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.
So, if there were ever to be a California LNG receiving terminal, would that preclude a facility being built in Oregon? Would an Oregon terminal be the final nail in the coffin now being outfitted for California LNG proposals? Opinions vary, and the California Energy Commission (CEC) as of the first of this year listed two possible California projects.
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 (see Daily GPI, Feb 27, 2008). 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 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. Also called for in the final report were analyses comparing lifecycles for similar amounts of energy from other sources domestically.
One former California state energy official called the Clearwater project “dead on arrival,” with no way to move the project forward at this stage. 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 California Energy Commission 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, TX-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, along the Pacific Coast, is tied to a new gas pipeline proposal that would bring a lot of supplies south into California (see Daily GPI, Sept. 9).
“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 the El Paso Natural Gas Ruby Pipeline from the Rockies to Oregon is going to get built. The Northwest LNG proposals have a lot of competition, he said.
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