July 16, 2008

LNG Firm Seeks Delay on State Review


Citing factors such as unresolved federal procedural issues and the undetermined composition of the liquefied natural gas it hopes to import, an Oklahoma-based company with plans to build an LNG import terminal at Pleasant Point announced Tuesday that it plans to postpone or temporarily withdraw its applications from the state review process.

In a press release issued Tuesday, Quoddy Bay President Donald Smith listed several factors that he says warrant postponing the state review process or temporarily withdrawing the company's application.

According to the press release, the company:

. Might need less processing equipment at the import terminal, depending on which country ends up supplying its LNG, which could save the company $100 million in construction costs.

. Could, along with other LNG developers, get a waiver from federal regulators that would allow for greater flexibility in imported LNG composition standards, which also could determine what kind of processing equipment is needed at the terminal.

. Has been asked to consider co-locating its transmission equipment in the same corridor that would be used by other LNG terminals proposed for Washington County.

. Wants to clarify the approval it received in 2005 from the Bureau of Indian Affairs for its local land lease contract with the Passamaquoddy Tribe.

Smith said Tuesday that Quoddy Bay does not yet know which country will be its source for LNG and so is not sure what the heat content - the number of British thermal units generated by each standard cubic foot - of the imported gas will be. Different countries have different standards for the LNG it exports, according to Smith, and so the company does not know what kind of processing equipment might be needed at the import terminal to make the fuel suitable for pipeline transmission.

Sometimes nitrogen has to be mixed in with the natural gas to reduce its heat content so it can meet federal import standards, according to Smith. Not having to build a nitrogen plant as part of the terminal would lessen the terminal's potential environmental impact and could save the company as much as $100 million in construction costs, he said.

"There has been a recent inflation in construction costs, and we want the opportunity to significantly reduce project costs as well as our environmental impact by eliminating potential unnecessary parts of the project design," Smith indicated in the release.

In a separate phone interview Tuesday, Smith said he is willing to work with other LNG developers interested in Washington County on sharing one right of way for the transmission lines that would connect the terminals to the Maritimes & Northeast Pipeline. The pipeline, which transmits natural gas from Atlantic Canada to southern New England, runs through Washington County north of Route 9.

"Having one right of way makes sense," Smith said. "I'm going to do everything I can to cooperate."

According to the company press release, Quoddy Bay also wants to clarify the approval it received in 2005 from the federal Bureau of Indian Affairs for the land lease it signed with Passamaquoddy tribal officials. A Passamaquoddy group called Nulankeyutmonen Nkihtahkomikumon - translated as "we take care of our land" in English - has sued BIA in federal court, claiming the bureau did not follow federal rules when it approved the lease.

"Quoddy Bay wants to ensure the lease contract was approved correctly by the BIA or is approved again using the correct methods before it continues to proceed with the permitting process," company officials stated in the release.

Smith said that, contrary to claims from critics that delays in the company's review process are a sign that its proposal isn't feasible, extending the review process will allow the company to come up with a better proposal.

"I'm hoping they'll say 'this makes sense,'" Smith said of the project's opponents. "By being patient, we may end up with a project that's more agreeable."

Quoddy Bay also is seeking federal permits for building the proposed terminal, which would be able to process 2 billion cubic feet of natural gas each day, but the Federal Energy Regulatory Commission suspended its review of the company's application this spring, citing insufficient information. Company officials said at the time that they are working to come up with the information that FERC seeks.

Quoddy Bay's is one of three proposals for LNG facilities in easternmost Maine. Downeast LNG has filed an application to build a somewhat smaller facility in nearby Robbinston, while a third group has proposed a facility in Calais, although those plans are still in the early stages.

Both the Quoddy Bay LNG and Downeast LNG projects have encountered opposition from residents concerned about the safety and environmental impacts of the facilities and accompanying tankers.

Other residents, however, view the competing projects as having the potential to pump much-needed tax dollars into local communities and create jobs in the economically distressed region.

A spokeswoman for Save Passamaquoddy Bay, a group of Americans, Canadians and Passamaquoddys opposed to LNG development on the bay, said in a statement Tuesday that Quoddy Bay LNG's request is indicative of the problems the company is having in putting together a viable project.

Linda Godfrey indicated in an e-mail that Quoddy Bay LNG has not put together an environmentally or financially sound proposal and that Canada will not allow LNG tankers to navigate through its waters into Passamaquoddy Bay. The LNG developers eyeing potential sites in Washington County are wasting taxpayer money, she added, and "are still unprepared," despite having had several years to develop their proposals.

"No matter what public relations spin Quoddy Bay LNG attempts to foist on the public, the fact is Quoddy Bay LNG has got a failed project," Godfrey wrote in the e-mail.

According to Smith, Quoddy Bay's attorney, Gordon Grimes, will be in Augusta this week to discuss the company's request with the state Board of Environmental Protection.

BEP has scheduled a hearing for Thursday, July 17, to consider a request from competing LNG developer Downeast LNG to dismiss Quoddy Bay's application. A residents group in Robbinston, where Downeast LNG would build its terminal, also has formally asked BEP to dismiss Quoddy Bay's proposal.

Downeast LNG and the group contend that delays in Quoddy Bay's application review could affect the board's review of other LNG applications, including Downeast LNG's. Downeast LNG has been granted intervenor status in the Quoddy Bay application review process.

Downeast LNG, however, has experienced delays of its own. Last September, the BEP initially denied Downeast's request to withdraw its application so it could revise its proposed pipeline route and submit additional information. The BEP changed its mind and allowed the request in November, leading Downeast to submit a revised proposal in February.

Officials with Downeast LNG declined Tuesday to comment on the possible postponement of the state's review of Quoddy Bay's application.

Cindy Bertocci, executive analyst for the BEP, said Tuesday afternoon that the board had not yet received any such official request from Quoddy Bay. What the board discusses when it meets Thursday will depend on what requests or materials it might receive from Quoddy Bay before the hearing begins, she said.

As of Tuesday afternoon, she said, the board was planning to take testimony and discuss the dismissal requests from Downeast LNG and the residents group, Robbinston Residents in Support of Downeast LNG.

The BEP is scheduled to meet at 9 a.m. Thursday at the Holiday Inn on Community Drive in Augusta, next to the Augusta Civic Center, according to Bertocci. The board is expected to discuss other, unrelated projects first and likely will take up the LNG project sometime after 1 p.m., she said.

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