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Vol. 10, No. 21 Week of May 22, 2005
Providing coverage of Alaska and northern Canada's oil and gas industry

LNG under siege

Blanco to use veto power for LNG terminals due to fish-killing regasification

Allen Baker

Petroleum News Contributing Writer

It may not be the shot heard ‘round the world, but a letter from Louisiana’s governor could cause some major reverberations in the booming LNG industry.

Gov. Kathleen Blanco says she’s concerned that using seawater to warm and regasify LNG could cause widespread harm to fish and other sea creatures, since the millions of gallons of water used to warm the gas gets supercooled by the process, killing essentially all its marine life.

Blanco sent a letter on May 17 to federal officials in charge of offshore LNG terminals, saying she’ll oppose terminals that use an open-loop system to regasify the minus-260-degree LNG that arrives in huge tankers.

Veto power

Blanco has some muscle besides a bully pulpit. Under federal law, governors can veto facilities in federal waters off the coast of their states.

Meanwhile, in a separate development on a project not far away, the U.S. Coast Guard has suspended its processing of permits for a ConocoPhillips-backed terminal off Alabama.

The Coast Guard responded after an April letter from the Environmental Protection Agency over the same fish-killing issue. Compass Port would be built 11 mines south of Dauphin Island and would use 50 billion gallons of seawater each year to warm the LNG.

Federal fisheries experts say virtually all life in the seawater would be eliminated as it passed through the system, including fish eggs and the microscopic sea life that’s food for Gulf fish.

The EPA has also indicated the facility could cause a plume five miles long that would carry 25 times more sediment than the average for the Mississippi River.

Energy-friendly state

In her letter to John Jamian, acting head of the Maritime Administration in the U.S. Department of Transportation, Gov. Blanco noted that Louisiana has been receptive to the energy industry and LNG terminals in particular: “As a state supportive of LNG development, we have tried to work within the current licensing system to allow offshore LNG development, but also protect our fishery resources,” she wrote. “Despite our best efforts to work with your agency and LNG developers, based on the inadequacy of current data, we are unable to reach an acceptable comfort level with the potential risks presented by the cumulative impacts of multiple offshore LNG facilities that use the open rack vaporizer system.

“Considering these ongoing concerns, I will oppose the licensing of offshore LNG terminals that will use the open rack vaporizer system. Until studies demonstrate that the operation of the open rack vaporizer will not have an unacceptable impact on the surrounding ecosystem, I will only support offshore LNG terminals using a closed loop system having negligible impacts to marine life.”

The problem is, industry officials have said that closed-loop systems would cost too much for the projects to make economic sense.

At least three offshore terminals have been approved in waters near Louisiana, and the Excelerate project, which uses on-ship regasification, has already taken its first cargo. Also in the works in a major ExxonMobil project called Pearl Crossing, about 40 miles offshore Cameron Parish at the western end of the state.

ConocoPhillips, Mitsubishi Long Beach deal

Meanwhile, on the Pacific Coast, ConocoPhillips has finalized a deal with Mitsubishi Corp. subsidiary Sound Energy Solutions, cementing their partnership on a proposed LNG terminal at the port of Long Beach.

The two companies had signed a memorandum of agreement on the terminal partnership in July of last year, said Linsi Crain of ConocoPhillips, so this was essentially a formality. “We have been working side-by-side with them dealing with local, national and state regulators,” she said.

The terminal would sit on 25 acres of industrial land at the Long Beach port. It could handle about 5 million tons of LNG each year, turning it into 700 million cubic feet of gas daily.

It would be a place for ConocoPhillips to bring in Asia-Pacific gas, Crain said, noting that the company has gas interests in the East Timor-Australia area, as well as large deposits in Indonesia and Vietnam.

ConocoPhillips, which has operated its LNG liquefaction plant in Nikiski, Alaska, since 1967, has other active projects at various stages of development in Nigeria, Qatar, Russia and Venezuela, as well as Australia, the company said.

Under the joint development agreement for the San Diego terminal announced May 17, ConocoPhillips and Sound Energy Solutions will establish an equally owned joint venture company, SES Terminal LLC.

The partners expect to make a final decision on the project in the first half of next year, assuming all permits are obtained. The terminal, expected to cost around $450 million, would start taking shipments in 2009.

—The Associated Press contributed to this story

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