Attorneys for Quoddy Bay LNG LLC Friday called on FERC to bar U.S. transportation of natural gas from a proposed Canadian liquefied natural gas (LNG) terminal until the Canadian government has withdrawn its threat to block U.S.-bound LNG tankers from traversing its waters.

"To ensure that Quoddy Bay can compete on an equal and fair basis with Canadian LNG facilities, including Irving Oil Ltd.'s marine terminal and multi-purpose pier project in St. John, New Brunswick [Canaport], Canadian LNG facilities should not be given open and nondiscriminatory access to U.S. markets through U.S. pipeline facilities unless the Canadian government timely agrees to reciprocal and nondiscriminatory access to Head Harbour Passage," a dangerous stretch of the Passamaquoddy Bay, which straddles the U.S.-Canadian border, Quoddy Bay told FERC.

Specifically, Quoddy Bay is seeking rehearing of a February FERC order that authorized Maritimes & Northeast to double the capacity of its system to accommodate regasified LNG from the 1 Bcf/d Canaport LNG import terminal being built by Irving Oil and Repsol in New Brunswick to supply the U.S. Northeast (see Daily GPI, Feb. 16). The $321.3 million Phase IV expansion project includes an additional 1.7 miles of 30-inch diameter pipeline looping that would extend from the St. Croix River at the U.S.-Canada border to Maritimes' Baileyville, ME, compressor station. FERC also approved Maritimes' request to amend its presidential permit to permit increased volumes.

Quoddy Bay wants the Federal Energy Regulatory Commission to place a "reciprocity condition on the authorizations to construct the pipeline facilities such that while construction [of the Maritimes facilities] can proceed, no gas from Canada will be permitted to flow through the new facilities until the Canadian government-created problem of denying innocent passage to LNG carriers through [Head Harbour Passage] is removed on a timely basis."

The company said it was "not aware of a single instance where FERC has denied a Canadian supplier or shipper access to U.S. pipeline facilities on the basis of the national origin of the natural gas being produced, or the location of the supplier in Canada." But the Canadian government "has effectively adopted [an]...anticompetitive policy with respect to the Quoddy Bay LNG project by proposing [to deny] free and open access, as required under bilateral treaties and international law," it noted.

Quoddy Bay believes an error occurred in the Maritimes order because the Commission at the time was not fully aware of the Canadian government's position with respect to U.S.-bound LNG tankers in Canadian waters.

Quoddy Bay is seeking FERC approval 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. Both would have to travel through Canadian waters to reach their terminal sites.

In a letter to FERC in February, Canadian Ambassador to the U.S. Michael H. Wilson said Canada would not permit large LNG tankers to enter Passamaquoddy Bay off the coast of southwestern New Brunswick due to the environmental and navigational risks (see Daily GPI, Feb. 16). Wilson said Canada was willing to work with the United States to meet its energy needs, but he 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."

In a response earlier this month, FERC Chairman Joseph Kelliher said the agency would continue processing the applications for the Quoddy Bay and Downeast LNG projects in Maine despite growing opposition by Canadian officials to LNG tankers traversing their waters (see Daily GPI, March 12).

He called on Wilson to supply FERC with a copy of study that the Canadian government commissioned on the environmental impacts and safety concerns of the LNG projects. Kelliher also asked for greater assistance from the Canadian agencies. And he noted that the U.S. Department of State currently was working with FERC staff and the Coast Guard to resolve the concerns of the Canadians about the LNG projects.

©Copyright 2007 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.