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California Regulators OK Gas Flows From Mexico

The New York Times: California Regulators OK Gas Flows From Mexico

“The PUC decided to allow Sempra Energy and Shell to create a border point where LNG would move from Mexican to U.S. pipelines.”

By THE ASSOCIATED PRESS

Posted 3 Sept 04

SAN FRANCISCO (AP) — The state Public Utilities Commission voted Thursday to allow liquefied natural gas to be shipped from Mexico through California pipelines for use in Western states.

The PUC decided to allow Sempra Energy and Shell to create a border point where LNG would move from Mexican to U.S. pipelines. The commission voted against a proposal to delay its vote so the economic and environmental effects can be studied.

“We’re experiencing the high prices of natural gas constraints today. We don’t have a moment to lose in addressing this threat,” Commissioner Susan Kennedy said at Thursday’s meeting in San Francisco. “These high prices are hurting residences and businesses of all sizes.”

LNG carries advantages for companies in cost and increased transportation capacity, but it also is extremely volatile. In January, an explosion at an Algerian LNG plant killed 27 people.

Nevertheless, several companies have been considering establishing facilities for the fuel in California.

San Diego-based Sempra and Shell have won Mexico’s approval to build a new plant at Costa Azul, about 55 miles south of the border, to process up to 1 billion cubic feet of liquefied natural gas daily when it opens in 2007.

At least some of that output would go to California, which typically uses 5 billion to 6 billion cubic feet of natural gas daily to generate electricity, heat homes, and other uses.

“We’re very pleased with today’s decision because it provides California’s natural gas customers the ability to tap into a significant and competitively priced future source of energy,” Sempra spokesman Art Larson said.

Sempra has agreed to pay the cost of upgrading infrastructure to link the Mexican supply with pipelines owned by San Diego Gas and Electric Co. and Southern California Gas Co. However, it will ask the PUC later for permission to pass that expense along to ratepayers.

Neither the upgrade costs nor how much expense will be transferred to ratepayers have been determined, Larson said.

Critics say LNG can pollute the air and facilities might pose a safety risk in the event of earthquakes or terrorist attacks.

A Greenpeace report on LNG said it releases carbon dioxide that contributes to global warming and is less efficient than fuel sources such as wind and solar energy.

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