The Canadian government Wednesday filed a formal protest with FERC to prevent the passage of liquefied natural gas (LNG) tankers into Passamaquoddy Bay off the coast of New Brunswick and Maine. Canada's ambassador said the country was prepared to use "domestic legal means" to "prevent such passage from occurring."

The Federal Energy Regulatory Commission (FERC) is preparing to conduct hearings on two proposed LNG terminals, which would both be located along the Maine coastline.

Quoddy Bay LLC filed an application with FERC in December to build a 2 Bcf LNG import terminal on a Native American reservation at Split Rock, ME, and a storage project in Perry, ME. The 15-acre site abuts the Passamaquoddy and Cobscook bays. A rival project, Downeast LNG, would be located in Robbinston, ME, which is about 60 miles north along the coast (see Daily GPI, March 13, 2006). Downeast has not filed an application with FERC.

Canada wrote to FERC last year expressing its concerns about potential environmental and safety risks associated with the LNG traffic (see Daily GPI, April 17, 2006). The formal protest this week follows several by U.S. citizen groups, which also are opposing the LNG terminals (see Daily GPI, Nov. 22, 2006).

Canadian Ambassador Michael Wilson said in the letter to FERC Chairman Joseph Kelliher that allowing 300-meter (984-feet) LNG tankers to enter Passamaquoddy Bay off the coast of southwestern New Brunswick is an environmental risk that Canada will not accept. Wilson said Canada was willing to work with the United States to meet its energy needs. However, The letter also issued a legal threat.

The Canadian government "will not permit LNG tankers to pass through Head Harbour Passage," Wilson wrote. "We are therefore prepared to use domestic legal means to address our concerns and prevent such passage from occurring."

Wilson described the Head Harbour Passage offshore New Brunswick as sovereign Canadian water. The passage is located between the northern tip of Campobello Island and Deer Island, and is about 1,772 feet (540 meters) wide at its narrowest. Wilson said the passage is known for its high tides, extreme currents and unpredictable fog, and the environmentally sensitive area is difficult to navigate.

Wilson indicated that the Canadian government commissioned a study of the environmental and safety risks of LNG tankers passing through the marine and coastal areas of Head Harbour. The study, he said, found that LNG tankers "present risks to the region of southwest New Brunswick and its inhabitants that the Government of Canada cannot accept."

Meanwhile, New Brunswick has been granted intervener status at the upcoming FERC hearings. As an intervener at the U.S. regulatory hearings, the provincial government would have an opportunity to present its case against the proposals. Premier Shawn Graham said Canada has voiced its opposition to the terminals, but it has not applied for intervener status.

In response, Quoddy Bay President Donald M. Smith sent a letter to Secretary of State Condoleeza Rice late Thursday.

"We regret that Canada is seeking to block badly needed LNG supplies from reaching U.S. gas consumers," Smith wrote in part. "Canada appears to have pre-judged the matter without giving Quoddy Bay an opportunity to complete the appropriate review process...By seeking to deny U.S. LNG developers fair treatment under international law, Canada no longer appears committed to the letter and spirit of the Free Trade Agreement.

"We are confident that experts in the State Department on the Law of the Sea share our position," Smith stated. Copies of Smith's letter to Rice were sent to Secretary of Energy Sam Bodman and Kelliher.

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