California "Energy Crisis" II

Kelpie Wilson and Marc Ash
t r u t h o u t | Report
Wednesday 13 April 2005

Report: California "Energy Crisis" II
Energy Giants Banking on Environmental Disaster

"It's strange that men should take up crime when there are so many legal ways to be dishonest."
-- 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.

This wild and unspoiled Baja ecosystem is the proposed site for the new Sempra LNG terminal.

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.

A small but dedicated band of some of the worlds best surfers have joined forces local Mexican villagers in an attempt to defend this magnificent stretch of Baja coastline.

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."

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.

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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.

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