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Global Warming Regulation Is Suddenly Hot

California's business community is accustomed to having its plans second-guessed by regulators seeking to determine whether a project or activity will harm birds, bugs, fish and plants. But a recent decision by the Coastal Commission appears to signal a dramatic shift in the state's regulatory environment, adding a global dimension to the list of potential impacts to be assessed.

By law, the jurisdiction of the California Coastal Commission is restricted to the state's coastal zone, which extends three miles out to sea and generally about 1,000 yards inland. Within that zone, any activity with the potential to affect the coastal environment falls under the commission's authority, as countless would-be developers of seaside property have discovered to their frustration over the past three decades.

But federal law also grants the commission authority to review projects outside state waters, prohibiting federal agencies from permitting projects that affect California's coastal environment unless the commission finds them "consistent" with the Coastal Act's protections. It is this provision that let the Coastal Commission weigh in on Australian mining giant BHP Billiton's controversial proposal to install a liquefied natural gas import terminal in federal waters 14 miles off the Ventura County shore.

In reaching their decision in April to reject the project, commissioners and their staff embraced a significant expansion of the panel's sphere of concern.

"We feel we have the responsibility to make this recommendation to you, not only for consistency with the Coastal Act, but for the planet," is how Executive Director Peter Douglas put it during his presentation of the staff report recommending rejection of the BHP project.

Most of the planet is, of course, outside the commission's geographic purview. But Douglas' comments and the commission's unanimous vote were based in part on a novel addition to the process of environmental review in California: evaluation of a project's potential effect on global climate.

"The proposed project, including its associated supply chain and end users, would result in emissions of several million tons annually of greenhouse gases, primarily carbon dioxide," the staff report says. "The contribution of these emissions to global warming would result in numerous adverse effects to coastal resources due to sea level rise, ocean warming, and ocean acidification, which lead to secondary effects such as loss of habitat and species, increased coastal erosion, adverse economic effects to California's ports and fisheries, and other serious impacts to the California coast," the staff report says.

The decision marked the first time that global warming and greenhouse gas emissions played a lead role in the environmental review process in California, and it may signal a seismic shift in the rules of the game for project applicants up and down the state. It also does not bode well for future proposals to import natural gas into California, nor for generating plants and other energy projects that involve hydrocarbon fuels.

The Coastal Commission's rejection was one of several knockout blows dealt over the past two months to BHP's Cabrillo Port project, a floating platform where gas supercooled into liquid form would have been pumped from tankers, stored in tanks and then warmed to covert it back to gaseous form for delivery. Three days earlier, the State Lands Commission had voted 2-1 to deny BHP a lease needed to lay pipeline on the sea floor to connect the floating terminal to the onshore gas transmission and distribution system operated by Southern California Gas Company.

Although the State Lands Commission did not perform as thorough an examination of the project's carbon footprint as the Coastal Commission did, the subject was clearly on at least one commissioner's mind.

"In the future, I believe every environmental impact statement with LNG or any energy source has to and must deal with total greenhouse gas emissions, and I believe that current state law requires it," Commissioner (and Lt. Gov.) John Garamendi told a local reporter.

The law Garamendi referred to was authored by former Assemblywoman Fran Pavley. It requires the California Air Resources Board to develop regulations and market mechanisms to reduce California's greenhouse gas emissions by 25% by 2020. Signed into law last year, the bill is one of several initiatives undertaken in California to address climate change since BHP submitted its Cabrillo Port application in 2003,

The Coastal Commission staff report estimates that port operations would emit 346,000 metric tons of greenhouse gases per year. Greenhouse gas emissions from the LNG carrier fleet serving the facility could total nearly 2.4 million metric tons a year, the report says.

Neither of the April commission votes was necessarily fatal to the BHP project, one of several proposed in waters off Southern California. The company could have appealed the Coastal Commission's decision to the secretary of commerce, and it could have challenged the State Lands Commission denial in court.

But under federal law, an LNG project in federal waters cannot be approved without the consent of the governor of the adjacent state. And on May 18, Gov. Arnold Schwarzenegger informed the Maritime Administration which has permitting authority over deepwater ports that he was denying BHP's project.

"Liquefied natural gas can and must be an important addition to California's energy portfolio," Schwarzenegger wrote. "However, 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 Cabrillo Port LNG project, as designed, fails to meet that test."

Schwarzenegger's letter to the Maritime Administration carefully sidesteps the entire issue of greenhouse gas emissions, which is curious given the role he has adopted as a leader in the campaign to battle global warming. Among other actions, he has appointed a global warming task force, negotiated an agreement among six western states to establish a carbon registry, signed an executive order directing the state to develop a low-carbon fuel standard, and criticized the Bush Administration for inaction on climate change.

But the carbon-free future is a long way off. And as Schwarzenegger notes in his letter to the Maritime Administration, California remains dependent on natural gas to generate more than 40% of its electricity. And because it imports 87% of the gas it uses, the state is vulnerable to price spikes and energy shortages. California, Schwarzenegger writes, "needs LNG" to diversify its energy supply.

If so, then the state appears headed for a showdown between its energy policy and its greenhouse gas policy.

Resources:
Coastal Commission staff report on BHP project: http://documents.coastal.ca.gov/reports/2007/4/Th7a-4-2007.pdf
California Climate Change Portal: http://www.climatechange.ca.gov/index.html
BHP Billiton's Cabrillo Port project: http://lngsolutions.bhpbilliton.com/default.asp
Cabrillo Port environmental review: http://www.cabrilloport.ene.com/