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Commerce Dept. on LNG: Yea to Sparrows Point, Nay to Weaver's Cove

The Department of Commerce Thursday issued a decision overriding the State of Maryland's objection to the AES Sparrows Point LLC proposal for a 1.5 Bcf/d LNG receiving terminal and pipeline east of the Port of Baltimore, and at the same time upheld the Commonwealth of Massachusetts' objection to a Weaver's Cove Energy LLC proposal for an LNG facility and associated pipeline near Fall River, MA.

The states independently objected to the projects on the grounds that the proposals were inconsistent with their federally approved coastal management programs. Under the Coastal Zone Management Act, federal agencies may not issue any permits required for a project if a state has objected unless the Department of Commerce, on appeal, overrides the objection.

Based on information submitted during the appeal, the department determined that the national interest served by the Baltimore facility outweighs its limited adverse coastal effects. The proposed project would help meet regional energy demand by providing enough natural gas to heat approximately 3.5 million homes per day or to generate electricity for 7.5 million homes per day, and the impact of dredging to fish and aquatic vegetation will not be significant, the Commerce Department decision said.

The AES Corp. subsidiary filed with the Federal Energy Regulatory Commission in January 2007 for the regasification terminal to be built on the 80-acre site of the old Bethlehem Steel plant on a peninsula jutting out into Chesapeake Bay (see NGI, Jan. 15, 2007). Sparrows Point would have about 1.5 Bcf/d of regasification capacity with a potential for expansion to 2.25 Bcf/d.

Regasified LNG would be delivered to regional markets via the Mid-Atlantic Express pipeline, an 87-mile, 30-inch diameter pipeline that would extend from the terminal to connections with interstate pipelines at Eagle, PA. The pipeline also would include connections with local distribution company Baltimore Gas & Electric. AES also is considering building a 300 MW gas-fired combined-cycle power plant at the terminal site.

FERC already has issued a favorable draft environmental impact statement (see NGI, April 28) for the plant, saying "with appropriate mitigating measures, as recommended, [it] would have limited adverse environmental impact and would be an environmentally acceptable action." The Commission was quick to point out that the DEIS is not the final word on the controversial project and said it would hold public meetings to gather comments before a final environmental decision is made.

Additionally, the Commission noted that according to the preliminary Coast Guard Waterway Suitability Report, the route of LNG tankers through the Chesapeake Bay can be made suitable with added measures to manage maritime safety and security. In this regard AES and Mid-Atlantic would be charged with developing an emergency response plan involving state and local agencies and a cost-sharing and transit management plan in line with FERC's requirements and those of the Coast Guard and other federal agencies.

The Coast Guard report issued said "an armed, multi-vessel escort will be required to enforce the federal safety/security zones around any loaded LNG vessel navigating within specified areas of the Chesapeake Bay" (see Daily GPI, March 4).

When the Commerce Department overrides a state objection, federal agencies may proceed with normal permit and license processes for the project. The project will also be required to comply with all state and local permitting regulations, and complete all required environmental reviews.

Regarding Weaver's Cove, the department determined that adverse coastal effects, particularly navigational safety concerns associated with delivering LNG to the terminal by tanker vessel up the Taunton River, outweigh the national interest. Navigational safety concerns were articulated in a U.S. Coast Guard report that concluded the Taunton River is unsuitable for LNG tanker traffic of the size and frequency proposed by Weaver's Cove, the Commerce Department pointed out.

This was the second blow last week for the embattled New England project. The House Natural Resources Committee passed legislation (HR 415) Wednesday that includes the Taunton River in southeast Massachusetts in the National Park Service's Wild and Scenic Rivers system, throwing another roadblock in the path of the Weaver's Cove project.

Weaver's Cove originally proposed, and FERC approved in 2005, the construction of an LNG terminal in Fall River. But due to continuing concerns expressed by the community and the U.S. Coast Guard, as well as the denial of a dredging permit by Massachusetts, Weaver's Cove in April considering an option of constructing an offshore LNG unloading berth in Mount Hope Bay and an underwater pipeline to transport the LNG to the proposed terminal site at Fall River (see NGI, April 7).

The latest proposal is now undergoing the Commission's pre-filing process, and Weaver's Cove has requested a deadline extension to place the proposed facilities in service by Nov. 1, 2015.

The bill voted out of committee last week was cosponsored by the entire Massachusetts and Rhode Island delegations in the House. It still must pass both the House and Senate before being sent to President Bush. Companion legislation introduced by Sens. Edward Kennedy (D-MA) and John Kerry (D-MA) was approved by the Senate Energy and Natural Resources Committee earlier this month. The Senate sponsors are working to bring up their legislation before the full Senate within the next several weeks.

The Weaver's Cove project has been the target of fierce opposition by local, state and federal officials, who are adamant against building LNG infrastructure in their backyard, although they admit that more natural gas supply is needed for the region. If built, the proposed terminal would provide 800 MMcf/d of peak sendout capacity, 400 MMcf/d of baseload supply and 200,000 metric tons of LNG storage.

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