If coal-fired generation is out and intermittent renewable-based electricity is in the future power mix, more natural gas, including imports of liquefied natural gas (LNG), will be needed after 2010 in California and more widely in other western states, according to the U.S. president of Australian-based Woodside Natural Gas, whose parent is a major LNG developer and operator on Australia’s Northwest Shelf.

As a former executive director of both the California Energy Commission (CEC) and California Public Utilities Commission (CPUC), Steve Larson helped identify the need for LNG in the midst of the state’s energy crisis, and now he is convinced it is part of the solution to the state’s and the West’s long-term energy needs.

Nevertheless, local community activists and regional/national environmental organizations remain adamantly opposed to any LNG development along the California coast. Larson is not discouraged yet, however.

Larson thinks Woodside has the right combination of competitively priced long-term LNG supplies and a proposed terminal-lite approach to getting the imports into the Southern California Gas Co. transmission pipeline system. In addition, Woodside’s proposed OceanWay project will not have to go through the California Lands Commission, whose chairperson — the lieutenant governor — is already on record as thinking the state can satisfy its LNG import needs through Sempra Energy’s Costa Azul terminal that opens next year along the Pacific Coast of North Baja California, Mexico, about 60 miles from the California-Mexico border.

Larson brought a broad perspective into his initial role when he headed the CEC staff and served on the state’s natural gas committee. In the midst of the 2000-2001 crisis, he readily saw the need for more gas-on-gas competition in the state.

“Back then, it was possible to see that it was pretty easy to manipulate the gas market in California,” Larson told NGI during a wide-ranging interview in his Santa Monica, CA, office last Wednesday. “That was very obvious to the committee, so we were quite interested in storage and in LNG. In my experience, it became clear to me that gas was going to become less available to California because there were better prices for marketers and shippers who could get it to other places.”

As the result, state policy makers began to rethink the question of whether LNG needed to be added to the mix. Larson was involved in listening to early LNG proposals that suddenly developed when he held positions at the governor’s office, CEC and ultimately the CPUC. His experience convinced him he should take on the CEO’s role for Woodside’s California operations.

Fast forward to last Thursday and another coastal press conference was held by environmental groups opposed to a proposal for an offshore LNG receiving terminal — NorthernStar Natural Gas Co.’s Clearwater Port. Woodside’s competing proposal, OceanWay, faces the same opposition, although its backers think they have listened and learned from the environmental community.

Although it was tabled in the state legislature as it adjourned last Wednesday, a proposal for the state to do a thorough assessment of proposed LNG projects (SB 412) was supported by both Woodside and NorthernStar. The proposed law would have made the CEC the key reviewer of the LNG plans. Labor unions connected to the potential building of the LNG facilities reportedly killed the bill.

“We worked very aggressively at trying to come up with language that would work, and I think we came quite close,” said Woodside’s Larson.

An organization called the “No LNG Community Alliance of Ventura County” turned out at the Ventura Harbor 60 miles northwest of Los Angeles to raise questions about how NorthernStar’s proposed conversion of an idle oil platform 20 miles offshore would impact everything from air quality to global warming. The group planned to meet at the dock where Clearwater Port advocates were hosting a whale watch cruise.

If the state is willing to pay any price, California can get LNG imported, but to make it as economic as possible requires a lot more work, said Larson, noting that Sempra’s Costa Azul supplies will help somewhat electric generation needs in Southern California, but the bulk of the gas will be used for power generation in Mexico or go north to the Arizona-California border interconnection at Erhenberg, AZ.

So in terms of growth in the region, something else [beside the North Baja terminal] is needed,” Larson said. “And our project is right offshore Los Angeles.” Larson indicated that Woodside is talking with the Los Angeles Dept. of Water and Power (LADWP), Sempra utilities and Southern California Edison, as well as a lot of other prospective gas buyers.

He thinks federal officials are interested in seeing a site permitted by the end of next year, and Woodside likes that time frame, but the local hearing process, which is sure to bring continued opposition, is scheduled to begin Sept. 26 at a hotel near Los Angeles International Airport, near where the regasified LNG would come ashore from its 28-mile-long underwater pipeline in Santa Monica Bay. Larson conceded the local permitting by the City of Los Angeles may take longer than the U.S. Coast Guard year-long process, however.

“The idea here is to deliver gas by the last quarter of 2012 or the first three quarters of 2013 — that’s what is in our application [to the U.S. Coast Guard and the City of Los Angeles],” said Larson, adding that Woodside most likely will begin expanding its California staff to start detailed engineering work next year. Its plans are relatively simple from an energy infrastructure standpoint.

“Our target date is a real commitment because we are using these specially designed [regasification] ships, which will be a modification of existing ones. When the permitting process is done, we need to have two ships to begin commercial operations.”

The key for Woodside is an underwater buoy system that Larson said is not new, but will involve a new variation of the technology, sitting 150 feet below the surface of the water where one of the regasification ships will come and attach to it. Then the ship works over a period of days to transform the LNG back into its gaseous state — using air, not seawater — and into the undersea natural gas transmission pipeline that will be attached to the buoy and onshore to the SoCalGas transmission pipeline system.

Other active offshore proposals involve more infrastructure, although Clearwater Port banks on having to only convert an existing offshore structure — as opposed to building new structures, and another offshore proposal south of Long Beach by Esperanza Energy LLC, a unit of San Antonio-based Tidelands Oil & Gas Corp., would link to an onshore gas-fired electric generation plant, of which there are several located in the Long Beach-Huntington Beach area. A horizontally drilled tunnel buried 100 feet under the beach 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.

Clearwater is in the midst of its environmental review, and Esperanza said it hopes to file an application by the end of this year.

Woodside is counting on the more unobtrusive aspects of its subsea pipeline and buoy. “When the ship is not there you can’t see anything, and even when the ship’s there, it’s 28 miles offshore,” Larson said. “We’re going to be good to the whales and we’re located five miles down from the shipping lanes.”

All of the gasification takes place at sea and the gas is brought onshore through a subsurface tunnel under the beach and Los Angeles city streets. Horizontal drilling will be used both from the beach offshore and from that point inward to reach the interconnection point.

“There will be a California Coastal Commission approval required because we go under the beach,” Larson said, “and we expect that it will be one of the hardest permits to get.” The coastal panel last April rejected an offshore LNG terminal proposal by another Australian resources company, BHP Billiton.

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