News

Clock begins ticking on offshore LNG project

On the eve of the government’s final review of BHP Billiton’s proposed $800 million liquefied-natural-gas project off the Southern California coast, questions are being raised about the extent of the A-list connections between the Schwarzenegger administration and the LNG industry.

Current and former members of the administration dismiss the possibility that the BHP Billiton project will be decided on anything other than the merits of the case. The governor’s office notes that Schwarzenegger is carefully weighing the pros and cons of the project. But critics, led by local governments and coastal environmentalists, are skeptical.

“There is a tremendous amount of overlap here,” said Susan Jordan of the California Coastal Protection Network. Her Santa Barbara-based group opposes the proposal, which calls for a floating LNG terminal located 13.8 miles off the coast between Malibu and Oxnard. The plant would heat frozen LNG brought in from overseas, turn it into gas, then pump the gas through a pair of submerged pipelines to land.

A number of top officials and advisers–including at least one former state senator–who specialize in energy have migrated to the gas industry.

Last year, Joe Desmond, once the governor’s top energy adviser and chairman of the California Energy Commission, left to join NorthernStar Natural Gas after he was unable to win Senate confirmation. David Maul, a ranking state natural-gas expert who ran the CEC’s Natural Gas and Projects office, left to join Esperanza Energy, which is proposing an LNG facility off Long Beach. Richard Costigan, the governor’s former legislative-affairs secretary and once the state Chamber of Commerce’s chief lobbyist, has gone to Manatt Phelps & Phillips, a well-known national law firm with a client list that includes LNG companies. Also at Manatt Phelps is attorney George Kieffer, former co-chairman of Schwarzenegger’s re-election committee and formerly a personal attorney to Maria Shriver. Kieffer, too, has represented LNG interests. Another Manatt Phelps attorney is former state Sen. Martha Escutia, who Capitol sources say has been pushing hard for the BHP project.

“Everybody’s lobbying everybody,” said one person familiar with the inner workings of the administration who is critical of the project. BHP Billiton spent some $2.7 million on lobbying through 2005-06.

“The fact that they go directly to work for industry is alarming to me. That shows they were courted while they still worked for the administration, so I think that definitely would have influenced their view of any projects and the advice that would have been given to the governor,” said Linda Krop, chief counsel of the Environmental Defense Center.

Schwarzenegger’s former communications director, Rob Stutzman, now works for DC Navigators, a political-consulting firm that launched a $1 million public-relations blitz in 2005 extolling the virtues of LNG. That campaign, developed before Stutzman joined the firm, was financed by business and LNG industry players, including BHP Billiton and Sempra, which is developing an LNG project in Baja California. A principal in DC Navigators is Mike Murphy, once one of Schwarzenegger’s closest political advisers.

Several appear to be playing key roles in the discussions involving BHP Billiton; others are involved in seeking an expansion of LNG generally. But all are watching the looming actions of the State Lands Commission, the Coastal Commission and the U.S. Coast Guard-Maritime Administration.

“The governor has been a supporter of LNG and he has made that very clear since he came into office,” Stutzman said. “But you have the State Lands Commission, whose staff recommended the project. You have the Coastal Commission, whose staff used global-warming gases emitted by tankers to recommend against it. You even have the Coast Guard. Your decision points are all spread out, and these bodies all have different members and different jurisdictions. It’s a lot more complicated and complex than simply lobbying a piece of legislation.”

The latter held a hearing this week, with a decision expected within 90 days, on BHP’s application to navigate the terminal in federal waters. The three-member Lands Commission, which has authority over the project’s pipelines, will convene Monday and issue its recommendation that day. Two days later, the Coastal Commission, with broad authority over environmental impacts, is scheduled to vote.

Barring appeals, Schwarzenegger will make the final decision by May 21. He can reject the project, approve the project, or approve the project with conditions. The governor, while supportive of LNG as an energy source and alternative to coal and oil, has not reached a position on the BHP project. “He has made some comments, but with respect to this particular project, the governor has no official position,” said Schwarzenegger spokesman Bill Maile.

The politics of the issue is likely to be intense at the Lands Commission, comprised of Lt. Gov. John Garamendi, state Controller John Chiang and Schwarzenegger’s Finance Director Mike Genest. Garamendi and Chiang, both Democrats, are expected to attend the meeting in person. Both declined to say whether they supported the project.

Garamendi, a two-time state insurance commissioner, former lawmaker and candidate for governor, is believed to have aspirations for higher office but as lieutenant governor he captures limited public attention. The high-profile BHP project gives him significant exposure.

For Chiang, a newcomer to statewide office, the issue presents a major policy test. He said that advocacy over the issue has intensified during the past two weeks, but was not particularly impressed at the lobbying campaigns surrounding the project, or at the fact that people with high-level Capitol credentials are involved in the efforts.

“My greatest concern is for the public to be served. To the extent that their [former Schwarzenegger officials or advisers] participation doesn’t interfere with full disclosure of the ramifications of the project, then I’m OK,” he said. “The areas I’m concerned about are environmental impacts, alternatives, the energy situation here in California and whether this is the best method by which to bring natural gas into the state.”

Stutzman, among others, noted that high-level advocacy is not unusual in huge, high-profile projects in which economic and environmental interests clash.
“You certainly want people involved in this who can be very strategic, who can communicate the imperative need for these types of projects,” he said.

Contact John Howard at john.howard@capitolweekly.net


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