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Anti-LNG Environmental Group Coalition Challenges CPUC in Court

With a mission to fend off the development of liquefied natural gas (LNG) terminals in California, a coalition of environmental groups, "Ratepayers for Affordable Clean Energy (RACE)," challenged a nearly year-old natural gas procurement decision by state regulators in a California appeals court last Wednesday. RACE is asking that the court overturn the California Public Utilities Commission's (CPUC) decision last year authorizing the state's major utilities to sign long-term LNG supply contracts.

The self-described umbrella organization for a dozen environmental groups argued that the CPUC based its decision on what RACE called the "false presumption that domestic natural gas supplies are declining, California's demand is increasing, and LNG will fill the supply gap and lower prices." RACE is actively opposing any LNG development, alleging it is "inefficient, unsafe and unnecessary," while promoting various renewable sources and energy efficiency programs.

RACE said it asked the CPUC to hold hearings to look at U.S. government projections on future natural gas demand that supposedly indicated that it "will not increase significantly during the next 10 years." It also wants hearings because utilities are affiliated with LNG suppliers.

The CPUC made its decision Sept. 2, 2004 without holding any hearings on the future gas demand estimates, RACE argued. At the time of its action, CPUC regulators characterized their decision as a means of ensuring more reliable, long-term gas supplies for the state by as much as an added 500 MMcf/d. The specific decision attempted to streamline the utilities' supply contract approval process, and in addition, designated LNG receipt points, which it said was a "key step in locking in contracts now for natural gas that will come online in the next few years."

"By establishing the receipt points now, the commission sent the signal the LNG suppliers will be able to deliver their gas to California," a CPUC announcement on the decision said. The CPUC action also "ordered the utilities to interconnect with LNG facilities when they are built."

The regulators noted at the time that LNG was not expected to come online until the 2006-07 time frame (and that was subsequently pushed back to 2007-08), but it recognized that the supplies were already being negotiated.

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