elias column sig

State, national columnists

Costa Azul shows state avoided white elephants

By From page A8 | March 01, 2014

White elephant: An idiom for a valuable but burdensome possession of which its owner cannot dispose and whose cost (particularly cost of upkeep) is out of proportion to its usefulness or worth. – Wikipedia

Remember the enthusiasm of Sempra Energy back in 2009, when it had just about finished its $975 million liquefied natural gas importing plant at Costa Azul, on the coast just north of Ensenada, in Baja California?

Almost giddy at the prospect of circumventing many California regulations and bringing liquefied natural gas to North America from places like Indonesia and Russia, Sempra won approval from Mexican authorities by promising to sell some of the plant’s throughput for use there – and that is happening.

But the San Diego-based company – parent of Southern California Gas Co. and the San Diego Gas & Electric Co., two of California’s largest utilities – also planned to pipe a lot of that gas north and use it in the San Diego area and perhaps beyond. This hasn’t happened.

Instead, hydraulic fracturing (fracking) of shale deposits in states like Wyoming and North Dakota and Pennsylvania, and soon very likely here in California, drove the cost of natural gas down near modern-era lows and made domestic supplies abundant.

Liquefied natural gas is natural gas frozen at one point and shipped in tankers across vast ocean distances, then rewarmed back into its former gaseous state and placed in pipelines from a receiving terminal.

If the natural gas industry had had its way, the California coast would now be dotted with such receiving plants. They were proposed everywhere from San Diego County beaches to Humboldt Bay and points in between like Ventura County, Santa Monica Bay and Long Beach. None of them was ever built in California, state authorities becoming convinced after a long flirtation with the idea that there was no need for the costly facilities.

Other places, like New Jersey and Louisiana, were not so lucky. Costa Azul won approval in Baja after a vetting process much shorter and more easygoing than California’s, with Sempra hoping this would give liquefied natural gas a backdoor entrée into the wallets of California consumers. Because no Costa Azul gas has moved north, this state’s consumers so far have paid none of the construction costs of either the plant or any of the ships serving it.

Meanwhile, the merits of California’s arduous approval process are now clear. For one thing, a series small earthquakes has broken the main highway running near Costa Azul apart (documented in several videos like this one: www.youtube.com/watch?v=OhkkFEVCGnI), even though Sempra reports its plant is unaffected. There is also a land dispute over Sempra’s title to the land at Costa Azul, mentioned as a caveat in offering materials when Sempra sold stock in its Mexican operations last year. Sempra also refuses to say how much of Costa Azul’s capacity is going unused.

At the same time, Costa Azul, like many liquefied natural gas plants built to receive gas in North America, has turned – at least in part – to shipping it out. One example saw a load of liquefied natural gas from Indonesia reshipped to Great Britain under a one-time permit from Mexico’s energy agency.

So far, the only customers for Costa Azul’s gas are 20 industries in Baja California, including one local electric utility.

But while most U.S. receiving liquefied natural gas facilities are being flipped for export of gas derived from fracking, that’s hardly likely to be a major use for Costa Azul, since no pipeline now exists for bringing fracked gas there.

All of which makes Costa Azul fit the classic definition of a white elephant – a fate that likely would also have befallen at least some of those other liquefied natural gas plants once pushed in California, had they ever been built.

Which proves that sometimes it can be just plain better not to build, a lesson not lost upon opponents of California’s planned high-speed rail project and the massive water tunnels proposed by Gov Jerry Brown.

Thomas Elias is a California author. Reach him at [email protected]

Thomas Elias


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