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Rhode Island, KeySpan at Odds over Security-Related Costs for LNG Project

May 9, 2005
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KeySpan LNG has significantly understated the costs of implementing security measures to deal with the risks associated with the company's proposal to upgrade its liquefied natural gas (LNG) storage facility in Providence, RI, to an import terminal, Rhode Island Gov. Donald L. Carcieri said last Thursday. He called on FERC to direct the company to pay additional security-related costs.

"Although we generally concur with KeySpan's estimate of $40,000 to $50,000 per port call [or $2-3 million a year], this estimate does not account for 'up-front' costs -- such as the purchase of boats and equipment, and training of personnel -- that must be in place when the first LNG carrier enters the Narragansett Bay. The state's current best estimate for such up-front costs is $825,000," Carcieri, a staunch opponent of the project, wrote in a May 6 letter to the Federal Energy Regulatory Commission [CP04-223, CP04-193].

The additional funding is required to carry out the State Homeland Security and Emergency Response Plan (SERP), which Rhode Island is developing to deal with the "unique hazards" associated with LNG terminals and the transportation of the chilled fuel.

"KeySpan's per-port-call number does not reflect initial expenses for patrol boats, Coast Guard certification and other training and equipment. Because these expenses are due 'up front,' KeySpan's first port calls will be more expensive than its predicted average. In fact, the state will require $825,000 before any carrier enters the Narragansett Bay...Moreover, these funds are needed in advance of the expenditures, rather than as a reimbursement. The state simply does not have that $825,000 in spare funds," the governor said.

KeySpan has informed the state that it will not provide any additional funding to support development of the SERP for the marine upgrade until it clear that the company will be able to pursue the project, Carcieri noted. He urged the Commission to direct KeySpan to "timely commit" to the funding.

"The burden should be on KeySpan, rather than on the state and local communities, to support project-specific safety and security efforts."

The proposed KeySpan LNG upgrade, if built, would boost the existing LNG storage facility's vaporization capacity to 525 MMcf/d from 150 MMcf/d, and would provide 375 MMcf/d of additional firm baseload supply of natural gas to Rhode Island and the greater New England region. KeySpan LNG signed an agreement in October 2003 with BG LNG to undertake the $50 million conversion project. The project won a favorable draft environmental impact statement from FERC staff in December 2004. It still is awaiting final environmental clearance and a certificate.

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