Rancho’s Hidden History Sheds Light on Public Safety Threat
By Paul Rosenberg, Senior Editor
“Mistakes are a sign of action and movement, and are necessary and inevitable in business,” said RJ Munzer, long-time CEO of Petrolane, in a 1979 interview in Nation’s Business. “But living with mistakes is a sign of stupidity.”
San Pedro’s Rancho LPG facility — built by Petrolane in 1973 — strikes some as a perfect example of what Munzer was talking about, despite whatever Munzer himself might have thought about the facility.
Initially built to receive about 50 million gallons of liquified petroleum gas annually via ship, Rancho only received two shipments, totaling less than 12 million gallons. It would never function as originally intended or as its environmental impact report described.
The first shipment was the only one from Sonatrach, Algeria’s state-owned oil and gas company, which had signed a nine-and-a half year contract.
The second, following the Sansenia explosion, required an escort of two fireboats and a complete shutdown of the port. Aroused public pressure blocked construction of an anticipated prime customer, a companion mixing plant in Wilmington designed to process propane with air to dilute it so it could substitute for natural gas. Still, Munzer was a lifelong salesman and LPG was what he sold best. But a salesman may not be the best judge of public safety.
Built at a time of stunningly lax regulations — without either a building permit or an environmental impact report (one was completed just as construct finished) — it has repeatedly been kept alive by bureaucratic inertia, despite sharply increased evidence of risk and failures to comply with regulations. Ever since the 1984 San Juanico disaster near Mexico City, which killed more than 500 people and injured more than 7,000, the dangers of LPG transport have been undeniable, yet they’re still systematically ignored.
Hidden Origins: Nixon’s Secret Plan Casts Local Shadow
Why does San Pedro have an ultra-hazardous LPG facility in the first place? Munzer is one key factor. But another is Richard Nixon, who made the Algeria connection possible. According to documents uncovered by Marcie Miller, who served on Coastal San Pedro Neighborhood Council from 2009 to 2013, a case can be made that the facility is a bizarre offshoot of Richard Nixon’s infamous “secret plan” to win the Vietnam War, which he promised to voters in 1968.
He didn’t actually have a plan to win the Vietnam War, but he hoped to end it less ignominiously with a strategy to divide the forces of similar national liberation struggles across the globe; one such struggle won Algeria’s independence from France in 1962. Nixon’s 1972 trip to China openly epitomized this approach. But a great deal more was hidden, including a secret effort to woo and influence Algeria — a participant in the Paris Peace Talks. This centered around initiating liquified natural gas and liquified petroleum gas imports as documented in once-classified documents from the White House, CIA and U.S. Department of State.
“There was a flurry of activity [from] 1969-70: ‘How can we win favor with the Algerians?’” said Miller, summarizing what she had found. “The best way would be to infuse a new government with lots of money in return for something.”
That something, she suspects, included the San Pedro LPG terminal and Nixon’s involvement helped hurry the process with minimal oversight.
The interest in liquid natural gas (primarily methane) is central in the documents, given the relative size of the markets involved. But the San Pedro and Algeria LPG connection was publicly announced at the time, just a few months after the LNG deal. What wasn’t known was the hidden geopolitical side of the story.
“Options open to the U.S. to increase its influence and prestige in Algeria are few,” a February 1967 CIA memo began. However, prospects gradually improved, despite a break in diplomatic relations following the Arab-Israeli Six-Day War in June of that year.
“[Algerian President Houari] Boumediene has categorically stated that his primary interest is in economic development,” said National Security Advisor Henry Kissinger in a memo to Nixon in October 1970. “He is anxious to have greater access to U.S. energy markets, capital resources and technology, and commercial ties with the U.S. have flourished even in the absence of diplomatic relations.”
In June 1971, Kissinger wrote a memo supporting the Sonartach LNG deal.
“It would improve relations with Algeria while reducing the Soviet influence and strengthening elements within Algeria who favor closer ties with the U.S.,” he wrote.
The following March, Kissinger continued.
“While the Algerians have not abandoned their philosophical positions on such issues as the Palestinian revolution and Vietnam, Boumediene’s pragmatic interest in developing Algeria has made possible a foundation for relating to the U.S. in areas — primarily economic — matching Algeria’s needs,” he wrote.
