Simitian LNG bill dies in Assembly

Liquefied natural gas (LNG) has been billed as a clean source of energy. But
the regulatory environment around the technology involves a decidedly messy
tangle of state and federal agencies.

Sen. Joe Simitian, D-Palo Alto, tried to clean up this situation with SB
426, but for the second-straight year saw the bill go down at the end of
session. The bill would have created a ranking process for different LNG
projects, based on factors such as environmental impact and safety, but it
died in the Assembly Utilities and Commerce Committee last Thursday night.

The bill was defeated largely by industry testimony at the hearing, and over
the strong support by several environmental groups. This came one year after
the bill passed out of the Assembly but was not physically delivered to the
Senate in time.

“It was clear that the additional year gave the opposition an additional
opportunity,” Simitian said.

Simitian’s bill was an attempt to centralize the current regulatory
patchwork. For one thing, the four currently proposed LNG facilities in
California are a mixture of onshore and offshore facilities. According to
the Deepwater Port Act of 1974, “manmade structures” in U.S. territorial
waters are governed by the federal secretary of transportation and
administered by the U.S. Coast Guard.

But California does have the right to govern these facilities, at least in a
piecemeal fashion. For instance, even offshore facilities will pipe their
gas onshore via large undersea pipes. This makes them subject to the
California Coastal Commission and requires that they file California
Environmental Quality Act (CEQA) report.

The problem with SB 426 is that it sought to apply a new process to all four
projects, even though they were in far different phases, according to Mark
Timmerman, a lobbyist representing Sound Energy Solutions (SES). SES is
subsidiary of the Japanese corporation Mitsubishi, which is seeking to build
an onshore LNG facility in the Long Beach Harbor in cooperation with Conoco
Phillips, an oil company. They already have invested over three years and
$40 million into getting the necessary permits, he said. SB 426, Timmerman
said, would impose a “subjective standard” on the process.

“Does the state believe that business will invest tens of millions of
dollars in California’s permit process when the state can tell a project
that even though you have met all of the regulations and laws of the state,
we like another project better, especially when you don’t know what the
standards are before you invest?” Timmerman said.

Timmerman added that these problems might have been addressed with the
proper negotiations and amendments, but that two years in a row Simitian did
not go to committee in time for a proper discussion of the bill.

Patrick Cassidy, spokesman for the Australian natural gas company BHP
Billiton, told a similar story. The company filed for permits three years
ago for its proposed offshore Cabrillo Deepwater Port, and has sought
approvals from bodies including the US Environmental Protection Agency, the
Department of Homeland Security, and the state lands commission.

“It’s a very long process,” Cassidy said. “There’s a lot of scrutiny.”

Most other proposed facilities on the West Coast–a list including four each
in Oregon and Mexico, as well as two in British Columbia–are onshore sites.
According to California Energy Commission (CEC) spokeswoman Suzanne
Garfield, their 2003 Integrated Energy Policy Report called for at least one
to two LNG facilities on the West Coast. The eventual need could be higher,
she said, as demand pulls domestic natural gas supplies eastward.

Garfield added that the agency would like to one day see a “one stop
shopping” permitting process going through the CEC, like exists for new
power plants. She declined to say whether the Commission considered SB 426 a
step towards such a process.

The other two projects currently pending in California are all offshore
terminals to be located about 20 miles off the Southern California coast.
This is a practical matter, according to June Cutler, a spokeswoman for
Woodside Natural Gas. The Australian company filed its initial applications
with the federal government and the city of Los Angeles on August 18.

“There just aren’t many locations that are situated appropriately for an LNG
terminal,” Cutler said.

This largely has to do with safety and environmental concerns. California’s
deepwater ports–the ones big enough to accommodate the immense tanker ships
used to transport LNG–are situated in urban areas of millions of people. By
definition, natural gas is a volatile substance and goes through a
particularly dangerous state when it is heated from its transport state and
put into pipeline, according to Susan Jordan.

Jordan is the director of the California Coastal Protection Network, one of
the principle environmental groups fighting particular LNG projects. She
spoke in favor of SB 426 at Thursday’s hearing, largely because she believes
the CEC and other agencies are not giving the proper scrutiny to LNG
projects.

“Their stance is ‘we need natural gas and we don’t care where it comes
from,'” Jordan said.

Even with offshore plants, she said, there are potentially serious problems.

For instance, the process of heating the gas to pipeline temperatures would
create serious emissions that would drift over the Los Angeles area. Other
environmental groups have pointed to the millions of gallons of chlorinated
water, used in the heating process, that each day would be discharged into
sensitive fishing areas near offshore facilities

Energy companies are trying to push projects through before the regulations
have caught up. She pointed to the money they have spent on lobbying, such
as the $1.8 million spent on lobbying in California in 2005 by another
Australian gas firm, BHP Billiton–good enough to make them our state’s
seventh-most-prolific lobbyist. BHP has also retained lobbyist George David
Keiffer, an attorney with close ties to Schwarzenegger.

Once these facilities are approved, Jordan said, they will operate at least
40 years, and far longer.

“This is the energy companies’ next big project,” she said. “They are
running out of oil.”