West Coast AGs Oppose Natural Gas Pipeline Expansion Despite Building Pressure on the Power Grid

In a move that is somehow both predictable and baffling, attorneys general from California, Oregon, and Washington filed a motion with the Federal Energy Regulatory Commission urging the agency to reject a proposed natural gas pipeline expansion project on the grounds that “the project does not serve the public necessity or interest,” even though the states, especially California, continue to struggle through a sustained energy crisis that has put massive pressure on their power grids.

The three attorneys general wrote:

“In light of the climate crisis, the commission should not approve expanded gas supplies that do not meet a significant public need and will worsen the effects of climate change, particularly where alternative energy sources can serve consumer need for energy more efficiently, cheaply, and with fewer environmental risks.”

The proposed project, the GTN Xpress expansion, would upgrade existing compressor stations to substantially increase the capacity of the existing TC Energy pipeline, which carries natural gas from British Columbia and connects to PG&E’s existing infrastructure, supplying Washington, Oregon, and California. Expanding the pipeline’s compressor stations would allow the pipeline to deliver more natural gas supply more efficiently. Several utilities in California have already signed contracts to purchase natural gas from the expanded pipeline system.

The AGs’ insistence that there is not a significant “public need” for additional gas supplies directly conflicts with the reality on the ground – especially in California.

This summer, California once again relied on natural gas to support its power grid. In an article headlined, “California scorns fossil fuel but can’t keep the lights on without it,” Politico reported:

“Faced with a fragile electrical grid and the prospect of summertime blackouts, the state agreed to put aside hundreds of millions of dollars to buy power from fossil fuel plants that are scheduled to shut down as soon as next year.

“… That plan was a last-minute addition to the state’s energy budget, which lawmakers in the Democratic-controlled Legislature reluctantly passed. Backers say it’s necessary to avoid the rolling blackouts like the state experienced during a heat wave in 2020.”

After the Politico story broke, Energy In Depth noted Governor Gavin Newsom’s acknowledgement that the state needs natural gas to provide reliable, baseload power to complement its renewables systems. Newsom said:

“Action is needed now to maintain reliable energy service as the State accelerates the transition to clean energy.”

The strain on the grid comes from increased demand for cooling amid hot summer temperatures in California and is driving up prices. Just last week, the National Weather Service issued heat warnings for several regions of Southern California. S&P Global reported that in response to the expected surge in power demand last week, the California Independent System Operator scaled back scheduled maintenance operations on grid assets. California officials have warned that up to 3.75 million homes – about 26 percent of California’s 14.21 million homes – could lose power due to heat waves and meager energy supplies this summer.

According to S&P Global, strong demand is not the only factor causing increased reliance on gas-fired power generation this month. Despite the attorneys general’s claims that “alternative energy sources can serve consumer need” more efficiently and cheaply than natural gas sources, the reality is that power generation from renewable sources is still highly variable:

“Power generation from wind and solar has been weaker so far this month compared to last. Data from CAISO shows that wind generation has come in 25 percent lower and solar 13 percent lower month-to-date than July levels.”

The result of high demand and constricted supply is higher prices in both the spot and futures market. S&P Global data shows that spot prices for major utilities in Southern California jumped to an eleven-month high last week. Notably, this price increase was not part of a nationwide trend. As Natural Gas Intelligence reports, futures contracts for delivery in “perennially pipeline-constrained” Southern California increased at a rate outpacing all other regions of the U.S.:

“With ample heat in the outlook for the western Lower 48, supply-constrained Southern California hubs bucked the broader trend to post substantial fixed price and basis gains for September delivery.”

The reporting from S&P Global emphasizes that a lack of pipeline infrastructure is a major factor driving up natural gas prices:

“Pipeline constraints have also elevated Southern California spot gas prices, while high storage levels have likely kept spot gas prices from spiking to the levels seen last September.”

The reality of California’s energy mix – and the political liabilities that come with rolling blackouts and brownouts – resulted in an eleventh-hour campaign by Newsom to include funds in the state’s budget to buy power from natural gas-fired power plants that California had scheduled to shut down next year.

However, California Attorney General Rob Bonta’s opposition to the efficient delivery of much-needed energy supplies makes it clear that the Newsom administration did not learn its lesson from this recent reality check.

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