NGI The Weekly Gas Market Report / NGI All News Access

Developer, City Spar Over LNG Terminal Benefit

Dispute over the local economic benefit of a liquefied natural gas (LNG) receiving terminal at the Port of Long Beach has stalled negotiations between Sound Energy Solutions (Mitsubishi, ConocoPhillips) and the City of Long Beach.

A report by a Cal State University Long Beach economics professor commissioned by Sound Energy Solutions (SES) concludes that the proposed $500 million, 1 Bcf/d LNG receiving terminal in the city's harbor would generate $10.3 million in annual tax revenue to the city and another $8 million annually to the state. Construction would mean 400 jobs and a $100 million payroll while the facility is being built. But a separate study by a consultant hired by the city denounces the project as offering too little.

Although the head of the Long Beach Gas & Oil Department isn't publicly discrediting the SES economic study, the city elected leaders are critical of the plant's potential economic benefits and skeptical about the safety claims, despite a draft joint federal-Port of Long Beach environmental impact report that said the project is "acceptable." Chris Garner, director of the municipal utility department, told the Long Beach Press Telegram that SES isn't living up to some of the city's demands that call for the LNG facility to bring local residents "significant value" through discounted natural gas and a "consistent stream of money into the city's general fund."

It has been nine months since the Long Beach City Council on a 5-4 vote instructed its municipal staff to continue negotiations with SES regarding long-term supplies for the city's municipal gas utility and a pipeline interconnection with the proposed LNG terminal (see Daily GPI, May 26, 2005). Garner is unsatisfied with the progress, although SES's top executive, Tom Giles, has told local news media that the company's offer is just a starting point.

In a status report memo last Tuesday to the mayor and city council, Garner called the SES LNG plans "controversial" for the city, and as such, "during negotiations SES has been told repeatedly that any offer it submits to the city must provide substantial ongoing value and benefits to both the citizens of Long Beach as well as the city itself. SES offered a proposal (characterized by SES as an 'initial'/ offer) with some specific monetary terms.

"The SES proposal is unacceptable and severely lacking in fair value as it would not result in substantial savings in natural gas bills for Long Beach residents, and would not provide substantial ongoing revenue available to the [city] general fund," Garner said as part of a four-page memo and four-page attached analysis, all of which were highly critical of the SES offer so far.

SES President Giles told the Press Telegram he was surprised by Garner's statements. "We're in the very, very beginning discussions of how and what benefits can come to the city and its citizens," he said in the newspaper's report. SES has pledged to "continuing the dialogue" with the city and assured news media that no final decisions have been made.

Garner said the city and SES have been talking for three years now since the city council authorized him to negotiate with the then-Mitsubishi Corp. subsidiary that subsequently has partnered with ConocoPhillips on the project. SES is pushing to build the first LNG receiving terminal along California's coast. Several other offshore proposals are in various stages of development and permitting -- all along the Southern California coast.

©Copyright 2006 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.