Backers Hope Oil Plan Floats

With Californians slurping more and more fuel, a milestone looms for a controversial drive to build an oil supertanker dock in Los Angeles harbor.

A Long Beach energy company is poised to release an environmental assessment of what would be the West Coast’s first terminal for fully loaded oil supertankers, capable of handling a vessel large enough to serve as a shipping crate for the West’s tallest skyscraper.

To supporters, the Pacific Energy Partners plan would fill a crucial need in a state that is expected to add 7 million sport utility vehicles and light trucks and 2 million cars by 2025. During the same period, the flow of oil from Alaskan and Californian fields will shrink.

But to detractors, the project is an environmental and safety nightmare. The tankers, they say, will add to the pollution produced by the nation’s largest port, which is already the region’s largest single source of diesel exhaust emissions.

Three years ago, Pacific Energy began its effort to create a spot at Pier 400 on Terminal Island, at the mouth of the Port of Los Angeles, where supertankers could disgorge their loads. At 1,100 feet long and 200 feet wide, one of these so-called Very Large Crude Carriers can carry more than 2 million barrels of oil.

The big tankers, when fully loaded, can’t navigate any West Coast port. So the oil must come on smaller carriers, or the big vessels must anchor miles offshore and transfer their oil by using much smaller ships.

At Pier 400, most of which is devoted to cargo containers, the harbor is deep enough for the supertankers because the huge man-made island originally was envisioned as a home for oil operations. Pacific Energy would build storage tanks for 4 million barrels of oil nearby.

“The infrastructure today is nearly maxed out in terms of its capability to move oil,” said David Wright, an executive vice president at Pacific Energy, which owns crude oil and fuel pipelines, storage tanks and petroleum distribution terminals in California, New Jersey, Pennsylvania, several Rocky Mountain states and Canada. Formerly controlled by Denver billionaire Philip Anschutz, the publicly traded partnership is 26% owned by Lehman Bros. and First Reserve Corp., a private equity firm.

The project “truly links L.A. and the L.A. basin with the entire world’s crude supply,” Wright said. “It can come here as economically as possible using these larger ships.”

Pacific Energy executives said the company expected to spend as much as $300 million on the Pier 400 project, with an additional $50 million in costs falling to the port.

Several trends are propelling the need for oil-importing facilities. The state’s growing demand for oil and its byproducts, the steady decline in California oil production and the need to import more crude oil over greater distances and in larger tankers.

For decades, California was a crude oil exporter but now relies on oil imported from Alaska and foreign countries for 63% of its supply. That percentage will grow steadily as production from the state’s largest oil fields in the San Joaquin Valley and the Long Beach area declines by an average of 2% a year.

The gap will grow wider still as California’s overall demand increases along with its appetite for gasoline, diesel and other fuels made from crude oil. Soaring demand in Arizona and Nevada, which rely on California for much of their fuel, exacerbates the import problem.

To handle future needs, California will need to boost oil imports 21% by 2015, and by more than 37% by 2025, with the largest increases in the Southern part of the state, according to a study by the state Energy Commission. Because no pipelines bring oil from out of state, petroleum must arrive by water. The commission said that the ports of Los Angeles and Long Beach -- a vital conduit for half a dozen refineries -- are not equipped for the onslaught.

“Most of the required expansion is needed in the Los Angeles Basin, which faces a number of barriers, including scarcity of land, pressure to remove a portion of existing facilities in favor of container cargo facilities, and new standards for marine terminals,” the commission said in the 2005 report.

The project has strong support from the port and regional planners.

“The region has a demonstrated need,” said David Mathewson, director of planning and environmental affairs for the Port of Los Angeles. “We have the infrastructure here to accommodate that kind of use and we are ready to go.”

“The most important thing it offers to businesses and residents in California is more about what it prevents,” said Gregory Freeman, vice president of public policy consulting for the Los Angeles County Economic Development Corp., a nonprofit business advocacy organization. “It prevents a bottleneck in the supply of crude oil into California.”

Environmentalists and neighborhood residents see it differently.

Oil tankers at dock emit more pollution than container ships because the tankers must run engines to force crude into pipelines and storage tanks on shore. Many container ships can shut down their engines and plug into the local electricity grid to run lights and equipment, a technology that only a few tankers worldwide are capable of using.

“It’s just going to exacerbate the pollution already felt by those communities,” said Shana Lazarow, an attorney for Communities for a Better Environment. “It’s going to have a tremendous localized impact.”

Wright said Pacific Energy was working to address pollution concerns and had held several community meetings.

Pacific Energy has purchased more than $13.5 million in “pollution credits” from companies that have shut down other polluting operations, Wright said. And as a pollution control measure, the supertankers would be required to slow down to 12 knots when they are about 40 nautical miles out at sea, twice as far out as other ships.

Some neighbors aren’t impressed with the pollution credits, which are sold under a program administered by regional air quality regulators. The credits address overall pollution levels in Southern California, not the air quality in the port’s backyard, they said.

“That whole pollution credits approach is disingenuous,” longtime San Pedro resident Noel Park said. “The new emissions they have bought credits for will be spewed out right here.”

Los Angeles port official Mathewson said Pacific Energy had “some significant challenges ahead of them, but they have expressed a willingness to address all environmental issues.”

Park and other nearby residents also worry about the potential for oil spills and explosions because of the project, which would increase the amount of oil coming into the ports. Exxon Mobil Corp., ConocoPhillips and several other companies already operate tanker docks and oil storage terminals there. BP’s terminal can accommodate a supertanker once the vessel has lightened its load enough that the ship doesn’t scrape the bottom of the channel.

Park complained that oil and petroleum product storage tanks were too close to residential areas and not moved to Pier 400 as originally planned.

“Every day I’m thinking we have to move away,” Park said.

To calm such fears, Pacific Energy has produced a thick document that it is handing out to community members, detailing safety measures and pollution prevention.

Pacific Energy, which initially expects to unload as many as 250,000 barrels a day of crude oil at Pier 400, has lined up customers for more than half of that capacity. Valero Energy signed up for 50,000 barrels a day for 30 years, and ConocoPhillips committed to 90,000 barrels a day for 20 years, Wright said.

“It’s an important part of our crude strategy because we’re having to go out all over the world to get crude,” said Scott Folwarkow, director of government affairs at Valero.

The release of the draft environmental impact report, expected by the end of the month, will be followed by a final report, incorporating responses to public comments and an environmental mitigation and monitoring study by the port. To proceed, the project must win approval from the port’s five-member Board of Harbor Commissioners and the Los Angeles City Council.

Pacific Energy executives said they hoped to complete the approval process by the end of the year and begin operations by the end of 2007.