PUC Clears Way for Liquefied Gas Imports
California utility regulators approved sweeping rules Thursday for the state’s natural gas industry, clearing the way for the importation of liquefied natural gas over objections from air quality officials, environmentalists and community groups.
The decision by the California Public Utilities Commission is the culmination of a controversial two-year proceeding that examined the state’s future demand for natural gas.
Thursday’s order, approved by all five commissioners, established benchmarks to ensure the adequacy of storage facilities and pipelines and the quality of imported natural gas, among other things. It also set procedures under which utilities should contract for supplies.
Shortly after the vote, a coalition of environmental, consumer and community groups said it would sue to block the decision. Ratepayers for Affordable Clean Energy, a coalition that opposes liquefied natural gas projects, said it would file suit in California Superior Court on Monday, claiming that the natural gas rules should have been vetted under the California Environmental Quality Act.
The South Coast Air Quality Management District agreed with that assessment and vowed to “aggressively challenge” the commission’s decision. District Executive Officer Barry Wallerstein said the rules would worsen air pollution by allowing the importation of foreign liquefied natural gas that burns hotter and produces more harmful emissions than the natural gas formulations in use today.
“I respect the views of the South Coast Air Quality Management District, but I do not share them in their entirety,” said Michael R. Peevey, president of the California Public Utilities Commission and a strong supporter of liquefied natural gas projects. He said the commission’s decision would help ensure future natural gas supplies for the state by setting the rules for gas importers and others.
Commissioner Rachelle Chong agreed, noting that natural gas is less polluting than other fuels, that demand for natural gas is growing and that liquefied natural gas “is one of the few new sources of natural gas available to California.”
In recent months, much of the debate focused on whether to alter natural gas quality standards to allow the hotter-burning formulations. These are expected to come ashore from several proposed liquefied natural gas import projects along the coast of California and Mexico.
Air quality officials complain that the hotter gas increases pollution. Others contend that household appliances aren’t built to operate on the hotter gas, which could cause fires.
The companies involved, including San Diego-based Sempra Energy, pushed to allow the hotter gas, arguing that it wasn’t harmful and that allowing a wider range of formulations would increase potential supplies for the state.
Sempra, which owns San Diego Gas & Electric Co. and Southern California Gas Co., is building a liquefied natural gas import facility in Baja California, Mexico, that could start sending gas to California by 2008.
The Baja facility is the furthest along of about half a dozen proposals in the region, all of which would receive super-cooled liquefied gas from Russia, Australia and other locales. After receiving the fuel, the facilities would return it to gaseous form and send it to customers through existing pipes.
“I commend them for weighing all of those decisions and trying to provide certainty so industry can prepare to provide for California’s future needs,” Darcel Hulse, chief executive of Sempra LNG, said of the commission. “At the end of the road, there are customers who need energy, and we’re in the business of meeting those needs.”
Still, Commissioner Chong stressed that the group’s decision Thursday didn’t sanction any liquefied natural gas projects or “determine if LNG will come to California ... but it establishes clear access terms so that LNG developers can plan their projects around it.”
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