On April 3, 1973, the Washington Post had reported a $1.7 billion deal for Algerian LNG from Sonatrach. The deal included the transportation of one billion cubic feet of liquified natural gas within 25 years. Then, on June 21, 1973, the Los Angeles Times announced that Petrolane would purchase about 500 million gallons of LPG from Sonatrach for as much as $40 million within a nine-and-a-half-year period. But neither deal worked out as planned. The LNG deal floundered, resulting in a massive lawsuit, as Algeria repeatedly increased the cost of its product in the wake of the oil crisis and the following geopolitical turmoil. The LPG deal, as noted above, only produced a single six-million-gallon shipment. But at the time the deals were conceived, they were central to altering United States-Algeria relations. Ripples were felt throughout North Africa and the wider oil-producing world.
A wide range of other issues float through the declassified documents — everything from a proposed $60-plus million air defense system deal with Raytheon to concerns over Algeria having given asylum to Timothy Leary, who the Algerians said had just “dropped out of the sky,” and who worried them as a potential influence on their youth. But the LNG project clearly played the central role.
Three other factors loom behind Petrolane’s creation of the LPG facility: the unique nature of the LPG business as a niche product in the oil and gas industry, Petrolane’s spectacular growth record — both in its core business and elsewhere — based on seeing itself primarily as a sales company and the tremendous growth of the oil and gas sector in California within the previous decade.
As explained in the 2003 book, The Story of LPG, that story “began with a problem, an unstable transportation fuel, continued with a disaster, the Hindenberg crash in 1937 and then developed with the efforts of a few enterprising individuals who had the vision to see its commercial possibilities.”
The early disasters remain as warnings.
Munzer had the same sort of enterprising vision that helped launch the industry in the first place, always looking for new ways in which LPG could be used or sold. Replacing distribution via cylinders with customer tanks that could hold several months’ supply was an early source of Petrolane’s growth, for example. Turning LPG into a common auto and truck fuel was a particular long-term obsession for Munzer.
But he wasn’t just wedded to LPG. Petrolane never had a formal growth plan according to Munzer. “Instinct and desire, those were the things that moved us,” he told Nation’s Business in 1979. “In the early 1960s, we realized we could really sell anything if it fit the locations in which we were operating. Our base was marketing; we understood that function, regardless of the product.”
In the early 1960s, the Los Angeles Times began publishing annual lists of California’s top 100 companies. In 1963, Petrolane was ranked 82nd in the state, with sales of $29 million and $2.3 million in profits, roughly 1 percent of top-ranked Standard Oil of California, with sales of $2.25 billion and profits of $313.8 million. Two other oil companies made the top 10 that year.
The next decade saw California’s oil and gas business boom, but excesses and dangers came into focus as well. Smog-fighting intensified as a Los Angeles concern and the 1969 Santa Barbara oil spill ignited the modern environmental movement, giving rise to Earth Day and spurring a wave of state and federal laws. Petrolane increasingly promoted LPG as an ecofriendly alternative. In a 1971 Los Angeles Times story, “Petrolane Reaps Profits as LP Scores Hit with Ecology Buffs,” Munzer predicted that LPG would account for 3 percent of all auto fuel in the United States by 1975 — a dramatic increase over the (unverified) 1 percent figure he cited as then current.
By 1973, the number of oil and gas companies in California’s top 10 had grown to five, including the top three slots. But Petrolane grew even faster: more than twelvefold in sales and almost sevenfold in earnings by 1973. It ranked 37th, with sales of $352.8 million and $15.9 million in profits, while the top five oil companies totalled $21 billion in sales and $1.5 billion in profits.
At the same time, Petrolane’s holdings had diversified significantly. Operations expanded from 17 states along with British Columbia and Mexico in 1963 to 47 states, Canada, Mexico, the Caribbean and western Europe in 1973. By that time, Petrolane’s holdings included a “fleet of 61 vessels worldwide for offshore exploration and development, a services division providing directional drilling and surveying services, as well as 51 Stater Brother supermarkets, 26 Mark C. Bloome tire centers, 14 drug stores, and three department stores in a joint venture.”
Petrolane’s “Green” Fantasy
Stater Brothers grew rapidly under Petrolane’s ownership, but the tire centers relate directly to our story. When Petrolane made a $30 million offer to buy the tire center chain in January 1972, the Los Angeles Times prominently reported that “ecology-minded motorists will have more facilities where they can have their cars converted from gasoline to propane gas … the fuel conversion facilities would be installed at some of the 22 Mark C. Bloome tire and automotive accessory outlets in Southern California, according to R.J. Munzer, Petrolane chairman.”
There were three reasons this was an audacious, if not hare-brained scheme. First, LPG conversion kits cost $400 compared to $300 for LNG conversion (and are still seen as problematic today); second, the lack of refueling stations (Petrolane had opened five such stations, including one in Los Angeles, which could work for fleet sales — its initial market niche — but not for individual drivers); third, LPG’s particularly dangerous properties.
“I would never ride in an LPG-fueled car,” retired oil industry consultant Connie Rutter told Random Lengths News, summing up her safety concerns.
Still, Munzer saw it as a huge potential market and he was nothing if not a salesman. His attitude permeated Petrolane’s thinking. The after-the-fact environmental impact report for the LPG facility made a characteristically dramatic and wildly unrealistic claim:
“If all local cars and trucks were equipped with propane combustion equipment, air pollution from motor vehicles would be reduced by 50 to 75 percent in the air basin,” the environmental impact report stated.
That appeal apparently resonated with public officials at the time. But grassroots environmentalists were unmoved and so was the marketplace.
At the same time, the extremely primitive EIR paid no attention to any potential for explosions. Nor did it foresee anything like the current operations. It describes the project as composed of three elements: a marine unloading arm, an underground pipeline and a storage and distribution terminal facility, containing no discussion of rail operations at all, much less of safety considerations.
“Petrolane planned to receive LPG by ship, blend it with air in another plant in Wilmington, then send it out by truck to customers who were affected by an expected natural gas shortage in 1972,” Rutter summed up.
Petrolane apparently began with the assumption that no EIR would be needed. But on Sept. 21, 1972, the California Supreme Court ruled (in Friends of Mammoth v. Board of Supervisors) that government agencies must file EIRs before approving significant private developments. On Oct. 4, the Los Angeles Times reported that the Los Angeles County Supervisors passed a motion directing the development of county procedures and placed 14 pending conditional use permits on hold. Petrolane’s project was apparently already underway. Its EIR was not completed until the project was done, with no public review process. As noted above, it did not secure a city building permit either. Rather than revisit and correct any flaws, they have been repeatedly treated as sacrosanct and even compounded over the years.
The most recent example of this involves the State Lands Commission. Corresponding with Rhys Williams, chief of staff to Lt. Gov. Gavin Newsom, one of three board members of the State Lands Commission, homeowner activist Janet Gunter referred to the evidence Miller found.
“There has never been any environmental impact review that responds to this LPG operation as it exists today,” Gunter wrote.
She pressed for the commission to get the Port of Los Angeles to provide “a rationale and a justification for the high risk exposure and potential liability that faces the public and the State from this site and its rail use.”
“You’re asking the commission to exercise jurisdiction that it does not appear to hold, in my opinion,” Williams wrote in response.
But Miller has also turned up evidence that the commission had a much more hands-on understanding of its role and responsibilities in the 1980s and 90s.
For example, a calendar item from May 9, 1996 states: “Section 10 of Chapter 29 requires that the commission approve all new contracts; and all amendments to existing contracts entered into by the city as tidelands trustee for, among other things, the processing of gas from the Long Beach granted tidelands.”
Given this view of oversight responsibilities, the commission would surely seem to have jurisdiction over operational changes that legally require a new EIR, as has happened at Rancho and Petrolane over the years. Activists will be making that argument with renewed force when SLC considers an informational item on Rancho at its Aug. 17 meeting —with a satellite video-conference meeting site at Ports O’Call Restaurant. While many of the details in Rancho and Petrolane’s history remain obscure —if not completely hidden — enough is now known to see how past patterns continue to repeat — and how government officials have repeatedly failed to correct past mistakes.
“Mistakes are a sign of action and movement, and are necessary and inevitable in business,” Munzer once said. “But living with mistakes is a sign of stupidity.”