In a room filled with citizens and elected representatives all opposing the project, the California Coastal Commission Thursday listened all day to its staff and the public before unanimously rejecting plans for an offshore liquefied natural gas (LNG) receiving terminal by Australian mining giant BHP Billiton. Company representatives were in attendance but declined several invitations from the coastal commission to speak.

Although BHP contends the coastal panel has exceeded its jurisdiction in this case, the action was the second major rejection this week in its permitting process, which on the federal level is still scheduled to go to California Gov. Arnold Schwarzenegger next month and the federal Maritime Administration (MARAD) by early July.

Now that both the California Lands Commission and the coastal unit have rejected the final environmental impact statement and report (EIS/EIR), speculation is circulating that the proponents for the $550 million, 800 MMcf/d LNG project will challenge the decision in the courts.

Technically, the state coastal panel, which was established 35 years ago to oversee development of California’s 1,000-mile coastline, only acted on the narrow issue of whether the BHP project was consistent with federal and state coastal regulations. However, the panel’s executive director, Peter Douglas, indicated he thought the company should have filed for a coastal permit because, in the eyes of the regulators, the offshore terminal 14 miles from its nearest point along the coast is “coastal dependent” under the state law’s definition.

BHP does not think the coastal commission has this authority over its project, which has been overseen by the U.S. Coast Guard/MARAD and the state lands commission, the two of which jointly developed the environmental review to the consternation of the coastal commission staff and commissioners, both of which were highly critical of the document in their comments during the day-long hearing Thursday in Santa Barbara.

Besides numerous safety and environmental concerns, including what LNG operations and ship traffic would do to the whales and dolphins that regularly swim along a 50-mile-wide swath of the state’s coast, many public witnesses and some of the commissioners and staff disputed the state’s need for LNG imports, particularly with Sempra Energy’s new West Coast LNG terminal in North Baja California, Mexico, 60 miles south of San Diego, set to open next year.

The volume of opposition and the depth of the concerns raised leave the other three proposed offshore LNG proponents wondering how they could possibly convince local officials and citizens that LNG can be imported safely and without doing irreparable environmental harm.

Even in recommending that the BHP plant be built, the final EIS/EIR lists 20 environmental and safety concerns that cannot be fully mitigated. This left enough of an opening for citizens and elected officials to conclude the risks outweighed the benefits of siting a terminal along a coastline where residents have a history of balking at additional energy development.

“The staff report draws the nexus between greenhouse gases (GHG), atmospheric deposition into oceans, climate change and adverse impacts on coastal resources,” Douglas told the commissioners. “That nexus between the impacts of this project and coastal resources, applying the [state coastal law] policies is the basis for our recommendations relative to the GHG impacts.”

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 its environmental review different from BHP’s. 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 underwater through a connection 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 federal review process of the BHP 3,000-page EIS/EIR will continue to move ahead on the Cabrillo Port proposal and eventually lead to a decision by Gov. Schwarzenegger and MARAD on the overall project, the bulk of which takes place in federal waters. Under the MARAD Deepwater Port Act, if Schwarzenegger does not act, his inaction is construed as approval.

Schwarzenegger deputy legal affairs secretary Louis Mauro Tuesday issued an interpretation of the federal law that gives any state governor approval/veto powers over proposed LNG projects. He cited the Deepwater Port Act as establishing the federal government’s ability 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. Schwarzenegger’s decision is due by May 21.

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