The latest proposal for an offshore liquefied natural gas (LNG) receiving terminal along the Southern California coast is a classic case of the late-bloomers thinking they can leapfrog four competitors well ahead of them by saving time and money avoiding mistakes made by the front-runners in recent years. Whether the late bet pays off should become clearer by the end of this year.

By that juncture, at least one of the long-time proponents should have a yes-or-no answer from permitting authorities, and Esperanza Energy LLC should have its application filed with the U.S. Coast Guard, U.S. Maritime Administration (MARAD) and the California State Lands Commission for a floating terminal 10 miles off the coast of Huntington Beach, CA.

"We have talked to all of the actionable state and federal agencies, gained their input and gave it to our project development team," said Dave Maul, a former natural gas manager for the California Energy Commission (CEC) who is an independent consultant now working for Esperanza, which is a unit of San Antonio-based Tidelands Oil & Gas Corp.

"We have come up with a design and a site that we think reflect all of the concerns expressed by the regulatory agencies," Maul said in an interview with NGI Monday. "Our project is designed from the very get-go to avoid all of the major environmental issues plaguing other projects."

Although Maul said the proponents will not divulge the estimated cost of the project until the formal filing late this year, Esperanza is the first LNG developer to link its proposed terminal to an onshore, natural gas-fired baseload electric generation plant (see Daily GPI, March 9). As an open-access, merchant facility, Esperanza envisions a total capacity of 1.2 Bcf/d.

There are several coastal power plants located in the Long Beach-Huntington Beach area. They can be interconnected to the LNG facility with a horizontally drilled tunnel buried 100 feet under the beach that would provide a conduit for water, communications and electrical lines to serve the offshore terminal. It would also provide an artery in which to run an undersea natural gas pipeline for bringing the LNG in gaseous form to shore and Southern California Gas Co.'s transmission pipeline system.

"Right now the project is being designed and advertised as a 'tolling facility,' meaning it is infrastructure owned and operated by Esperanza much like a major pipeline owner/operator, so we will be working down the road with commercial interests [marketers, shippers, suppliers]," Maul said. "That is consistent with the state of California's view that they would prefer to have an open access project, or a certain percentage of the capacity reserved for open access."

Would Esperanza start construction of the project without some substantial amounts of gas contracted for? "I think it is safe to assume we would not proceed without contracts," Maul said. He added that Esperanza considered the timing of making public its proposal in the aftermath of BHP Billiton's Cabrillo Port proposal up the coast offshore Oxnard having a final environmental review and facing federal and state decisions by mid-year, and an onshore proposal for nearby Long Beach harbor having its environmental permitting process halted last January by local authorities.

"Looking at the field [of competing proposals] before us, we have learned a lot of lessons and incorporated that information, and we have looked at the objections of the regulatory agencies, local communities and environmental organizations," said Maul, who noted that Esperanza has strategically chosen a project design and technology that he believes will get the company through the regulatory process faster.

Esperanza thinks it can finish Coast Guard/MARAD and state lands processing in 18 months, or by mid-2009, and build a terminal to come on line in mid-2011 or early 2012. The company has had little local community contact, however, except for briefing the mayors of the three closest coastal communities -- Long Beach, Seal Beach and Huntington Beach.

The company now intends to have more "open, public meetings" with citizens and officials in the three cities, said Maul, who expects one or more the cities to call their own public meetings, at which Esperanza would be able to describe its plans and answer questions.

When the company was formed almost a year ago, Esperanza officials said its goal was to create a LNG import facility that "can play an important role in meeting California's growing energy needs," meaning gas priced competitively with the major supplies flowing in from various interstate pipelines. They said the company would only pursue the project "if it can be sited, designed and operated in the safest, most environmentally responsible and economically viable manner possible."

Maul said the most important aspect of upcoming local community meetings will be for the company to get feedback and ideas from local citizens that will help Esperanza head off future problems.

Esperanza proposes what Maul calls two floating "forklifts" on a submersible structure surrounding a buoy that is permanently moored to the ocean bottom. The terminal sits about 100 feet above the water line. "It is a fairly innovative use of existing technology and designed to meet California's needs [for reducing harbor/shipping-related pollution]," Maul said.

There is no storage of LNG; the cargo is offloaded and immediately regasified. That process would employ warm water discharged from an onshore thermal host in the regasification of the super-cooled LNG, eliminating the use of nearby sea water. The water would be warmed to ambient temperatures before being discharged in water surrounding the floating facilities.

In Huntington Beach and Long Beach, there are several merchant- and utility-operated gas-fired coastal electric generation plants, any one of which could serve as a source of warm water and electricity for the LNG project. Esperanza said it was in technical discussions with these plants, which are operated by AES Corp., NRG Energy and the Los Angeles Department of Water and Power.

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