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Apr 04, 2005 - 12:15 PM

Chevron-Texaco's LNG-Gate

by Jamie Court and Doug Heller
Today's announcement of Chevron-Texaco's purchase of Unocal has a back story that could be the biggest scandal of the Schwarzenegger Administration yet. Back in July '04, some of Arnold's top brass were treated by Chevron-Texaco to an overseas trip -- it included luxury accommodations at the Four Seasons Hotel in Sydney, Australia -- to sell the gov's people on why Liquefied Natural Gas (LNG) should be California's new source of electricity. Today's announced merger is mostly about Chevron-Texaco's desire to corner the market on LNG, of which Unocal controls significant supplies in the Far East. It's a $16 billion bet that California will open the door to coastal LNG terminals and make the long-term commitment to gas produced electricity.

What kind of insider information could that type of bet hinge on? Arnold's campaign committees have accepted $222,200 from Chevron-Texaco. Chevron-Texaco's former lobbyist, Patricia Clarey, is now Schwarzenegger's chief of staff. There's no energy company in the state that Arnold's Administration is closer to.

But if Chevron-Texaco corners the international market on LNG, it will be in the same position to withhold electricity supply and drive up electric prices that Enron and other energy firms like Reliant and Dynegy were in five years ago. (Don't forget Chevron owned about 27% of Dynegy when the market was manipulated last time.) And reporting by the Orange County Register last year showed that Chevron-Texaco shipped three tankers full of California gasoline out of state just as California drivers were paying record prices at the pump.

The state legislature and/or California Attorney General should immediately investigate all discussions between Arnold's Administration and Chevron-Texaco about LNG and the timing of those discussions. Bechtel Corporation, a top Republican donor, stands to benefit greatly from a new LNG market by building the coastal terminals needed for it, but the energy company that controls the LNG stands to profit the most. Chevron-Texaco's campaign cash, with the help of all-expense paid trips and a lobbyist in the gov's inner circle, should not be able to buy that company a new grip on California's electricity supply. If state officials drill a little they might just find "LNG-gate" not too far below the surface.

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