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Shell's Gulf Landing LNG Terminal Approved by MARAD

Shell Gas & Power said its Gulf Landing offshore liquefied natural gas (LNG) import terminal has been approved by the U.S. Maritime Administration (MARAD). The 1 Bcf/d terminal will be located in West Cameron Block 213 about 38 miles offshore Louisiana. Service is expected in late 2008 or early 2009.

MARAD's conditional approval includes acceptable actions to enhance the protection of marine life, including a monitoring program and mitigation of potential impacts. The issuance of the record of decision by MARAD follows a comprehensive regulatory review that began in November 2003.

The project will include two gravity-based structures, LNG containment facilities, open-rack vaporizers, living quarters, a ship berthing system and pipeline facilities. The terminal will be able to receive 135 LNG ships annually, each with cargoes of between 125,000 and 160,000 cubic meters.

Gulf Landing is the eleventh proposed LNG terminal that has been approved in North America (including two approved pipeline projects that would deliver gas from LNG terminals in the Bahamas). It is the third offshore Gulf of Mexico terminal approved by the Maritime Administration/Coast Guard.

"The Gulf Landing terminal is a very attractive entry point to U.S. natural gas markets, both in terms of diversity of pipeline connections and customer access," said Catherine Tanna, Shell Gas & Power's director for the Americas and Africa.

"Shell believes the regulatory review has resulted in a balance between protecting the environment and helping the U.S. meet a critical need for reliable, clean-burning natural gas," said Tanna.

However, some environmentalists publicly disagreed. Aaron Viles, fisheries campaign director for the Gulf Restoration Network, said the approval is a "clear case of the resource scientists being rolled by the pro-energy permitting agency."

Environmentalists have raised questions about the impact of using sea water in the open-rack vaporization process. They say it would have a devastating impact on fish populations, particularly Red Drum, an overfished species that currently is under a rebuilding plan. The National Oceanic and Atmospheric Administration's Fisheries department and the Maritime Administration determined that about 0.1%-3.8% of the annual Red Drum catch in the Gulf could be lost if even one LNG terminal with an open sea water vaporization process is built.

"With each facility, the risk of significant impacts to Gulf fisheries such as red fish and shrimp increases," said Viles. One terminal "could destroy the equivalent of 3.8% of Louisiana's annual red fish catch... It's irresponsible for the Coast Guard to ignore the concerns" about the impact on sea life.

"Important Gulf fisheries like red fish and shrimp could end up paying the price that Shell was unwilling to bear in their resistance to closed-loop technology," he said. Environmentalists have urged regulators to require LNG companies to reuse contained water ("closed loop" process) for the warming process, but that would cost LNG terminal operators about $20-40 million/year in vaporization costs because it would require 1.5% of the cargo to be used for heating. Terminal developers also noted that it would result in some air emissions.

"Those concerned about the long-term sustainability of Gulf fisheries are hopeful that this decision isn't the final determination on whether this open-loop facility is developed," said Viles.

Mark Prescott of the Coast Guard Deepwater Ports Standards Division told NGI that MARAD and the Coast Guard carefully weighed the impact on the fish population with all of the other factors and determined that it was not significant enough to warrant rejecting the terminal's application.

"NOAA Fisheries responsibility is to protect fish... and this issue is quite clear; this [LNG terminal] does not help [the Red Drum situation]," Prescott noted. "Therefore why would they be in favor of it? The Maritime Administrator [John E. Jamian] who had to make this decision had to consider a wide range of issues that include energy sufficiency, security, safety, cost and fish.

"This will have some minor impact but balancing that with all the other issues involved [we] feel this is the right decision," said Prescott.

However, the LNG project does not have a final green light just yet. A separate environmental impact statement (EIS) will have to be done on the construction of the two massive 200-foot by 500-foot cement structures that will form the offshore base.

A huge ditch will have to be excavated near a waterway for the gravity-based structures to be formed and then floated out to sea. "EPA was really not too thrilled that it was not incorporated into the current EIS," said Prescott. "Now they'll have to have a separate EIS. That will be an issue in the record of decision.

"It will be another year before [Shell] has a site approved. It's going to be five years before this project is operational."

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