PUC votes to allow liquefied natural gas to flow from Mexico into Calif

Could hinder Renewable Energy development
source: Terence Chea AP for SF Chronicle 2004.9.3

Huge quantities of liquefied natural gas are set to flow into United States from Mexico, after a vote by the state Public Utilities Commission to permit the shipment of LNG through California pipelines.

Despite opposition from environmentalists, the commissioners voted 3-2 on Thursday to allow the creation of border access points, where LNG could flow from Mexican to U.S. pipelines for use in California and other Western states. The PUC rejected a proposal to delay the vote so the economic and environmental effects could be studied.

"We're experiencing the high prices of natural gas constraints today. We don't have a moment to lose in addressing this threat," Commissioner Susan Kennedy said at Thursday's meeting in San Francisco. "These high prices are hurting residences and businesses of all sizes."

But Commissioner Loretta Lynch, who wanted to delay the vote, said the commission's rushed the decision without studying how much natural gas the state needed.

"We were willfully blind," Lynch said. "We decided that we didn't need any evidence before we made the rate payers pay for all sorts of natural gas."

[Solar e-Clips Editor Note: Seems a shame to invest in such risky and expensive solutions, with narry a thought toward simpler, safer, fuelfree, job creating, solutions right here at home. There is a huge, untapped potential for reduced Natural Gas in California use via solar hot water heaters (direct savings) and photovoltaics (indirect through peak demand reduction). A recent study by Xenergy demonstrates the huge potential for NG savings in the residential sector alone in California.]

LNG, a super cooled natural gas, carries advantages in cost and increased transportation capacity, but its extreme volatility has raised safety concerns. In January, 27 people were killed by explosion at an Algerian LNG plant. [photo at left]

Despite those concerns, several companies are considering establishing LNG facilities for the fuel in California.

Sempra Energy and Shell have secured Mexico's approval to construct a new plant at Costa Azul, about 55 miles south of the border, to process up to 1 billion cubic feet of liquefied natural gas daily when it opens in 2007.

Some of that output would go to California, which typically uses 5 billion to 6 billion cubic feet of natural gas daily for generating electricity, heating homes, and other uses.

Thursday's decision will allow California to boost its natural gas capacity by about 10 percent, or 500 million cubic feet, said Brian Prusnek, Kennedy's energy adviser.

Sempra spokesman Art Larson said Thursday that the decision "provides California's natural gas customers the ability to tap into a significant and competitively priced future source of energy."

Critics say LNG generates air pollution and poses safety risk at facilities in the event of earthquakes or terrorist attacks. A recent Greenpeace report said LNG releases carbon dioxide that contributes to global warming and is less efficient than alternative fuel sources such as wind and solar energy.

"Our fear is that this puts California's commitment to renewable energy and energy efficiency at risk," John Coequyt, a Greenpeace energy policy specialist, said Thursday. "The state is basically promoting a technology in LNG that's unsafe, unnecessary and bad for the environment."

Sempra has agreed to pay the cost of upgrading infrastructure to link the Mexican supply with pipelines owned by San Diego Gas and Electric Co. and Southern California Gas Co. But it will ask the PUC later for permission to pass on the expense to rate payers.

Thursday's decision will allow the two utilities to establish access points for LNG near Long Beach, Ventura, Otay Mesa and possibly other sites. The two utilities currently pipe in natural gas from New Mexico, Texas and other Western states.

Having access to LNG from Mexico will allow the utilities to diversify their energy supplies and boost reliability and cost-savings for customers, said Rick Morrow, vice president of customer service for the utilities.