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Court Ruling Gives New Jersey Power to Block LNG Project

A federal district court in Washington, DC, has upheld the U.S. Maritime Administration's (MARAD) decision designating New Jersey as an "additional adjacent coastal state" that has the power to block Atlantic Sea Island Group LLC's (ASIG) proposed deepwater liquefied natural gas (LNG) terminal to be sited on a man-made island off the coasts of New York and New Jersey.

The U.S. District Court for the District of Columbia rejected ASIG's motion for an injunction barring MARAD from enforcing its decision. It allows the federal agency to continue processing the company's application for its Safe Harbor Energy deepwater port. Both New York and New Jersey are identified as adjacent coastal states, with each having a say over whether the LNG project moves forward.

"Because the administrator [of MARAD] had legal authority to designate New Jersey and because the administrator's decision was not arbitrary or capricious and was valid even if issued outside of the statutory time frame, [MARAD's and the Department of Transportation's] motion to dismiss...will be granted and ASIG's motion for preliminary injunction will be denied as moot," said U.S. District Judge Richard W. Roberts. It was not known whether ASIG plans to appeal.

A license under the Deepwater Port Act cannot be issued without the approval of a governor of an adjacent coastal state. In August 2007, MARAD deemed ASIG's license complete, with New York named as the only adjacent coastal state. In November of that year, at the urging of New Jersey Gov. Jon S. Corzine, MARAD added New Jersey as an adjacent coastal state in the license application process for the Safe Harbor Energy LNG project, prompting the court showdown between New York City-based ASIG and the federal agencies (see NGI, Feb. 25, 2008).

In seeking the designation as an adjacent coastal state, a coalition of New Jersey groups argued that the "proposed port's location would interfere with the Port of New Jersey and prime fishing areas protected under the state's federally approved coastal environment," and that construction activities would impact water quality, the court decision noted.

But the court said potential port disruptions and water quality were not at issue in the case. "The court's limited role on review is only to determine whether the administrator considered the available evidence and reached a decision that is rationally related to the facts contained in the record. Under this deferential standard, based on the factual support contained in the administrative record, the administrator's decision was neither arbitrary nor capricious and will be upheld."

The Safe Harbor Energy LNG terminal proposed for the 60.5-acre island would have the capacity to deliver 2 Bcf/d to 65 million consumers, lessening the region's heavy dependence on natural gas shipped up from the Gulf Coast. The project would be located 23 miles from New York Harbor and 19 miles from New Jersey (see NGI, Jan. 30, 2006).

The plan for ASIG's terminal in the Atlantic Ocean is in direct competition with the Broadwater Energy LNG project proposed by TransCanada Corp. and Shell Oil on the north side of Long Island in the protected waters of Long Island Sound about nine miles from the closest New York shoreline and 11 miles from the closest Connecticut shoreline. Both projects would be designed to serve New York City regional markets. Broadwater, which was approved by the Federal Energy Regulatory Commission in March, would be connected to the Iroquois Gas Transmission System, while Safe Harbor presumably would be connected to Transcontinental Gas Pipeline (see NGI, March 24, 2008).

Atlantic Sea Island Group is sponsored by a group of local investors, engineering firm AECOM and investment banking firm Morgan Joseph & Co. Inc.

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