Energizing California’s Economic Recovery

by Jack Stewart
March 4, 2005
The worst of the recession is behind us, and we are now seeing modest economic growth in California. This is good news for employees and state tax revenues. The bad news is that economic growth means higher demand for energy, both electricity and natural gas.

A recent report from the California Energy Commission states that we are overly reliant on limited pipeline capacity to transport natural gas into the state. California currently produces only 16 percent of the natural gas consumed in the state. The natural gas we need for our homes, businesses and to produce electricity comes from miles away in Canada and Texas. California competes with other states for this natural gas, driving up the price we pay for this essential commodity.

Business leaders are not the only Californians that should be concerned about shortages and higher energy prices. Residential consumers and small business owners could see wild swings in the price of natural gas, driving up utility bills by hundreds of dollars.

Fortunately, California can solve its energy supply problems. One important new source of energy is super-cooled, liquefied natural gas (LNG), which has been used for the production of electricity and heating for more than 45 years. Europe, Japan and South Korea, as well as the eastern United States, currently benefit from importing LNG.

California should build terminal port facilities to receive and deliver LNG. Such ports would bring California’s most important fuel source closer to us, a goal that needs to be reached soon. The recent CEC report on natural gas supply was not our first warning: in 2003 the Commission recommended that the state “should ensure that existing natural gas storage capacity is appropriately used to provide adequate supplies and to protect prices.”

Governor Arnold Schwarzenegger said in his 2003 campaign for governor that he supports LNG as a safe, clean and cost-effective option that will make natural gas more affordable. His support of LNG ports is linked to his efforts to secure California’s economic recovery by improving the state’s short-term and long-term business climate.

The rewards of bringing LNG ports to California are more than economic. As the cleanest burning and safest fossil fuel, as well as an ingredient in producing hydrogen fuel, the environment will benefit as well.

LNG’s environmental and safety record is a proud one. There are currently five LNG ports in the US today, and none have had safety problems for 25 years. LNG shipping has never experienced a major incident. And, unlike oil, LNG causes no water or land damage if spilled or leaked. This stellar safety record is augmented with other safety features such as equipping LNG tanks in California d with in-tank cameras and instruments to monitor conditions. Moreover, safety zones assure that public activities and structures remain safe. No other source of reliable and affordable energy can currently provide these assurances.

LNG ports will not jeopardize the environment - but inaction and shortsightedness will. Without LNG to propel the state forward, we in California will remain vulnerable, and less expensive neighboring states will appear even more attractive to businesses and residents.

Increasing supply by locating LNG terminals in California is a common sense and necessary response to mounting consumer demand. If we don’t have the facilities in California for LNG, businesses and consumers who now rely on natural gas may see their bills increase by forces out of the state’s control. In-state storage of LNG is the only recourse that will prevent the kind of price spikes that hurt residents and businesses in the state.

The California Energy Commission’s report provided the facts that illustrate the need for LNG ports. But they will only become a reality if policymakers muster the political will.

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