Doubts pile up in the wake of the California State Lands Commission rejection of BHP Billiton's proposed offshore liquefied natural gas (LNG) receiving terminal as being too problematic from both safety and environmental standpoints. Proponents of three other offshore LNG projects along the Southern California coast are worried, but each is a different type of proposal. BHP officials said Tuesday they are assessing their options, one of which is to challenge the state agency's ruling in court.

Earlier this year, sponsors of a fifth California LNG proposal -- an onshore terminal in Long Beach harbor -- filed legal action against both the City of Long Beach and its Harbor Commission to recover excess permitting costs from the city and force the Port of Long Beach to complete a final environmental impact statement and report (EIS/EIR).

A legislative critic of the BHP proposal -- the $550 million, 800 MMcf/d floating receipt terminal 14 miles from a point on shore and 23 miles from its onshore pipeline connection -- called the Cabrillo Port project an unproven technology that would have environmental and safety risks that cannot be mitigated against. State Assembly energy/utilities committee Chairman Lloyd Levine raised fears of explosions and disruptions of the terminal similar to what BHP experienced in the Gulf of Mexico with one of its offshore gas production platforms that was ripped from its mooring and pushed 100 miles from its location by Hurricane Rita.

Industry stakeholders think LNG facilities have been forced by ever-stiffer regulations and building/operations standards to be "more innovative to provide cutting-edge technology" to exceed California's very strict environmental quality standards. While technically it is accurate to raise doubts because there are no current offshore LNG receiving terminals, offshore oil/gas operations have been around a long time. But an uncharted area with LNG offshore is in the transfer of the liquid cargo to whatever regasification facility is used, since both are floating and subject to uneven movements.

There can be potential problems with cryogenic hoses used to transfer LNG from the ship to unstable regasification tanks, but the newest of the four competing projects, by Esperanza Energy, would eliminate the transfer hoses with a different technology. "Esperanza's was designed to avoid the cryogenic hose issue," said a consultant and former California Energy Commission LNG expert, David Maul."The LNG receiving facility attaches itself to the LNG carrier, eliminating any differential motion between the two that could cause the cryogenic hose to fail."

The political attitude toward LNG generally and offshore receipt in particular has the other project sponsors scratching their heads and determining where they might need to shore up their permitting applications, each of which is a massive document for a massive undertaking.

The other review process of the BHP Billiton 3,000-page EIS/EIR will continue to move ahead with a state Coastal Commission hearing Thursday on the Cabrillo Port proposal and eventually a decision by Gov. Arnold Schwarzenegger and the federal Maritime Administration (MARAD) on the overall project, the bulk of which takes place in federal waters.

Schwarzenegger's deputy legal affairs secretary, Louis Mauro, Tuesday issued an interpretation of the federal law that gives any state governor approval/veto powers over the proposed LNG projects. He cited the federal Deepwater Port Act as establishing the federal government to license deepwater ports in federal waters, and BHP Billiton LNG International Inc. is seeking one of those permits. But the governor of the adjacent coastal state ultimately can render a yea or nay if he/she acts within 45 days of the last federal public hearing, which in this case was the April 4 Coast Guard/MARAD hearing in Oxnard.

"The governor's office is conducting a careful and thorough review of the matter and the governor has not made any decision," Mauro said in his written statement at the behest of Schwarzenegger. "Gov. Schwarzenegger's decision is due by May 21.

"The State Lands Commission and California Coastal Commission are responsible for reviewing different and distinct aspects of the proposed project pursuant to different laws. The governor reviews whether a federal license should be issued in federal waters, but the State Lands Commission reviews whether a lease of state lands should be approved for a proposed pipeline over state lands (within three miles of the shoreline). The coastal commission reviews whether the project is consistent with California coastal laws."

Mauro said the governor will continue to review the LNG application of BHP Billiton becassue either or both the lands commission and coastal commission rulings may be challenged in the courts, and therefore, may not be final. If the governor doesn't act within the allotted 45 days, he will be assumed to approve the project, Mauro said.

The California Coastal Commission staff is recommending that the panel similarly reject BHP Billiton's project.

LNG backers early in the draft EIS/EIR process complained that critics were taking worst-case scenarios and consequences to overstate the risks inherent in the Cabrillo Port project. The Washington, DC-based Center for LNG presented testimony early in the process that concluded "improbable worst-case scenarios lead to overestimates of the resulting consequences."

Each of the other projects has differences that presumably will make their environmental reviews different from BHP. A second Australian firm, Woodside Natural Gas Inc., proposes to use special LNG storage and regasification ships that would take the cargo from a trans-oceanic carrier out at sea and bring it to an offshore, underwater docking facility in which regasified LNG would be offloaded as a gas under water connecting to a subsea pipeline that would take the supplies ashore at a point along the coast near Los Angeles International Airport where an existing link to the SoCalGas transmission pipeline system is located.

The other offshore project is NorthernStar Natural Gas's Clearwater Port, an existing idle offshore oil platform that would be converted to a storage/regasification facility and attached to an underwater natural gas pipeline to take the supplies ashore around Oxnard, CA. It would involve the same cryogenic hoses for transferring the supplies from the transport ship to the regasification facility that has caused concerns with BHP's project.

Esperanza, a unit of San Antonio-based Tidelands Oil & Gas Corp., wants to develop two receiving platforms 10 miles off the coast at Huntington Beach, CA. Late in the mix, Esperanza said it hopes to file an application by the end of this year, thinking it can learn from the mistakes of the earlier applicants, according to one official.

Touting the preliminary work of a "best-of-class" industry/environmental team, Esperanza was not specific about potential site locations in a written announcement in March, noting it was concentrating on up to 12 miles offshore of the greater Long Beach area, but the company told the Los Angeles Times the site was offshore Huntington Beach, which is located five miles south of the port city.

The proposal is to link to an onshore gas-fired electric generation plant, of which there are several located in the Long Beach-Huntington Beach area, 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 while also providing an artery in which to run an undersea natural gas pipeline for bringing the LNG in gaseous form to shore.

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