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FERC Questions Why It Should Continue Review of SES LNG Terminal

Given that the Port of Long Beach has halted further review of the project, FERC Wednesday asked SES Terminal LLC to justify why the agency should continue processing the company's application for its proposed liquefied natural gas (LNG) terminal for the Port of Long Beach, CA, a project that has been troubled from its very inception in 2004.

"By letter dated Jan. 22...the executive director of the Port of Long Beach informed you that its board of harbor commissioners declined to lease a site to SES Terminal LLC for the construction and operation of SES' proposed LNG import facility. The board also directed the port's staff to stop processing SES's application for a harbor development permit. Because SES's ability to security the terminal site is essential for the project to go forward, please provide a response within seven days...explaining why we should continue to process your application," the FERC's Office of Energy Projects said in a letter Wednesday to the company.

The board of commissioners voted last week to cease environmental review of the SES terminal project (see Daily GPI, Jan. 24). "After deliberation, based upon an opinion from Long Beach City Attorney Robert Shannon, who concluded that the environmental impact report [EIR] on the proposed LNG project 'is and in all likelihood will remain legally inadequate,' and since an agreement between [SES] and the city does not appear to be forthcoming, the board of harbor commissioners disapproves the project and declines to pursue further negotiations," the Long Beach port said in a statement.

The proposed Sound Energy Solutions' (SES) LNG terminal is a joint project of Japan's Mitsubishi Corp and ConocoPhillips. It has triggered strong emotions on the West Coast and in Washington, DC. In 2004, when the project was first proposed, the Federal Energy Regulatory Commission and the California Public Utilities Commission battled over who would have jurisdiction over the proposed facility (see Daily GPI, June 14, 2004). Congress eventually settled the dispute in the Energy Policy Act of 2005, which gave exclusive jurisdiction over LNG projects to FERC.

With the jurisdictional issue settled in Washington, the terminal project still faced insurmountable obstacles in California from regulators, port and local officials and the public.

In June 2005, with no public announcement, the Long Beach port's board of harbor commissioners in closed session decided to let expire an ongoing exclusive rights agreement with SES on the designated site in the harbor. The five-member board said it would await a final EIR on the project before taking any further action. But a final EIR was never issued. The draft EIR released in October 2005 concluded the project could be "constructed and operated in a safe manner," given a series of protective and mitigating measures by SES.

SES had a memorandum of understanding (MOU) for a 25-acre site in Long Beach Harbor to build a receiving terminal for processing up to 700 MMcf/d of LNG. The MOU essentially outlined the terms of a lease of the property from the port if the permitting process was successfully completed, the company said.

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