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Schwarzenegger may hold key to BHP's US$600 m -

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KERRY O'BRIEN: Whoever thought we'd see the day we might have to rely on Arnie Schwarzenegger to
help deliver big dollars to Australia in exports? But that's what it may come to in southern
California, where Australia's resource giant, BHP Billiton, has come up against the wealthy
residents of Malibu in its drive to sell tens of billions of dollars of liquefied natural gas. Two
years ago, Woodside Petroleum secured a $25 billion deal to ship liquefied natural gas from Western
Australia to China - the biggest export deal in Australian history. Now, Woodside and BHP are
pursuing contracts with California and Mexico that could be worth twice as much as the huge China
deal. But Californian residents have vowed to block BHP's plan for a US$600 million floating gas
platform off the coast of Malibu, and California Governor and celluloid hero Arnold Schwarzenegger
could be the final arbiter. Washington correspondent Jill Colgan reports from the Californian

JILL COLGAN: California has more than 35 million people, and only the wealthiest can afford to live
here, on the coast. It's home to movie stars and billionaires, and if BHP Billiton is successful,
these waters will also be home to a huge floating natural gas platform called Cabrillo Port.

KATHI HANN (PUBLIC AFFAIRS CONSULTANT, BHP BILLITON): I think that once people understand the facts
about Cabrillo Port, they'll understand and realise that we are building it to the highest public
safety and environmental standards and that it will provide a clean, safe, reliable source of
energy for California.

JILL COLGAN: At its closest point, Cabrillo Port would sit 22 kilometres off the coast. But
distance hasn't made the hearts of locals fonder.

ANDY STERN (MALIBU MAYOR ELECT): People are utterly and completely opposed to the project. They're
horrified about it.

JILL COLGAN: The gas platform will be just a blip on the horizon; barely visible, if at all, from
here on shore. But the residents of this stretch of coast want to keep it free of any threat of
damage, no matter how small the risk, and they have the resources to back them up. Malibu's
incoming mayor, Andy Stern, says BHP has done little to ease the concerns of locals, who fear
accidents, natural disasters, even terrorism could turn the platform into a floating danger.

ANDY STERN: I'm concerned it's gonna blow up. I'm concerned there will be a tsunami. I'm concerned
there will be an earthquake. We're in earthquake country. I have fallen out of my bed because of
earthquakes. Why in the world would someone build something in the ocean like that - a highly
dangerous thing?

JILL COLGAN: The council doesn't always see eye to eye with environmental groups, but on this,
they're sitting on the same side of the fence.

MARK MASSARA (DIRECTOR, SIERRA CLUB CALIFORNIA): Well, the potential for accidents, spills and
disasters is there with the operation, and that's a fact of life and it's a fact of natural gas
terminals, and we're unwilling to put up with that risk, given the value of our coastal resources
and the fact that conservation measures and existing pipelines can more than satisfy our natural
gas needs.

SUSAN JORDAN (CALIFORNIAN COASTAL PROTECTION NETWORK): My impression of the project was that it's a
technology that's never been done before. This is what we consider to be a guinea pig project, and
frankly, we're unwilling to allow the first one to be built off the California coast.

VIDEO: In order to help alleviate the predicted energy shortfall in the US, BHP Billiton is
proposing to build Cabrillo Port to supply clean natural gas to California.

JILL COLGAN: Cabrillo Port is an ambitious project that would cost BHP up to US$6 billion by the
time it's finished. It involves building a permanently moored floating storage and regasification
terminal to receive tankers carrying LNG - liquid natural gas - from Western Australia.

VIDEO: The tugs firmly press the LNG carrier against the fenders of the FSRU. The LNG carrier's
manifold is now aligned with the FSRU's loading arms. During this process of securing and aligning
the two vessels, the tugs keep the carrier firmly alongside the FSRU.

JILL COLGAN: The LNG would be regasified on the terminal and pumped via two pipelines along the
seabed to shore. So far, BHP has played down the amount of opposition the plan faces.

KATHI HANN: The opposition is pretty much local, as far as we can tell.

VIDEO: The total loading operation takes about 16 to 20 hours.

JILL COLGAN: But opponents have delayed Cabrillo Port already. Earlier this month, the US
Coastguard suspended its review process of the project, wanting answers from BHP to environmental
and safety questions. For all the money it's spending on the project, BHP has not convinced locals
of its safety, with assurances that have rung hollow.

KATHI HANN: Well, I suppose that's always a concern, but look, I live here in Ventura County. I've
raised my family here; my kids went to school here. I live in Oxnard. Frankly, I'm not going to
work for a company that's going to do some harm to the community.

JILL COLGAN: BHP is now fighting an environmental network with deep roots.

