Providing coverage of Alaska and northern Canada's oil and gas industry
May 2004

Week of May 23, 2004

No undue delays for LNG projects, FERC says

Federal agency works to finish LNG safety report; consultant says difficult to predict fire potential from spills

Larry Persily

PN Government Affairs Editor

The Federal Energy Regulatory Commission says it will not “unduly” delay any of the dozen pending applications for new liquefied natural gas receiving terminals along U.S. shores as it works toward a final report on LNG safety risks.

FERC issued a consultant’s report May 13 on the risk of fire and explosion from LNG tankers coming into port or tied up at a dock, specifically looking at how much damage could result if terrorists were able to blow a hole in a ship and its gas storage tanks.

The commission’s final report on LNG tanker safety is expected by the end of the year, FERC Commissioner Joseph Kelliher said at a natural gas conference in Denver. Until then, the federal agency would hold off approving any new terminals, he told Dow Jones Newswires, although a commission spokesman later clarified FERC’s position that it would not unduly delay approval of any pending applications.

The agency is accepting public comment on the consultant’s report until May 28.

Lack of information makes modeling difficult

The report, prepared by Houston-based ABSG Consulting Inc., said it is difficult to predict the effects of an LNG spill for several reasons:

• “No models are available that take into account the true structure of an LNG carrier, in particular the multiple barriers that the combination of cargo tanks and the double hulls in current LNG carrier provide.

• “No pool spread models are available that account for wave action or currents.

• “There is no data available for spills as large as the spills considered in this study.”

But, after stating those caveats, the report said an LNG tanker could catch fire and even explode, threatening people three-quarters of a mile away if terrorists were able to breach a ship’s double hulls and also its cargo storage tanks. Under some conditions, the report said, a gas leak could create a flammable vapor cloud that would, at the right mixture with air, ignite and travel several thousand feet before dissipating.

“It suggests that some of the accident scenarios involve enormous fires that could cause deaths, severe burns to people several thousand feet away, and hot enough to burn wood and melt steel closer in,” said U.S. Rep. Edward J. Markey, D-Mass., whose district includes the DistriGas LNG facility at Everett, Mass.

LNG tankers were temporarily barred from Boston Harbor and the Everett facility after the Sept. 11, 2001, terrorist attacks in New York City and Washington, D.C., and opponents of LNG terminals proposed for the East, West and Gulf coasts worry the new facilities could make their communities the target of terrorist attacks.

Maybe a dozen new terminal predicted by 2025

In addition to the 12 pending FERC applications for new LNG terminals, developers have proposed more than two dozen other sites to receive shipments of imported gas to meet America’s growing supply shortage. Most proposals, however, are expected to die off in the face of community opposition and/or economics. International oil and gas consulting firm Wood Mackenzie Ltd. expects the nation could see perhaps seven new terminals by 2010-2012, and the U.S. Department of Energy expects as many as a dozen by 2025.

The ABSG Consulting report for FERC noted that although communities worry about the risk of LNG spills and fires, the industry has a good record: “These vessels have a remarkable safety record and provide an essential link in the movement of LNG from production locations to consumer locations.”

The report said the lack of research and proven “pool spread models” make it difficult to predict how much gas would spill out of a tanker, whether it would ignite or disperse, and how far any damage might extend.

“Clearly, there is an opportunity to develop pool spread models that consider more realistic analysis of the spill behavior on the water surface,” the report said. “Large-scale spill tests would be useful for providing better data for validation of models.

“It is also important to note that this study addresses the potential consequences of large-scale LNG cargo releases without regard to the sequence of events leading to such an incident or their probabilities of occurrence. As such, this report does not and was not intended to provide a measure of risk to the public.”

FERC, in its final report later this year, will attempt to model the risk that comes with allowing more LNG tankers and receiving terminals in the country.

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