California has become an afterthought in the now low-key debate about a liquefied natural gas (LNG) receiving terminal on the West Coast of the United States. Twice over the past 40 years of global LNG trade, California has been a focal point for U.S. western imports, and twice high expectations have crashed amid harsh local and state permitting requirements.

Eighteen months ago there were four active LNG proposals -- three offshore -- targeted along the Southern California coast. Currently there are no active projects, although two of the four are technically still alive, albeit barely. That leaves the U.S. western LNG playing field to three proposed projects -- all onshore -- in Oregon.

In the Pacific Northwest, which is slated to have an influx of added supplies from the Rockies via at least one new interstate natural gas pipeline, critics argue there is not enough demand to support an Oregon LNG terminal, so much of the gas coming through a facility there would have to be sent south to the California market. Some LNG backers disagree with this assessment.

If there is to be a California LNG receiving terminal, would that end Oregon's LNG prospects? Likewise, would an Oregon LNG facility terminate California's prospects? Two California LNG projects are still viable, according to the California Energy Commission (CEC). Whether they move passed the "proposed" stage, however, remains a question.

In the first half of 2008, San Diego-based Sempra Energy began pre-commercial operations at its Energia Costa Azul LNG terminal in North Baja California, Mexico. Meanwhile, some large financial interests were still in various stages of trying to get competing projects under way -- Australian-based Woodside Natural Gas and its Ocean Way offshore project; NorthernStar's Clearwater Port; Tidelands Oil & Gas Corp.'s Esperanza offshore LNG project; and Mitsubishi Corp's Sound Energy Solutions (SES) terminal proposed for Long Beach harbor.

(A fifth terminal project offshore California proposed by Australian giant BHP Billiton was scrapped after the California State Lands Commission voted 2-1 to reject it.)

Even before NorthernStar suspended its permitting process with the U.S. Coast Guard, it was struggling to complete the Coast Guard's requirement for a global lifecycle assessment of the greenhouse gas (GHG) impact of the proposed ship-to-ship transfer and regasification processes. The requirement was the first GHG assessment of this scope in the LNG siting process, looking at the projects' carbon footprint all the way from the extraction of the gas through the shipping to Southern California and the offloading and undersea pipelines to the burnertip onshore.

One former California state energy official called the Clearwater project "dead on arrival." The second project that could be resuscitated is the newest one, Esperanza, which has not filed with the Coast Guard, and won't until it can line up financing, according to David Maul, a former CEC gas expert who now works as a consultant with Esperanza and a number of other energy projects in the West.

Announced two years ago and incorporated by its parent company, San Antonio-based Tidelands Oil & Gas, Esperanza has yet to file its formal applications to the Coast Guard and California State Lands Commission.

Maul said the Coast Guard's global climate change questions have proven "overwhelming," numbering more than 120 in volume. He characterized the Clearwater project as not responding to any of the questions and asking the Coast Guard to have its project put on hold.

Maul characterized the Oregon projects as problematic and totally dependent on the California market, but at least one of the projects, NorthernStar's Bradwood Landing along the Columbia River, has continually argued that its supplies will be used in the Northwest. Another project, Jordan Cove, to be located along the Pacific Coast, is tied to a new gas pipeline proposal that would bring a lot of supplies south into California.

"The Oregon projects have one serious flaw and that is the lack of demand for the gas there, although there is some demand in the Portland area," Maul said. "All of the LNG projects would import more than Portland can absorb. They are viewed as California supply projects -- not Oregon supply projects."

Nevertheless, a Portland-based spokesperson for Bradwood cited an "independent" study conducted for NorthernStar that indicated "less than 1%" of the LNG imported would flow out of the Pacific Northwest to Nevada and Northern California. "Oregon consumers would receive on average 73% of all LNG delivered to consumers from the Bradwood facility," the spokesperson said. "Washington state would receive 26% of all LNG delivered."

Maul acknowledged that Bradwood is far along in its permitting, although it has unresolved issues between the states of Washington and Oregon as well as on a local level in Oregon. He said it is "too close to call" regarding whether the NorthernStar project, or one of the other two projects, eventually makes it.

"If any of the California projects were to go forward, such as Esperanza, for example, it would take out the entire Southern California market and hurt the need for an Oregon terminal," said Maul, adding this is especially true now that it looks like El Paso Corp's Ruby Pipeline, which would carry Rockies gas to West Coast markets, will be built. The Northwest LNG proposals have a lot of competition, he said.

Meanwhile, backers of the proposed Jordan Cove LNG project are confident they will have all the necessary federal, state and local approvals by late 2010 to begin construction of their terminal and connecting interstate gas pipeline. If Federal Energy Regulatory Commission (FERC) approval comes by the end of this month, Project Manager Bob Braddock said Jordan Cove could have something to report regarding future LNG supply deals before the end of this year.

"It was just a matter of time, so we thought we wanted to remind the Federal Energy Regulatory Commission that we're ready, and we can get on the Sept. 18 commission meeting docket," said Braddock, who runs the Oregon operations for the limited partnership of an affiliate of Alberta-based Fort Chicago Energy Partners LP and Energy Projects Development LLC. The facility would be built at the international port of Coos Bay, OR.

Braddock told NGI last Thursday that he expects a favorable, albeit conditioned, FERC decision on the terminal and related Pacific Connector Gas Pipeline LP (PCGP) projects, which are tied together. Draft and final environmental reviews of the project outlined more than 100 conditions.

"There may be a few more added, but we know what they are," Braddock said. The FERC staff usually establishes them in the form of recommendations to the commissioners, he said.

Jordan Cove continues with the same financial plans, timetable and approach toward lining up a LNG supply source.

Within 60 days of federal approval "we should be in a position to start to make announcements regarding substantive discussions, if not firm commitments, on LNG supplies," said Braddock.

"We have a pretty good feel for when supply sources are looking to have a facility in service," Braddock said. "We have a permit request for the terminal and pipeline working its way through the U.S. Army Corps of Engineers, and that will take through next June to complete. That should be the last federal action, and by then we expect all the state and local actions would be locked up as well."

Ultimately, the market will decide when and if there is one or multiple LNG terminals along the West Coast, Braddock said. Qualifying it as his own personal opinion, Braddock said he only sees room for one project going ahead, and he said he is confident Jordan Cove will be the one to serve markets in both the Northwest and California.

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