The Lands Commission voted 2-1 on Monday night against the 3,000-page report after members raised such issues as global warming and cost-effectiveness during an all-day hearing attended by worried residents, including actor Pierce Brosnan. A BHP spokeswoman in Melbourne said the company would review the commission's decision and assess its position.
"Then we will look at what we will do next," the spokeswoman said.
BHP Billiton's Cabrillo Port project involves building a terminal larger than an aircraft carrier about 14 miles (23 km) off the California coast. The plant would unload liquefied natural gas and regasify it before pumping it ashore.
Some residents were worried it could be a terrorist target.
The company says the plant would produce more than 10 percent of California's daily natural gas consumption and would be environmentally friendly. A spokesman did not respond to an email seeking comment on the vote.
Five governmental bodies, as well as California Gov. Arnold Schwarzenegger and U.S. President George W. Bush, need to approve the project.
Schwarzenegger, who has gone to great lengths to establish his "green" credentials, said in a statement that an LNG facility would make California less vulnerable to fluctuations in gas supply and price.
He said he would use a federally allotted 45-day review period to ensure the project meets safety standards.
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