Build Pipelines and Gas Will Come - New York Times

DONALD E. FELSINGER, chief executive of Sempra Energy, the San Diego company with $12 billion a year in revenue, says America needs big energy infrastructure projects such as pipelines to help contain prices. Here are excerpts from an interview:
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Sean Kelly

Q. Why is the United States so dependent on other countries for energy?
A. We've become more and more of an importer of energy over time. There is nothing on the horizon that is going to lessen that. It's something we're going to have to live with, and address.
Q. Is natural gas part of the solution?
A. Natural gas is going to follow in the ways of oil. In North America, we have been able to satisfy our own demands for natural gas from internal production. What we haven't been able to produce in the United States, we've imported from Canada. But we're at a point of time in our history that it's becoming apparent that we are consuming more gas. That's why prices have gone from $2 to $3 per million B.T.U.'s over 20 years and now are in the range of $7 to $15.
We saw that coming about five years ago. We're one of the biggest users of natural gas, serving about 6.5 million customers. We're building natural-gas-fired combined-cycle power plants.
Q. How can you keep prices from shooting up further?
A. We came to the conclusion that there was plenty of gas around the world looking for a market — that imported natural gas could be priced to compete against domestic supply.
Q. Is natural gas in the same countries that have oil?
A. It's some of the same countries, but also different countries. You see a lot of the South American countries like Bolivia that have gas. We have stranded natural gas up in Alaska. We have natural gas in Australia. It's all over the world. It's in more places than oil is.
Q. If we import more liquefied natural gas, would that ease our dependence on oil?
A. It would lessen it somewhat, because oil and natural gas get substituted for each other. But it's naïve of us as a country to think we're going to become energy-independent. If we were to launch a program like that, it would take many, many years. I'm not sure it would be achievable.
We have been struggling as a country for a number of years to have a defined energy policy that would set certain goals to achieve by certain dates. I think the country would benefit by having a more focused energy policy that sets goals and objectives we're trying to achieve. But I'm not concerned that we have oil or natural gas coming in from other parts of the world. As the global economy develops and as countries become more dependent on the revenue from selling natural resources, the world becomes a more civilized place.
Q. You're bringing more liquefied natural gas into the New Orleans area. Why?
A. We are building, in Mexico, the first L.N.G. receipt facility on the west coast of North America. That facility will service northern Mexico and the western United States, and will be in operation in 2008. The coast of Louisiana is interesting because production of offshore gas in the Gulf of Mexico is declining. That means fixed assets, like pipelines that take that gas to Chicago or New York, are not being utilized. By siting L.N.G. plants in the gulf area, we can use the existing infrastructure more fully.
Q. And you're building a pipeline across the Rocky Mountains?
A. Yes. The Rockies is one of the few areas in the United States that has growth potential. There is more gas that can be found there, but it is constrained from a pipeline standpoint. If producers can get their gas to market, they would be motivated to drill new wells and develop new supplies that exist there. So we are working with our partner, Kinder Morgan, to build an express pipeline that would take that gas all the way to Ohio.
Q. After decades when few energy projects were built, is American resistance to such projects beginning to fade?
A. It's just like the electric transmission grid, which is a point of focus right now from a reliability standpoint. Companies are trying to upgrade it and improve its reliability, driven by the blackout that impacted New York. Our natural gas infrastructure is going through similar change. It has to be modified to accept the receipt of L.N.G. and pipelines have to be built to more efficiently move that gas to the marketplace.
Q. Over all, do you expect a growing acceptance for energy-related projects?
A. I think there will be. I think we have to do a lot more to educate the public. I looked today at the prices our customers were paying for natural gas and they were spiking up, and we've seen the struggles they were having paying their heating bills this winter.
Q. You recently settled a class-action lawsuit that contended you withheld energy during the California energy crisis. Your company agreed to pay $377 million and change some of its business practices — without admitting any wrongdoing. What happened?
A. California had a bad experience with deregulation. The way they went about it set the stage for massive problems because there was a lack of infrastructure to serve the state's energy needs. As a result of that, nearly every company that did business in California got sued. We were one of those. We decided to settle and move on with our business.
William J. Holstein is editor in chief of Chief Executive magazine.
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