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Sempra boss says company is OK with San Diego City Council plan to eliminate natural gas

Natural gas is a cornerstone of Sempra, the Fortune 500 giant that is the parent company of San Diego Gas & Electric and Southern California Gas Company.

But on Thursday, Sempra’s top executive said he has no beef with a unanimous vote by the San Diego City Council to eliminate natural gas in new construction and electrify nearly all existing buildings in the city by 2035.

“We’re supportive of where the city wants to go,” Sempra CEO Jeff Martin said when asked about the council’s resolution during the company’s second quarter earnings call with financial analysts. “And I think one thing that’s unique about our business, whether we’re in Louisiana or Mexico or California, we’re strongly aligned with supporting policymakers and making sure we’re advancing services for consumers.”

The council’s vote earlier this week is part of a sweeping update to San Diego’s Climate Action Plan, passed in 2015, to slash greenhouse gas emissions throughout the city.

While many other cities in California, including Encinitas, have passed resolutions to ban natural in new construction, San Diego’s call to retrofit existing structures goes significantly further.

According to a PowerPoint presentation of the city’s update to the Climate Action Plan, 90 percent of natural gas usage in existing buildings will be phased out in the next 12 years. Specifics of the city’s more aggressive plan are still to come.

“It will require an enormous effort on the part of the City and its citizens and should remain a major focus of implementation planning going forward,” the city’s Office of the Independent Budget Analyst said in a report. However, the office did not estimate how much the plan would cost.

An analysis from the Building Electrification Institute and research firm Inclusive Economics looked at the jobs impact of the city’s more aggressive policy and said “policies to decarbonize all existing buildings and achieve local and regional climate goals would create thousands of jobs across San Diego County.”

SDG&E has supplied natural gas to its customers for more than 100 years and SoCalGas is the nation’s single largest natural gas distributor. Parent company Sempra has established itself as one of the most aggressive players in the worldwide liquefied natural gas, or LNG, market.

Martin pointed to the fact that since 1982, the state has decoupled the profit that power companies make from the amount of power they sell to customers.

The price of gas and electricity is a direct “pass-through” so the utilities don’t profit from how much the energy costs. Instead, the California Public Utilities Commission sets a predetermined amount the utilities can make.

“In California, we’ll go out and purchase the fuel at a certain price, whether it be electricity and natural gas, we’ll run a really highly efficient system and we pass that cost on to the customers without markups,” Martin said. “So whether we’re selling more natural gas or less natural gas, isn’t really a financial issue to us.”

But Martin also said natural gas “has a long-term role in the economy here in the United States and globally.”

Natural gas is a fossil fuel and methane can leak from pipelines, well sites and other infrastructure. Methane is about 30 times more potent than CO2 when released into the atmosphere.

The state of California already plans to derive 100 percent of its electricity from carbon-free sources by 2045. Earlier this year, SDG&E released a “roadmap” to reach the net-zero target and predicted natural gas would remain in the utility’s energy portfolio by 2045, but at significantly lower volumes.

On Thursday’s earnings call, Sempra officials touted SoCalGas reporting a 37 percent reduction in fugitive methane emissions in 2021.

Sempra and its subsidiaries have sought ways to clean up natural gas, such as investing in what they “renewable natural gas”— gas that’s generated through biogas produced by organic waste from sources such as cow manure at dairies and farms — and conducting pilot projects to blend hydrogen with natural gas to reduce emissions.

But Matthew Vasilakis, co-director of policy for the local environmental group Climate Action Campaign, said, “all of those things are simply ways to ensure their fossil-fuel infrastructure continues to generate the profits they need to expand … If the city’s committed to zero carbon, then there’s no way that methane gas or any of the false solutions that Sempra and SDG&E have put forward” should be be included.

Sempra is the majority owner in the $10 billion Cameron LNG facility on the Louisiana Gulf Coast, which opened full commercial operations in August 2020, shipping gas to markets around the world. The company is also adding an export component to an existing LNG facility it operates near Ensenada, Mexico.

Plus, Sempra is working to construct a huge LNG facility in Port Arthur, Texas, and the company is in discussions with the Mexican government to build LNG projects in the port city of Topolobampo and in seaside town of Salina Cruz in the state of Oaxaca.

In the LNG process, export facilities take natural gas via pipelines and cool it to minus 260 degrees Fahrenheit. They load the liquefied gas onto specially made cargo tanks on double-hulled ships that take the LNG to markets around the world, many of them eager to replace their use of coal with natural gas.