After heavy lobbying by the energy industry, the federal government has inserted itself into California’s intensifying debate over proposals to build import terminals for liquefied natural gas (LNG) along the coast. Although it adds a new dimension of contention to the debate, the move by Congress to shift authority over terminal siting to the Federal Energy Regulatory Commission (FERC) will do little to quell what is shaping up to be one of the hottest environmental controversies to face the state in a generation. Nor will the federal government’s new role affect the projects furthest ahead in the permitting process.
Liquefied natural gas is conventional natural gas that has been chilled to about 260 degrees below zero. At that temperature, the gas becomes a liquid and occupies only 1/600th of its original volume, making it feasible to transport it by ship in giant insulated tanks. The United States has four LNG import terminals — one each in Massachusetts, Maryland, Georgia and Louisiana —where the ships dock and unload their liquid cargo, which is then warmed to turn it back into a gas and either stored in tanks onshore or piped directly into the local gas utility’s transmission system.
There are no import terminals serving the West Coast. But if energy companies get their way, there soon will be.
Frustrated by the slow pace of regulatory approval — a process that typically involves numerous permits and reviews by local, state and federal agencies — the energy industry has been lobbying heavily over the past four years to streamline LNG terminal siting. The industry got most of what it wanted in the federal energy bill, which grants FERC “exclusive authority to approve or deny an application for the siting, construction, expansion or operation of an LNG terminal,” which the bill defines as “all natural gas facilities located onshore or in state waters” that are used to import or export gas.
Paradoxically, the bill does not affect the two terminal proposals off the Ventura County coast that are leading candidates to be California’s first LNG terminal. They would be in federal waters and are therefore governed by another federal law, the Deepwater Port Act, which explicitly grants the governor of a neighboring state the power to veto LNG terminals in waters beyond the state’s 3-mile limit.
Opponents of LNG development have been harshly critical of the effort to bypass state and local authority, which remained in the energy bill despite coastal lawmakers’ efforts to remove it.
“Cutting the states out of any real role in LNG siting decisions is dangerous and unwarranted,” said Rep. Lois Capps (D-Santa Barbara). “This is a power grab by the administration.”
Still, there is little doubt about market demand. Driven by a growing gap between stagnant domestic gas production and rising demand, energy companies have submitted plans for about 40 LNG import terminals in North America, including nine that could serve the West Coast: three in Oregon, four in Southern California and two in Baja.
Those projects that have prompted the most controversy are one proposed for Long Beach Harbor — a regulatory long shot, given its proximity to a densely populated urban area and one of the busiest container ports in the world — and the two off the coast of Ventura County: Crystal Energy’s Clearwater Port would occupy an old oil platform 10.5 miles from land; BHP Billiton’s Cabrillo Port would be a floating terminal 14 miles offshore. Each port would receive two to three tanker shipments a week and would be capable of handling 800 million cubic feet of LNG per day, a quarter of the state’s residential gas consumption.
To make their case for the terminals, the companies have painted a grim picture of impending crisis. “California now faces a severe energy shortage,” Crystal Energy warns on its website and in a brochure distributed throughout Ventura County in support of its proposal. “As the natural gas shortage drives the price of electricity up, business and jobs are disappearing from California.”
The most vocal project opponents have made similarly hyperbolic claims, warning that accidents or terrorist attacks on tankers or terminals handling flammable LNG could unleash an apocalyptic cascade of tragedy and destruction. “A fiery inferno would engulf everything for 30 miles,” Oxnard attorney Tim Riley warns on his widely visited anti-LNG website.
Neither of the extreme scenarios is accurate, according to independent energy analysts and safety experts.
Domestic natural gas production is not keeping pace with U.S. demand, but the gap so far is a small one. It’s even smaller in California, where gas demand has fallen 20% during the past four years and is not projected to rise significantly for two decades. And according to a recent study by Sandia National Laboratories, the most extreme scenarios described by LNG safety skeptics — vast conflagrations that incinerate everything within a 30-mile radius of a tanker terminal — are highly improbable.
Liquefied natural gas imports currently account for about 2% of the nation’s gas supply, according to the Energy Information Administration (EIA), the statistical arm of the U.S. Department of Energy. In its long-range forecast of supply and demand, the EIA projects that LNG imports are likely to increase to 15% of supply by 2025, driven by the combination of steadily increasing demand and flat or diminishing production from tapped-out domestic gas fields.
“Our traditional supply basins in the United States are not keeping pace with demand,” said Rick Morrow, Southern California Gas Company’s vice president for customer service.
Handling the increased load won’t require 40 new import terminals. According to the National Petroleum Council, an industry panel that advises the U.S. secretary of energy, all that is needed is expansion of the four existing U.S. terminals, plus construction of seven to nine more distributed among the nation’s Atlantic, Pacific and Gulf coasts. The West Coast market cannot absorb more than the capacity of one or two LNG terminals over the next decade, analysts predict.
It is unlikely that any of the Southern California terminal proposals will be first out of the gate. San Diego-based Sempra Energy has received permits and is nearly ready to begin construction of an LNG terminal 14 miles north of Ensenada in Baja. That port will have a capacity of 1 billion cubic feet of gas a day and is expected to begin operation in 2008.
About half that gas will be delivered to Mexico, according to the company. The other half will be available for sale to California customers, including Sempra’s corporate subsidiary, Southern California Gas Co.
Crystal Energy, (805) 830-6312.
BHP Billiton, (805) 604-2785.
Rep. Lois Capps, (202) 225-3601.
California Energy Commission:
Federal Energy Regulatory Commission: