SACRAMENTO Gov. Arnold Schwarzenegger, who less than two years ago called the site his "personal preference" for a liquefied natural gas facility, rejected a proposed LNG terminal off the Oxnard coast on Friday, saying it fell short of meeting California's environmental standards.

Under federal law, the governor's rejection is final, meaning the Australian energy firm BHP Billiton will not be able to receive a federal permit.

"The Cabrillo Port LNG project as proposed would result in significant and unmitigated impacts to California's air quality," Schwarzenegger wrote in a letter to U.S. Maritime Administrator Sean Connaughton. "Any LNG import facility must meet the strict environmental standards California demands."

Schwarzenegger, however, left open the door for other applications, saying he still strongly believes California needs to expand its access to natural gas by importing LNG.

"Liquefied natural gas can and must be an important addition to California's energy portfolio," he wrote.

Oxnard activist Shirley Godwin, who for four years has helped wage a grass-roots campaign against the BHP project and LNG generally, said she was "thrilled" with Schwarzenegger's veto. "I'm also very concerned about his strong support for LNG," she said. "It sounds like he's really encouraging these other projects."

Three other energy firms have proposed LNG terminals off the California coast, including one project that seeks permission to convert Platform Grace, an offshore oil platform 12.6 miles due west of Oxnard.

Billy Owens, project manager for the Clearwater Port project, called Schwarzenegger's decision "good news" for his company.

Clearwater Port officials this week publicly pledged to abide by all local air quality regulations.

"We've been comfortable with that position for a long time," Owens said. "Our project has a much smaller environmental footprint."

Schwarzenegger's rejection of the federal permit comes on top of decisions last month by the State Lands Commission and the California Coastal Commission to reject the state permits the project would have required.

In his letter, the governor specifically objected to a preliminary decision by the U.S. Environmental Protection Agency that would have exempted the BHP project from Ventura County Air Pollution Control District regulations, and said any project that results in onshore air pollution should be required to offset its adverse effects on local air quality.

"Clearly he looked specifically at this project and saw the things that we have seen," said Godwin.

Oxnard Mayor Tom Holden, who met with top Schwarzenegger advisers earlier this month to voice the city's concerns, praised the governor for taking a fresh look at a project he once had praised.

"We thank the governor for having the courage to re-look at this," Holden said.

He added the activism of Oxnard citizens played a major role in forcing state officials to critically analyze the project.

"What made a difference is that residents of Malibu and Oxnard rallied together," he said. "The combination of Oxnard, rich in culture and diversity, with Malibu, with its star power, was very dynamic."

BHP Billiton spokesman Patrick Cassidy said the company will need time to evaluate Schwarzenegger's comments before deciding whether and how to proceed.

"We respect, but are disappointed with, the governor's decision," he said. "For the past four years, BHP has worked cooperatively with federal and state officials."

Schwarzenegger's action disappointed manufacturers and other large energy users, which argue California needs to expand its supply of natural gas to meet future electricity needs.

"The fact is that we only produce 13 percent of our needs and our economy is growing," said Dorothy Rothrock, lobbyist for the California Manufacturers and Technology Association. "We appreciate that the governor agrees we need LNG. While we are disappointed he did not approve this project, we are confident that LNG is a safe and clean alternative that will hopefully come to California soon."

Critics of the BHP project said the rejection underscores the need for a comprehensive statewide analysis of the need for LNG and a comparative review of all the proposals.

"It's really what needs to happen," said Susan Jordan of the Coastal Protection Network.

Jordan advocates passage of SB412, a bill by Sen. Joe Simitian, D-Palo Alto, that would require such a statewide review. Similar proposals have failed in each of the past two years, but Jordan said rejection of the BHP proposal should give new life to the idea.

"We've now seen pretty dramatically that the lack of any meaningful process has not served the public or the industry well," Simitian said. "It suggests there's a crying need for a rational process at the state level. We can't get to the right place if we don't know where we're headed."