NGI The Weekly Gas Market Report / NGI All News Access

New Jersey Eyes Pact with BP on LNG Terminal, Battles Delaware Over Jurisdiction

An agreement is being crafted that would give the state of New Jersey ownership over the pier that would extend into the Delaware River from BP's proposed Crown Landing LNG terminal. The state believes the agreement will help it win a jurisdictional dispute with Delaware over construction of the pier and development of the terminal.

New Jersey's Economic Development Authority (EDA), the South Jersey Port Corp. (SJPC) and BP are working on a memorandum of understanding (MOU) that calls on the state to issue between $50 million and $100 million in tax-exempt bonds to fund construction of the 2,000-foot pier in the Delaware River, assume ownership of the pier and lease the pier to BP for operation of the LNG terminal.

The $500 million terminal, which would include 1.4 Bcf/d of vaporization capacity and tanks capable of storing 480,000 cubic meters of LNG, would be built on 40 acres at a 175-acre site in Logan Township, NJ.

Up to this point the terminal has been blocked by the state of Delaware, whose boundary extends to the New Jersey shoreline. Delaware has rejected the project on grounds that it would damage its coastal zone, but New Jersey sees economic benefits from the project mainly from increased gas supply and potentially lower natural prices. Before the terminal can be built, however, New Jersey first will have to win a boundary dispute with Delaware at the Supreme Court.

Paul T. Fader, chief counsel for the governor of New Jersey, said last week that he intends to file a brief with the Supreme Court later this month on the jurisdictional dispute. Fader said a 1905 interstate compact between the two states grants each state the right to "exert regulatory control over structures built on" their shorelines and grants ownership rights over tideland structures.

"New Jersey's riparian jurisdiction clearly applies to the pier that is part of the Crown Landing project," Fader said in a recent letter to Joseph Schoell, legal counsel to Delaware Governor Ruth Anne Minner. He cited a Supreme Court ruling in 1934 in New Jersey v. Delaware and a more recent 2003 decision in Virginia v. Maryland, in which the court ruled in Virginia's favor in a similar situation involving a dispute over Virginia's use of the Potomac River.

Meanwhile, the EDA is working on the MOU that would provide BP with financing for the development of the pier. According to the agreement, BP would pay additional rent to fund the lease of riparian rights. It also would make a payment to Logan Township in lieu of taxes and would pay a fee to establish a South Jersey Economic Development Fund. Other fees would be paid to the State of New Jersey, EDA and the SJPC. The MOU is expected to be approved within the next few months.

"I would expect in the next month or so we will wrap up these negotiations," said BP spokesman Tom Mueller. He said gaining the state's support on the project was a very positive development, but the company is not ready to chalk up a win just yet. "We are still exploring other options [in case New Jersey does not win its jurisdictional dispute]," he said. "But we don't have any real viable options on the table at this point. We have looked at [alternative locations] as part of our exploration. We're also considering different pier orientations or moving the pier in some way, but these are just ideas."

©Copyright 2005 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.

ISSN © 2577-9877 | ISSN © 1532-1266
Comments powered by Disqus