Tom Elias: Backdoor LNG is coming into California

[Hans Laetz, Newsgroup Editor]

There’s been plenty of good news lately for Californians who oppose
setting up import terminals for liquefied natural gas in this state.
But the jury is still out on whether that means California consumers
will be freed from the prospect of becoming dependent on that pricey
form of imported energy.

The good news first: Only one effort to build a California LNG import
facility remains active and it isn’t very active. That would be the
proposed but almost dormant Esperanza receiving terminal, which would
be built 15 miles off the coast of Long Beach.

The list of possibilities dwindled to that one when the State Lands
Commission during the late spring formally terminated a bid to build a
terminal tentatively called “Clearwater Port” on the coast just north
of Ventura.

The termination was automatic because there had been no activity by
Clearwater’s would-be builder, Houston-based NorthernStar Natural Gas.

Shortly after the State Lands Commission action, NorthernStar declared
itself bankrupt.

The demise of Clearwater marked the third LNG proposal to go under in
the last 10 years, joining other failed plans to site facilities near
Eureka and off the coast near the Los Angeles-Ventura county line.

LNG is natural gas supercooled to a liquid and shipped thousands of
miles across oceans in gigantic, multihulled tankers, then reheated
back to a gaseous state and pumped into existing pipeline networks.

The only foreign LNG now able to reach California comes through Sempra
Energy’s Costa Azul receiving plant north of Ensenada, not far south
of the Mexican border.

There’s further good news for California consumers in the forecasts of
both the U.S. Energy Information Agency and several leading private
natural gas consultants indicating there will be no need for LNG
anytime in the foreseeable future.

One reason for that is a fast-increasing effort by U.S. companies to
exploit the gas contained in shale deposits in Wyoming and Colorado.

Consultant Ben Schlesinger, who has worked for Exxon Mobil, BP, Shell
Oil, Tokyo Gas, Nigeria LNG and other industry giants, is one who
predicts the glut of American gas coming on-line in the next several
years will create an oversupply of gas not only here, but also in
Europe, which imports almost all its energy.

This suggests it’s likely that some American LNG facilities will be
converted from receiving gas to sending it overseas — the very thing
that’s about to happen to a just-approved facility at Kitimat, Canada,
on the British Columbia coast north of Vancouver. First designed as an
import plant, Kitimat now will become an exporting facility.

And yet, there’s still some potential bad news out there for
California gas customers worried about the high cost of LNG. It comes
from Oregon, where a plant at Coos Bay is well along in the approval
process.

Oregon’s Public Utilities Commission estimated long ago that three-
fourths of all imports coming to any terminal in that state would end
up in California.

Why should that concern consumers? Because each specially-built LNG
tanker costs more than $1 billion and it takes at least six to keep
any receiving plant supplied. The plants that first turn natural gas
liquid and then turn it back to an invisible gas cost more billions.
Those costs are inevitably included in the price consumers pay for
whatever gas they use that stems from LNG, raising them substantially.

No matter how piously companies like PG&E, Southern California Gas and
San Diego Gas & Electric (SoCal Gas and SDG&E are both fully-owned by
Sempra) deny that LNG will increase rates, the sheer amounts invested
in LNG facilities guarantee it.

Which means millions of Californians have a major interest in a very
local-looking Oregon dispute. For the longer farmers in two Oregon
counties can delay building of a link between Coos Bay and PG&E’s
existing pipeline for Canadian gas near Roseburg, Ore., the greater
will be the predicted American natural gas glut.

And the greater the glut, the lower the price of all natural gas
worldwide. If the price gets too low, there will be little incentive
for building any new LNG plants. That’s what happened in the early
1980s, when both PG&E and Southern California Gas insisted LNG was
critical for California’s energy needs — only to see crashing gas
prices make their plan for an LNG plant at Point Conception in Santa
Barbara County economically infeasible.

As a result, Californians have paid an estimated $40 billion less in
gas bills over the last 30 years than they otherwise would have — and
there have been none of the shortages the big utilities predicted. The
sky did not fall when Point Conception was left in its natural state.

A lawsuit by the Chumash Indian tribe created the delay that killed
that effort. Citizen groups in Oregon are using every delaying tactic
they can devise while trying to duplicate the consumerist triumph of
the Chumash.

Californians need them to succeed — or we will pay untold billions
more in gas bills over many decades to come.