space on the El Paso Co. and Transwestern pipelines that have long brought gas to California from Texas, Oklahoma and the Rocky Mountain area. The idea then was that some domestic supplies would be replaced by LNG, which would arrive at prices guaranteed to be competitive with whatever might be the current price of domestic gas.
Oops. The Sempra contract with Tangguh gives that outfit 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,” says Sempra spokesman Art Larson.
And even before Costa Azul could begin pumping gas into any part of California, that happened. Tangguh will send half the gas that previously was earmarked for Sempra’s facility at Costa Azul for the years 2010-2012 to South Korea, which will pay about $4 per million British thermal units more for it than the Indonesians and their partners could get from Sempra. Sempra, of course, will still make the same profit as if the gas had come here, under that “pay our costs” provision.
“We’ll still get our profit,” says Larson. “This won’t affect our stockholders.” Sempra, then, will be paid for not importing LNG. A fine deal if you can get it.
Meanwhile, the domestic supplies coming to California via the El Paso and Transwestern pipelines have fortunately not yet been cut off. Nor should they ever be. If this new wrinkle isn’t sufficient cause for the state PUC to reconsider its ill-advised 2004 decision, reached on a 3-2 vote of the five commissioners, it’s hard to see what might be.
For the unreliability of a major foreign source of LNG has now moved out of the realm of “maybe” and into plain reality. If California really needed this gas, it would simply not be there for heating, cooking, generating power or any other purpose.
Tell this to the voters, and how do you suppose they might now respond to a poll question on whether LNG facilities should be sited along the California coast?
LNG critics have long questioned both the economic feasibility and the environmental safety of LNG, but now the factor of unreliability can be added.
That ought to be enough to kill the prospects of the three LNG proposals still active here. But don’t bet on this happening soon. For as long as there’s the prospect of money to be made – especially easy money like Sempra will now reap – these proposals are not likely to go away.