May 18 (Bloomberg) -- California Governor Arnold Schwarzenegger rejected BHP Billiton Ltd.'s proposed $800 million natural gas-import facility because it would harm the environment.

He echoed comments by the California Coastal Commission and State Lands Commission, which both turned down the proposal for off the coast of Southern California last month. Schwarzenegger, a Republican, said the state does need additional gas supplies.

The governor's decision, announced today in an e-mailed statement, may terminate Melbourne-based BHP's more than three- year pursuit for approval of the project. The facility would process liquefied natural gas, or LNG.

``Liquefied natural gas can and must be an important addition to California's energy portfolio,'' Schwarzenegger said. ``However, any LNG import facility must meet the strict environmental standards California demands.''

BHP Billiton, Australia's largest oil producer, had proposed a facility off the coast of Ventura County that would be capable of handling enough gas to satisfy about 10 percent of California's demand.

``This one is over and done,'' Susan Jordan, director of the California Coastal Protection Network in Santa Barbara, a leading proposal opponent, said in a phone interview. ``If BHP wants to come in with a different kind of project, that's up to them, but the one they had proposed was clearly not appropriate.''

If Schwarzenegger had approved the project, it likely would have encouraged BHP Billiton to take legal action to overturn the decisions by the state commissions, she said.

`Safe, Reliable'

Schwarzenegger can veto the project based on a federal law that governs offshore developments. The State Lands Commission earlier rejected a BHP application for a lease of state property for a planned pipeline, while the Coastal Commission said the proposed facility would harm air quality and marine life.

``We respect but are disappointed with the governor's decision,'' BHP spokesman Patrick Cassidy said in a telephone interview from Houston. ``For the past four years, BHP has worked cooperatively with state and federal officials'' to ``design and redesign'' the proposal.

The company will ``take some time'' to consider its next steps, he said.

Celebrities such as actor Pierce Brosnan also opposed the plant. They said it would cause excessive pollution and endanger wildlife and residents.

Flurry of Proposals

Cabrillo Port, first unveiled in August 2003, was one of a flurry of LNG investment proposals amid expectations that demand for gas will exceed North American supplies. LNG imports are expected to climb to 4.5 trillion cubic feet in 2030, or 17.4 percent of supply, from 0.6 trillion cubic feet in 2005, or 2.6 percent, according to the U.S. Energy Information Administration.

California, the nation's most populous state, has been seen by investors as fertile ground for LNG because less than 15 percent of the state's gas is produced within its borders. California has also embraced gas as a power-plant fuel because it generates less pollution than fuels such as coal.

``California needs LNG,'' Schwarzenegger said today. ``California faces significant challenges in ensuring adequate natural-gas supplies.''

He said he ``strongly supports'' the construction of an LNG facility off the coast of California.

LNG is chilled to a liquid so it can be transported over long distances by ship to its destination, where the fuel is reconverted to its gaseous form and used to heat homes and generate electricity.

Local Opposition

Some opponents of Cabrillo Port disagreed with the governor about the need for LNG.

``This is a good time for all of us to step back and assess whether any LNG is necessary anywhere on the West Coast,'' said Rory Cox, California program director with San Francisco-based Pacific Environment. ``I don't believe California needs it.''

Other companies working on LNG plans in California include Woodside Petroleum Ltd. and Northernstar Natural Gas Inc. The port of Long Beach in Southern California in January voted to block a facility proposed by ConocoPhillips and Mitsubishi Co.

``If folks would divorce themselves from the fear-mongering and look at the need for natural gas in California, these projects would move forward,'' said Bill Cooper, executive director for the Center for Liquefied Natural Gas in Washington, in a telephone interview.

Texas and Louisiana have proven more receptive to such projects. Four U.S. LNG plants are being developed along the Gulf Coast in those states by companies such as Exxon Mobil Corp., ConocoPhillips, Sempra Energy and Cheniere Energy Inc. Sempra is also building a plant in the Baja California region of Mexico.

Cooling Investments

There are more than 50 projects in the planning stages in North America and Mexico, according to consultants Benjamin Schlesinger & Associates Inc. in Bethesda, Maryland. Investments have cooled amid concerns that delays in the construction of facilities that liquefy gas will cause a shortage of LNG.

``Unfortunately, the supply of LNG around the world is not as plentiful as one would have thought,'' ConocoPhillips Chief Executive Officer Jim Mulva said at the company's annual meeting on May 9. ``The amount of LNG coming into the U.S. is going to be less, and it's going to be deferred into the future.''

There are five operating LNG-import facilities in the U.S. They are owned by companies including Dominion Resources Inc., El Paso Corp. and Southern Union Co.

To contact the reporter on this story: Greg Chang in San Francisco at gchang1@bloomberg.net

Last Updated: May 18, 2007 19:17 EDT