The following substitutes for and corrects a report run in Daily GPI, May 21

Natural gas is part of a “four-horse race” in which all four will finish together, if state energy officials are facile enough to bring gas, renewables, energy efficiency and liquefied natural gas (LNG) under the wire simultaneously, a state natural gas expert told an industry audience in Denver last week.

“This is not a competitive horse race since all four are hitched to the wagon called ‘California’s economy’, and we need all four horse to win this race,” said the California Energy Commission’s (CEC’s) top gas official, David Maul. And for the traditional gas “horse” a lot will depend on future pipeline capacity since as gas demand continues to increase in the nation’s most populous state, natural gas imports remain high (at the 85% level).

“California is working hard to encourage each horse to give its maximum effort, consistent with cost-effectiveness tests and environmental protection requirements,” Maul said. “We have goals for each horse and need all of them to come close or exceed their goals.”

Currently, the state’s gas infrastructure is deemed as “adequate,” but additional infrastructure will “soon be needed,” said Maul, the CEC’s natural gas and special projects manager, who participated in a panel discussion of the “Western Pipeline Roundup” looking at California’s and Midwest market needs at the annual GasMart industry conference last Wednesday. “Demand for added gas is growing, and California’s energy agencies are working together to attract new investment and supplies.”

Maul cited four recent reports on gas in California — all completed last year: the now-annual Integrated Energy Policy Report, “Energy Action Plan,” Electricity/Natural Gas Assessment Report, and Natural Gas Market Assessment Report.

At this point, the state’s energy policymakers and planners agree that natural gas prices are “higher than desired,” Maul said, but they are assuming prices will continue on an upward trajectory, while they become even more volatile. At the same time, he said, additional import capacity is needed as identified in some of the above-cited planning documents completed in 2003.

Maul said the state officially last year recognized the need for LNG as holding potential value for California. More broadly, however, LNG use will have to meet the following commitment from the “action plan” agreed-to by the state’s three major energy agencies to “license and, where appropriate, fund construction of new energy facilities that are consistent with the reliability, economic, public health, and environmental needs of the state.”

California has a long list of issues needing resolution before LNG can play a role, including: clarification of natural gas quality standards, equal access to the state’s gas markets, defining the role of long-term supply contracts by the state’s private-sector utilities, clarifying potential pipeline upgrades, and reducing uncertainty in terminal permitting, which probably has more — not less — uncertainty now than a year earlier.

For each of the issues, Maul cited actions already underway in the state to address them, such as a joint research study on emissions by Southern California Gas Co. and Air Resources Board reconsideration of its gas standards, along with a state “LNG Interagency Permitting Working Group” to begin to lessen the uncertainty surrounding the permitting process.

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