LNG/Truthout.org/Energy Giants Banking on Environmental Disaster

To view complete article, visit www.truthout.org

    Report: California "Energy Crisis" II

    Energy Giants Banking on Environmental Disaster

    By Kelpie Wilson and Marc Ash

    t r u t h o u t | Report

-- Al Capone

    California, March 2001: rolling blackouts sweep through major cities,
leaving entire communities without power. The explanation offered by private
energy generators was simple: "There is a crisis, and we don't have enough
power to meet the demand."

    Three years, hundreds of investigations, and billions of taxpayer
dollars later, a web of deceit, corruption and illicit profit are well
documented and part of the public record. California State officials now
acknowledge that power companies withheld more than enough power to have
averted the blackouts, and they did it to drive up prices and profits. In
fact, CBS News reported, federal investigators have power plant control room
audio tapes of traders from Williams Energy telling plant operators to "turn
off the juice."

    Lesson learned? Apparently not.

    The California Public Utilities Commission, charged with protecting
California ratepayers and implementing a sensible state energy plan, is
about to deliver ratepayers into the hands of oil companies wanting to hook
the state into a dependency on expensive, imported liquefied natural gas
(LNG) that comes at the end of a long supply chain over which Californians
have no control.

    Like a gang of crack dealers, energy companies have been lining up to
push for LNG re-gasification terminals to supply California's huge energy
market. But so far, environmental concerns have slowed the siting of these
terminals in the state. And so the attention has turned to nearby Baja
California, Mexico, where a free-for-all has ensued, leading to the
emergence of Sempra Energy as the first to secure a site: Costa Azul, a few
miles north of Ensenada.

    Sempra wants to locate a sprawling industrial facility on this beautiful
bit of unspoiled coastline that is one of the last remaining unbroken
stretches of coastal sage scrub in the Californias. This is a marine
treasure with a world-class surfing wave, a fishing community and a tourism
economy.

    LNG is natural gas, chilled at the wellhead to minus 260 degrees
Fahrenheit, loaded into expensive tankers the size of aircraft carriers, and
shipped around the world. At the destination, the liquid is re-gasified by
warming it, and then it is siphoned off into pipelines. All of this consumes
considerable amounts of energy, reducing the efficiency of the gas as an
energy source.

    At Costa Azul, Sempra will use seawater to warm the gas, which will
chill the seawater by 20 degrees or so, with devastating consequences for
marine life and the resident fishing community.

    Reliance on LNG has global environmental and human rights impacts. Most
of the natural gas supply available to the West Coast will be extracted from
fragile environments inhabited by defenseless indigenous people. Gas from
Peru comes from deep in the Amazon, where environmentally reckless
extraction is killing off tribes who have only just been contacted by the
outside world. Another major source of LNG would be Sakhalin Island, off the
coast of the Russian Far East, impacting indigenous people, rare gray whales
and hundreds of threatened marine species.

    Sempra Energy held a groundbreaking ceremony at the Costa Azul site on
March 30th, but two days later, the Baja California state legislature
launched an investigation into the project.

    "There hasn't been transparency from the beginning to the end," said
legislator Guillermo Aldrete. "We want to know the economic and
environmental impacts - both negative and positive." Aldrete was
particularly concerned about Sempra's involvement in the California power
crisis of 2000-2001. Sempra agreed to pay $7.2 million in 2003 to settle
accusations by federal regulators that it had engaged in market
manipulation, and it is a defendant in a lawsuit seeking further damages for
its "gaming" of the gas supply.

    "We can't trust Sempra Energy if they have these problems in
California," Aldrete said.

    Inexplicably, it is the California Public Utilities Commission (CPUC)
that is facilitating the Costa Azul project and clearing the way for LNG as
a major new energy source for the state. Last September, CPUC approved
Sempra's request to terminate contracts with domestic natural gas suppliers.
This opened a hole in the state's natural gas supplies that Sempra and
Chevron-Texaco want to fill with more expensive, more polluting, more
dangerous and less secure LNG.

    In the case of Sempra Energy, the company will ship the LNG to its Costa
Azul terminal and sell it to a subsidiary called Sempra Trading, which will
in turn sell it to Sempra-owned San Diego Gas & Electric and Sempra-owned
SoCal Gas, creating a giant vertical structure perfectly configured for
price fixing.

    CPUC has also approved letting Sempra offload the cost of its $800
million terminal to all California ratepayers. The only thing it has not
done yet is allow Sempra to lock in long-term contracts for LNG with
California utilities. Without long-term contracts, the company will find it
difficult to secure financial backing to actually build on the Costa Azul
site.

    Activists in California and Mexico are not considering this a done deal
yet and are calling on CPUC to hold evidentiary hearings on LNG. "So far the
CPUC has only listened to the energy companies. They need to hold
evidentiary hearings to determine, first of all, if we really need the gas
and these facilities," said Aaron Quintanar of WiLDCOAST , a conservation
group that is fighting the Costa Azul terminal. But so far, the CPUC has not
responded to a November letter from 24 members of the US Congress asking for
evidentiary hearings.

    In a letter to the commission, Sempra Energy maintained that evidentiary
hearings are not required, giving the example of the CPUC's approval,
without such hearings, of a $500 million dollar program to support small
distributed generation units (eg: small gas turbines, wind turbines,
photovoltaics, fuel cells and diesel generators). Sempra pointed out that
the "relatively small cost of constructing the facilities necessary to
access new supplies of natural gas is similarly expected to produce
'sizeable public benefits' in the form of enhanced reliability and lower
natural gas prices for all California consumers."

    According to Ratepayers for Affordable Clean Energy (RACE), the CPUC's
endorsement of LNG flies in the face of the State's approved Energy Action
Plan, which prioritizes energy efficiency and renewables, not natural gas.
RACE says that if the State were to seriously pursue its commitments by
adopting a renewables goal of 33 percent by 2020, it could "eliminate the
natural gas demand equivalent of two LNG terminals over the next 10 to 15
years."

    Finally, the question must be asked: why is the CPUC willing to increase
California's dependence on foreign fossil fuels and at the same time subject
ratepayers to another round of Enron-izing? The answer may have something to
do with the Governor.

    Last week, Chevron-Texaco announced its purchase of Unocal, a smaller
company that controls considerable natural gas supplies in the Far East. The
citizen's group Foundation for Taxpayer and Consumer Rights (FTCR) said in a
press release that Chevron-Texaco treated some of Governor Schwarzenegger's
top staff to a junket in Australia last July to sell them on LNG as
California's new source of energy.

    FTCR concluded: "Today's announced merger indicates Chevron-Texaco's
desire to corner the market on LNG, of which Unocal controls significant
supplies in the Far East. It's a $16 billion bet that California will open
the door to coastal LNG terminals and make the long-term commitment to
gas-produced electricity."

    FTCR also notes that Governor Schwarzenegger's campaign committees have
accepted $222,200 from Chevron-Texaco and that Schwarzenegger's chief of
staff is Chevron-Texaco's former lobbyist, Patricia Clarey. The group is
calling for the California legislature to launch an investigation of what
they have dubbed "LNG-gate."

    At a time when oil men are running the federal government and energy
issues have come to dominate our foreign policy, it is distressing to see
the state of California, long a leader in renewable and clean energy, going
down this path.

------------------------------------------------------------------------

    You can send comments to t r u t h o u t Executive Director Marc Ash at:
director@mail.truthout.org

    Kelpie Wilson is the t r u t h o u t environment editor. A veteran
forest protection activist and mechanical engineer, she writes from her
solar-powered cabin in the Siskiyou Mountains of southwest Oregon.