Advice to the anti-LNG crowd

Just the other day, yet another ripple of excitement ran through the anti-LNG crowd. This ripple was about a news item announcing plans for a new, so-called Australian LNG export terminal in California. Folks, let’s take a deep breath; there may be less to this than meets the eye. And it particularly behooves us, as Coos county residents, to be sceptical about such things. It’s déjà vu all over again!

The first indication of unseriousness in the California LNG plan is that the so-called news item is clearly a press release, published uncritically and verbatim (or 99% verbatim) in a trade journal. Trade journals do not criticize individual businesses much, since their existence depends on their patronage. And the press releases they publish on their behalf have all kinds of purposes, not necessarily honest or obvious, but nearly all aim to make a business proposition look good to potential investors.

Let’s start with the admitted fact that this plan is to be carried out by a brand-new company called “Cal LNG”, which is being formed by three other entities including Australian Oil Company (AOC), which is “a Californian-focused oil and gas developer”, according to another press release put out by AOC itself. But when you check into AOC’s background, it’s obvious they are not a big player in the gas business. Shares of AOC are selling on the Australian Stock Exchange for 8 cents. Although based in Australia, AOC’s main interest is to drill for oil and gas in California’s Sacramento Valley. These are the sites known as Dempsey and Alvares, mentioned in AOC’s press release. So it sounds like both outfits, AOC and Cal LNG, would like to export as LNG all or part of the gas they hope to extract from California’s central valley.

We have had many experiences with brand-new companies in Coos Bay, and they boil down to the fact that when you look behind the face they put on, most turn out to be no more than flimsy fronts for a few speculators. Almost invariably they are underfunded but eager to attract investors; in fact, that is often the main purpose of their spiel. AOC itself admits that it sorely needs funding, particularly since an expected $1.6 million investment check from another oil developer will not be arriving; they changed their minds. But it will all be fixed: “As part of its normal business operations AOC has been progressing positive discussions with a number of potential funding partners in North America.” In other words, all hats but no cattle. Of course, it could be on the up-and-up, but it all sounds a bit tentative besides being ungrammatical.

Yet another trait typical of promoters, one often observed when they visit Coos Bay, is that they don’t know what they’re talking about. One recent local example was the big-talking bunch that was going to build 500 homes behind the old Coos Bay K-Mart. Very likely their real agenda was the quick sale of some land of dubious value; I published an investigative article about them on Mary’s blog.

But to get to the heart of the matter, we learn from the first press release that Cal LNG, AOC’s corporate child, is going to develop “. . . an LNG export and domestic supply facility on the west coast of the United States.  Project sites have been identified and negotiations for Cal LNG to secure a site are progressing . . . ” So they’ve been talking about buying some land somewhere, but nothing final. Again, all hats and no cattle. This vague verbiage is in the same class as that used by several promoters who wanted to enchant Coos Bay’s aboriginal heavy industry fanatics in the past. Preaching to the customary choir of thrilled local officials, excited union bosses and enchanted working people down on their luck, those promoters claimed to have long-term contracts in the bag with buyers of whatever it was they were going to produce here. Then, later on, we learned – this time without any press releases – that no contracts ever existed, at least none signed by buyers.

But, there is always the value of enthusiasm, since Cal LNG feels inspired by the fact “. . . that there are limited LNG export facilities on the West Coast of the United States and we intend to capitalize on this”.

Now this sounds a little strange because west coast LNG export facilities are not just “limited”; there simply aren’t any. (NOTE: that’s without counting what has been since 1969 the only operating LNG export facility in the U.S., the one in Kenai, Alaska, which not long ago was going to shut down due to the declining local gas supply.) But maybe instead of counting actual LNG export terminals on the lower west coast, Cal LNG is counting the plans for the two plants in Coos Bay and in Warrenton, near Astoria, but those are by no means certain to become operating terminals, as I explain in a concurrent article. Furthermore, the main reason why Warrenton and Coos Bay became the darlings of would-be LNG export promoters was that Californians had vehemently opposed all such plans. As a result, California today has no existing import or export terminals for LNG, and no plans to build any. What does that tell you about Cal LNG’s chances down there?

The press release also makes much of the involvement of a privately held company called Blue Sky in the California venture, because Blue Sky is “a successful oil production company and understand[s] the technical and regulatory issues associated with taking a project into development.” But Blue Sky is described as being in the oil business, not the natural gas business. That makes perfect sense, for if they were in the gas business they would know that the “regulatory issues” for a new LNG plant will take years to settle, and may cost hundreds of times more than the $1.6 million that AOC so sorely needs. And that’s without counting many more billions and several years for construction, once all the permits are lined up. They would also know that California will vehemently oppose their plan, and that highly environmentalist California swings a lot of weight in the federal government.

I won’t hold my breath.