California’s new statewide energy action plan calls for an accelerated effort to increase gas storage capacity, gas conservation and demand-side management as well as developing two Pacific Coast liquefied natural gas (LNG) receiving terminals, the state’s three major energy agencies announced in a press conference this week. “California is in the market for LNG, and that is what people need to hear,” said one of the state energy commissioners.

“This action plan calls for figuring out how we can locate LNG terminals off the shores of California and bring in supplies, and that means that long-term contracts for gas need to be part of the picture, and they are part of the picture,” said S. David Freeman, chairman of the California Public Power and Conservation Financing Authority. “Now we are largely in the spot market for natural gas just like we were in electricity before the stuff hit the fan. So we have recognized these concerns and we are dealing with them.

“The problem of natural gas is much broader and deeper than just how much storage we can build in California.”

As part of the preview of the state agencies’ joint meeting, state officials painted an optimistic picture of California wholesale gas price and supplies for the upcoming winter, noting it is already back to normal in its storage levels and prices have stabilized.

“Prices have stayed the same this summer and are currently 10 to 20% lower than what they are in the rest of the country,” said William Keese, chairman of California Energy Commission, which on Thursday posted a new study on LNG on its web site (www.energy.ca.gov). “We have reached normal storage [levels], which should insulate us for the winter; the rest of the country probably will not reach normal storage levels, so the price pressures will come from the rest of the country, not from California’s situation.”

One of Keese’s fellow energy commissioners, Jim Boyd, reiterated that California’s storage injections have been “at extremely high rates” in recent weeks, as have many other parts of the country. “Even though gas is expensive, people have been injecting gas,” Boyd said. “We’re going to be just fine; we’re already ahead of the level of storage needed to meet the core (residential/small business) customer needs this winter.

“Although we’re in pretty good shape, what happens on the East Coast will affect us price wise, and it still hurts the economy to pay as much as we have to pay for gas right now,” he said. “That’s why we are putting a huge effort into exploring for more gas for California. I have been basically telling people all over the country and the continent that we need gas in California, and we’ll take it by land or by sea, and that means we’ll take LNG.”

While he would not talk about specific proposed sites or projects for proprietary reasons, Boyd said there are “several additional” new proposals that haven’t been made public yet, and that any of the proposals will have to go through “a full regulatory process,” including environmental impact reviews. “The new energy action plan and the climate it establishes in California provides a more board and quicker review of what needs to be done to permit LNG facilities in California where we have both off- and on-shore proposals.

“I would venture to say that we would likely see the first West Coast terminal in Baja, and also that ultimately there will need to be a second facility — probably in the greater Pacific Region, and it is hard to say where it will be. The key thing is that California is interested in LNG, and a lot of people have thought heretofore that we were not interested in it. There is a lot of natural gas in Alaska that is attractive and could be made available on the West Coast in the form of LNG.”

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