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LNG Project Killed

Published on 1/23/2007 on Press Telegram
Harbor commissioners cite inadequate EIR, lack of public safety disclosure in decision.

By Kristopher Hanson, Staff writer

LONG BEACH – Harbor commissioners on Monday effectively killed a controversial plan to build a $750 million liquefied natural gas terminal in the port.

Citing a flawed environmental impact report, stalled negotiations and lack of cooperation from the federal government, commissioners decided to abandon the Sound Energy Solutions-backed project after meeting in closed session.

"After deliberation, based upon the opinion from the city attorney which concludes that the EIR on the proposed LNG project is and in all likelihood will remain legally inadequate,' and since an agreement between Sound Energy Solutions and the city does not appear to be forthcoming, the Board of Harbor Commissioners disapproves the project and declines to pursue further negotiations," Board President James Hankla said.

Approval of the project has rested primarily with the five-member Harbor Commission. The commissioners serve as port property landlords on behalf of the city.

Other agencies, including the Federal Energy Regulatory Commission, California Coastal Commission and California Public Utilities Commission, have also played roles in evaluating the project.

SES, which invested in environmental reports, community functions, LNG demonstrations, staff and an aggressive marketing campaign, now faces an uncertain future.

"We're all a bit surprised right now," said Thomas Giles, SES president and CEO. "We had just re-started negotiations with the city last week."

City Manager Gerald Miller could not be reached for comment.

Rumors have circulated that the company may sue to recover some of the costs associated with the failed EIR, although Giles said Monday only that the company was "looking at all our options right now."

Those options may include an appeal urging the city to finish the EIR or a motion asking the state or federal government to intervene.

City Attorney Bob Shannon said the city's decision would withstand a legal challenge.

"We're confident in our position," he said. "There's no legal obligation for the city to continue."

The commission's decision comes after more than three years of heated debate over safety issues and the economic impact of the project, which would be the first of its kind in California.

After a solid start in May 2003 with strong backing from labor and many environmentalists, the project ran into a string of political setbacks, including a damaging decision by FERC to withhold information about potential safety risks to the public.

By 2006, competitors had announced proposals for offshore LNG facilities up and down the coast, making SES' on-shore facility less appealing.

In early December, Mayor Bob Foster blasted the project, saying it posed an "unacceptable" risk to port workers and area residents.

A week later, city officials indicated that SES' proposal to give Long Beach $500 million over 40 years was inadequate.

"Simply put, this is the wrong project in the wrong location," Foster said Monday.

In the end, following weeks of uncertainty and pressure from both sides, commissioners agreed to abandon work on the EIR and end negotiations with SES, a Mitsubishi/ConocoPhillips subsidiary.

Touted as a gateway for clean-burning fuel into the nation's smoggiest metropolis, SES' proposal involved construction of an import facility on 25 acres in the port.

Workers would unload and reheat as many as 120 annual shipments of super-cooled gas from Australia and other Pacific Rim locations, then ship it to customers throughout Southern California.

The site was expected to supply 20 percent of Southern California's LNG needs through an existing network of natural gas pipelines.

The facility was also planned to be a major distribution point for the growing number of LNG vehicles around the Southland, including trash trucks, public bus fleets and big rigs.

SES made lavish financial offers to the city, including a $4 million "groundbreaking bonus" and discounted rates for Long Beach Gas customers.

The deal included $10 million in annual property taxes and $100 million up-front for the city's general fund.

In their final analysis, commissioners, backed by a team of city attorneys, decided that the EIR was too vague and flawed to pass muster.

They questioned the lack of information from federal authorities regarding safety and security impacts, and questioned the methodology and conclusions of safety impacts in the EIR.

The EIR "fails to provide necessary information to the public, most critically in the area of public safety and security, all as legally required" by the California Environmental Quality Act, Shannon noted in a Jan. 8 memo to commissioners.

Kristopher Hanson can be reached at kristopher.hanson@presstelegram.com or (562) 499-1466.

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