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ConocoPhillips Offers Guaranteed Deliveries to AL in Return for LNG Terminal OK

Working to improve the prospects for its proposed Compass Port LNG terminal off the coast of Alabama in the Gulf of Mexico, ConocoPhillips has offered several concessions to the state, including guaranteeing that up to 200 MMcf/d of gas would be on call for use in the state on a monthly basis at market prices.

Steve Lawless, manager of LNG stakeholder relations for ConocoPhillips, said that kind of guarantee usually commands a premium or reservation fee, but industries in the state would simply pay the market price. He said ConocoPhillips would set up some kind of nomination process with the state, where the state could nominate midway through the previous month for deliveries to start on the first of the next month.

This could be an incentive for business development in the state. This "energy guarantee," plus the pledge to spend at least $100 million with Alabama businesses during construction and $15 million per year during operation, were offered to the Alabama governor, who has said previously he has reservations about the company's proposal to build an offshore terminal off Dauphin Island (see NGI, June 27, 2005). The offshore terminal must be permitted under the Deep Water Ports Act, which gives the governors of coastal states some say in decisions on siting a terminal, along with the U.S. Maritime Administration and the Coast Guard.

Currently, the processing of all projects under the Deep Water Ports Act in states that suffered damage in last summer's hurricanes, is on hold. The Coast Guard ordered suspension of project activities to allow the affected states to concentrate on cleaning up storm damage. ConocoPhillips has petitioned the Coast Guard to resume processing of its application.

The company also told the Alabama governor it would pledge there would be no net impact on any "species of concern" named in a final environmental impact statement on the project. Officials in Gulf coastal states have expressed concern about use of an "open loop" system with seawater to warm the LNG during the regasification process, saying this could harm fish. ConocoPhillips says there is new data from researchers that shows the process can be used in a manner that will cause little damage to sea life.

Takeaway capacity would be 1 Bcf/d from the proposed Compass Port LNG import terminal, located 11 miles south of Dauphin Island. ConocoPhillips also has proposed a terminal about 50 miles out in the Gulf off Louisiana.

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