LNG Importers Say Clean-Air Standard Limits Supply

By Published On: May 27, 2006

Liquefied natural gas importers are warning the California Public Utilities Commission that a proposed pollution regulation may leave Southern Californians in the cold. In a May 18 letter to the CPUC, Shell Trading Gas & Power claimed that adopting the South Coast Air Quality Management District’s proposal to limit the fuel’s Btu content “could substantially impact the price and availability of LNG supplies to the southern California market.” Most of the gas from Asia, the likely source of liquefied natural gas bound for Southern California, cannot meet the district’s proposed Btu content standard without treatment, which comes at a higher cost. The air district asked regulators earlier this month to cap the Btu content of liquefied natural gas to prevent increased air pollution. The agency’s executive officer, Barry Wallerstein, urged state regulators to “avoid taking any actions that would degrade air quality for the 16 million residents of the South Coast Air Basin, who already breathe the worst air in the nation.” High-Btu gas, also known as “hot gas,” he said, “can cause nitrogen oxide increases from 20 percent to over 100 percent for some types of combustion sources.” Nitrogen oxide emissions contribute to both ozone and fine particulate matter. Sound Energy Solutions and BHP Billiton – both of which are proposing to build LNG terminals in Southern California – would meet a certain heat content to avoid extra pollution, according to Wallerstein. The air regulator’s letter follows claims by Calpine and Southern California Edison that the high-Btu gas could damage their generating turbines and cause increases in air pollution above existing limits (Circuit, Feb. 3, 2006). Shell Trading and Sempra Energy utility subsidiaries refuted the assertion that a higher limit would damage generating equipment and significantly increase air pollution. Sempra is constructing the Costa Azul LNG terminal in Baja California – expected to open early in 2008 – to which Shell plans to ship 500 MMcfd of LNG. “California’s economy cannot afford such an extreme and unnecessary measure as the SCAQMD’s proposal,” wrote Edwin A. Guiles, Southern California Gas and San Diego Gas & Electric chair, in a May 16 reply to the CPUC. He pointed out that the Btu content of the gas that the two Sempra Energy subsidiaries deliver already varies widely, ranging above and below the air district’s proposed Btu limit. It ranges from 1,269 to 1,429 on the Wobbe Index – a measure of Btu value. Limiting the gas as requested by the air district would be virtually impossible, he added. Thirty percent of the two utilities’ gas already would not meet the air pollution control agency’s proposed standard. Moreover, limiting the supply of LNG would be counterproductive to the air district’s pollution reduction goals, according to Guiles. It would make it difficult for operators of dirty diesel trucks, buses, and other equipment to convert to cleaner-burning natural gas, he said. Pollution reductions from converting vehicles to natural gas would more than offset any small increases in nitrogen oxide emissions from turbines and other gas-burning equipment, Guiles stated. The company estimated that those emissions will rise less than one-tenth of a percent. Shell attorney John Leslie acknowledged that the Btu content could be reduced by injecting nitrogen into the LNG. But he said that the process would raise the price of gas for homes and businesses in Southern California. utility, be it a municipal utility or an investor-owned utility, to meet all achievable, cost-effective energy-efficiency measures. At the same time, it recognizes that what is cost-effective in one utility may not be in another. That is why the bill has the CPUC and the Energy Commission set different targets for each utility. The goals that the Trinity Utility District must meet will be very different from the goals that Pacific Gas & Electric must meet. Energy efficiency is a critical part of any program aimed at reducing greenhouse gas emissions. In his Executive Order S-3-05, Governor Schwarzenegger established greenhouse gas pollution targets to reduce emissions to year-2000 levels by 2010 and to 1990 levels by 2020 and created a Climate Action Team to determine how to meet these goals. In a draft report issued on December 8, 2005, the Climate Action Team identified energy efficiency as a major piece of the program to reduce greenhouse gases. Out of 42 different programs the Climate Action Team recommended, energy-efficiency programs accounted for the second-largest total reduction in emissions: 21 million tons of carbon dioxide by 2020. And unlike other programs suggested in the report, energy-efficiency programs do not add short-term economic costs but instead lead to immediate economic savings. The implications of AB 2021 are more than simply providing consumers and business with affordable electricity. This bill is about helping all utilities create sustainable energy programs through energy efficiency. Investments in more efficient buildings and appliances have avoided the need for the equivalent of two dozen giant power plants over the past 30 years – the emissions equivalent of taking 2 million cars off the road. AB 2021 accelerates all utilities’ electricity and natural gas efficiency programs and will help California meet at least 8 percent of the 2020 emissions limit and achieve enormous economic and job benefits. This is a reduction of 174 million metric tons of CO2 by 2020, which is the equivalent of taking 1 million cars off the road. By adopting these policies, California will spur innovation that will lead to even larger efficiency opportunities. – Lloyd Levine (D-Van Nuys) is chair of the Assembly Utilities and Commerce Committee. CA Vampire Slayer Act Legislation that aims to remove electricity-sucking gadgets from their continued flow of intravenous juice will be heard on the Assembly floor May 30. AB 1970, by Assemblymember Lloyd Levine (D-Van Nuys), requires that labels be placed on devices from laptop computers to cell phones to inform consumers about the amount of energy they use when plugged in but turned off. “Consumers are paying for electricity they don’t even know they’re using,” said Levine. He noted that vampire appliances are bleeding consumers of $3 billion annually – about $200 per household. Up to 10 percent of a household’s energy use is attributed to these products. The bill, also known as the California Vampire Slayer Act of 2006, is meant to complement the California Energy Commission’s appliance efficiency standards. In addition to the devices’ associated cost to consumers and the grid, “the energy used by vampire appliances significantly contributes to the production of greenhouse gases and other air pollution,” Levine noted May 24. – Elizabeth McCarthy LNG Importers Say Clean-Air Standard Limits Supply Liquefied natural gas importers are warning the California Public Utilities Commission that a proposed pollution regulation may leave Southern Californians in the cold. In a May 18 letter to the CPUC, Shell Trading Gas & Power claimed that adopting the South Coast Air Quality Management District’s proposal to limit the fuel’s Btu content “could substantially impact the price and availability of LNG supplies to the southern California market.” Most of the gas from Asia, the likely source of liquefied natural gas bound for Southern California, cannot meet the district’s proposed Btu content standard without treatment, which comes at a higher cost. The air district asked regulators earlier this month to cap the Btu content of liquefied natural gas to prevent increased air pollution. The agency’s executive officer, Barry Wallerstein, urged state regulators to “avoid taking any actions that would degrade air quality for the 16 million residents of the South Coast Air Basin, who already breathe the worst air in the nation.” High-Btu gas, also known as “hot gas,” he said, “can cause nitrogen oxide increases from 20 percent to over 100 percent for some types of combustion sources.” Nitrogen oxide emissions contribute to both ozone and fine particulate matter. Sound Energy Solutions and BHP Billiton – both of which are proposing to build LNG terminals in Southern California – would meet a certain heat content to avoid extra pollution, according to Wallerstein. The air regulator’s letter follows claims by Calpine and Southern California Edison that the high-Btu gas could damage their generating turbines and cause increases in air pollution above existing limits (Circuit, Feb. 3, 2006). Shell Trading and Sempra Energy utility subsidiaries refuted the assertion that a higher limit would damage generating equipment and significantly increase air pollution. Sempra is constructing the Costa Azul LNG terminal in Baja California – expected to open early in 2008 – to which Shell plans to ship 500 MMcfd of LNG. “California’s economy cannot afford such an extreme and unnecessary measure as the SCAQMD’s proposal,” wrote Edwin A. Guiles, Southern California Gas and San Diego Gas & Electric chair, in a May 16 reply to the CPUC. He pointed out that the Btu content of the gas that the two Sempra Energy subsidiaries deliver already varies widely, ranging above and below the air district’s proposed Btu limit. It ranges from 1,269 to 1,429 on the Wobbe Index – a measure of Btu value. Limiting the gas as requested by the air district would be virtually impossible, he added. Thirty percent of the two utilities’ gas already would not meet the air pollution control agency’s proposed standard. Moreover, limiting the supply of LNG would be counterproductive to the air district’s pollution reduction goals, according to Guiles. It would make it difficult for operators of dirty diesel trucks, buses, and other equipment to convert to cleaner-burning natural gas, he said. Pollution reductions from converting vehicles to natural gas would more than offset any small increases in nitrogen oxide emissions from turbines and other gas-burning equipment, Guiles stated. The company estimated that those emissions will rise less than one-tenth of a percent. Shell attorney John Leslie acknowledged that the Btu content could be reduced by injecting nitrogen into the LNG. But he said that the process would raise the price of gas for homes and businesses in Southern California.

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