Schwarzenegger rejects LNG plan

With BHP’s LNG terminal shot down, Sempra’s Mexican project remains frontrunner to supply California with imported natural gas

The Associated Press

California Gov. Arnold Schwarzenegger rejected an application May 18 by Australian energy company BHP Billiton to build an $800 million floating liquefied natural gas terminal off the Southern California coast.

BHP Billiton’s proposal previously was rejected by the State Lands Commission and the California Coastal Commission. The company needed permission from both bodies and the governor to build the terminal.

Schwarzenegger said he was open to the idea of building a terminal off the coast as a means of diversifying the state’s fuel supply. But he said the current proposal did not pass muster.

“Liquefied natural gas can and must be an important addition to California’s energy portfolio,” the governor said in a statement. “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.”

The terminal was to be built about 14 miles off Malibu and 20 miles off Oxnard. Residents, including a number of celebrities, said it would be an eyesore and would pollute the air.

The plan involved bringing chilled gas overseas to be heated and then piped ashore. From there, Southern California Gas Co. would deliver it to consumers.

BHP spokesman Patrick Cassidy said the company was disappointed with Schwarzenegger’s decision.

“For now, we’re considering the comments made about Cabrillo Port to determine what our next steps will be,” he said.

Other projects along the West Coast are still in the pipeline.

Crystal Energy has a proposal in the works for an offshore terminal similar to the BHP Billiton project, but it would use ambient air for its heat exchangers, rather than burning some of the LNG to regasify the rest, as in BHP Billiton’s proposal. Emissions from that process were a major argument used by opponents.

Also in the works is a Woodside Energy plan to use regasification ships that wouldn’t be a permanent feature on the seascape, another argument used against Cabrillo Point.

In addition, there’s a new offshore project proposed off Long Beach by Texas-based Esperanza Energy, which would place two floating terminal offshore about 15 miles south of Long Beach and 10 miles off Huntington Beach, near existing oil platforms. The Long Beach City Council was noncommittal but receptive to that proposal in a meeting earlier this month.

A plan by a ConocoPhillips-Mitsubishi joint venture for an LNG terminal at the Long Beach port was rejected in January by the port’s harbor commission after the venture failed to reach an agreement with city officials on the project. That issue is now in court.

Terminal proposals in Oregon are still in the works, including one at Coos Bay, about halfway down the coast that could provide gas to the California market.

Meanwhile, Sempra Energy is well along on construction of its terminal just across the border in Mexico, and may add more capacity. That terminal would serve the West Coast market as well as Mexico. l

—Allen Baker contributed to this article for Petroleum News