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Coast Guard Resumes Review of McMoRan's Main Pass LNG Terminal

McMoRan Exploration Co. said the U.S Coast Guard on April 21 resumed the statutory period under the Deepwater Port Act (DWPA) for review of the company's proposed 1 Bcf/d Main Pass Energy Hub liquefied natural gas (LNG) import terminal and gas storage facility offshore Louisiana. McMoRan now expects the terminal to be approved by the end of the year.

The DWPA establishes a specific regulatory time frame of 330 days from the date that a notice of a complete application is published until a final deepwater port license is issued or denied.

The Coast Guard "held up ours and other applications for offshore LNG terminals while they gathered additional information on the marine impact issue," noted McMoRan spokesman Bill Collier. "In our case there are some things that are unique to our facility. We have this two-mile wide salt dome beneath the facility in which we plan to implement cavern storage so that we have that additional business operation."

The LNG project also would include a 28 Bcf salt dome gas storage field. Aggregate peak deliverability from the proposed terminal, including deliveries from storage, are expected to reach 2.5 Bcf/d.

The Coast Guard requested information on how the storage operation would work. It will be the first offshore gas storage field in operation. Although salt dome storage has worked well onshore for many years, there is very little information available on how it will operate under the Gulf of Mexico, Collier noted.

The statutory clock was stopped on several other deepwater port applications late last year, including applications for ExxonMobil's Pearl Crossing terminal BHP Billiton's Cabrillo Port offshore Oxnard, CA, and ConocoPhillips' Compass Port LNG import in the Gulf. One of the more significant realizations in recent months at the Coast Guard was the large environmental impacts associated with onshore construction of massive gravity-based structures used for the terminals. Another issue was the impact on the marine environment from the use of the open-rack vaporizers, which take in large amounts of seawater for heating and then return the water after usage. However, while additional information was requested, none of the projects so far appear to be threatened by an adverse regulatory decision.

McMoRan said the Coast Guard is satisfied that sufficient information has been provided. Meanwhile, the company also is working with the Federal Energy Regulatory Commission on its application for pipeline and storage operations.

The company also said it is continuing discussions with potential LNG suppliers in the Atlantic Basin and with natural gas consumers in the United States to develop commercial arrangements for the facilities. It has not completed any supply or market agreements to date.

The company reported a net loss of $5.7 million, $0.24 per share, for the first quarter of 2005 compared with a net loss of $13.3 million, $0.78 per share, for the first quarter of 2004. Its net loss from its continuing operations this year totaled $4.3 million, which includes $2.3 million of start-up costs associated with the Main Pass Energy Hub and $7.5 million of exploration expense.

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