NEWS FILE: In 1969, a spill covered the beaches of Santa Barbara with crude oil.

JILL COLGAN: It was on this coast that the modern environmental movement was forged in America,
after a devastating oil spill in 1969, sparking a militant resistance.

MARK MASSARA: Sierra Club and the public in California are unwilling to allow further
industrialisation of our coastal resources, especially for the sole purpose of furthering our
dependence upon natural gas, which is a finite polluting fossil fuel.

JILL COLGAN: But now they're fighting a surge of would-be developers who see California as rich
pickings. The State's energy needs are growing. California can meet only 15 per cent of its LNG
demands, with predictions of a shortage crisis by 2007. Importing more LNG appears inevitable, and
the big energy companies are vying for a slice of the action.

SUSAN JORDAN: The companies are driving the process. It's like they're using the California
coastline as a dartboard - you know, Chevron Texaco wants to put their project here; BHP Billiton
wants to put their project there; Crystal Energy wants to put theirs on a platform. I mean, this is
an incomprehensible process. It doesn't follow any logic. We want to be in the driver's seat. If we
decide we need LNG, we in California should be making the decision about where on the coast it
should be located.

JOHN OLSEN (CONSUL-GENERAL TO LOS ANGELES): You can respect those views, but at end of the day,
one's got to have balance and objectivity in making a policy determination, and I see the process
taking that step, that process forward, and I think at the end of the day, that will mean a green
light for this project.

JILL COLGAN: Australia's Consul-General in LA is former South Australian Premier John Olsen. He's
invested enormous time and energy into promoting the project, speaking at public meetings on behalf
of BHP.

JOHN OLSEN: Australia can demonstrate 1,600 shipments throughout the world always delivered on time
and never with incident. That is Australia's record, and that is what we're offering Californians
in answer to a crisis that's about two or three years away from them.

JILL COLGAN: But he has not endeared himself to residents.

ANDY STERN: The Consul-General was astonishing to all of us. We found him to be arrogant. We found
him to be totally and completely uncaring about us, and his attitude was clearly, "We want this. We
want jobs for Australia, and we're just gonna go ahead and do it." He didn't say that, but that was
the attitude we perceived from him.

JOHN OLSEN: Perhaps we should ask also the other 30 million-odd Californians who will need energy
to power their industry, to preserve and increase jobs for Californians in the future, energy
required to sustain the Californian economy, energy required to turn the lights on in your home.

JILL COLGAN: Australia has backed the project at the highest level, with the Prime Minister
personally pitching it to Governor Arnold Schwarzenegger. Joining in Australia's G'day LA
celebrations this past week, Federal Resources Minister Ian MacFarlane followed up the Prime
Minister's meeting with members of the Governor's office and met with opponents of the project.

IAN MacFARLANE (RESOURCES MINISTER): I met yesterday with Susan Jordan, who represents some of the
environmentalist groups, and I certainly acknowledge her concerns, but the reality is there is now
an acknowledgment by the administration that California needs more natural gas, and Australia will
stand ready and willing to export that gas to whichever option the Californian people decide is
their best option.

JILL COLGAN: BHP and the Federal Government are banking on getting through the review process and
landing the project in the office of Governor Schwarzenegger, whom they hope will give it the green
light. But that may not end the process, according to local reporter Jonathan Friedman, who
attended a hostile public meeting on the project in Malibu.

JONATHAN FRIEDMAN (REPORTER, 'MALIBU TIMES'): Well, there are some developers in Malibu who have
tried to build for 20 years, and there are a couple of projects in certain areas that have been
going on endlessly. Because of the wealth in this city, they can bring together lawsuit after
lawsuit after lawsuit. They've driven companies out of the city by suing them so much that the
company either runs out of money or the company just gets fed up and leaves.

JILL COLGAN: What avenues of recourse do you now have open to you?

ANDY STERN: That's sort of like asking the coach of a football team on the other side. We're
certainly studying our options and we're certainly speaking with various attorneys and other
governmental jurisdictions concerning what our options are.

JILL COLGAN: Let me put it this way: in the past, has the council here chosen a litigious route?

ANDY STERN: If you asked that of Malibu citizens, they'd bust out laughing. I'd be happy to show
you the list of our lawsuits. We're involved in 10 or 11 just against the California Coastal
Commission, and probably two or three dozen more with other people.

JILL COLGAN: If the county sues, BHP could find itself in a long and costly legal war while other
companies exploit the competitive advantage. Ultimately, it may be Californian courts that decide
whose interests matter most and what is a fair price to pay for life-sustaining energy.

KERRY O'BRIEN: It seems not all Australian exports are as welcome in Malibu as Mel Gibson. Jill
Colgan reporting.