Maryland Gov. Martin O'Malley told a House subcommittee Monday that the state is working within the federal regulatory framework to make known its opposition to AES Corp.'s Sparrows Point liquefied natural gas (LNG) terminal proposed for Baltimore County, MD, but he left open the possibility that Maryland may take legal action to stop the project.

"We are going to do everything we can to [develop] remedies in this process before going to the alternative judicial process," he said during a field hearing in Baltimore held by the House Subcommittee on Coast Guard and Maritime Transportation to examine the safety of LNG in general and the proposed Sparrows Point LNG terminal specifically.

"The federal government has a great deal of power" with respect to the siting of LNG projects, O'Malley said. "I would hope that the voice of our state government will be heard in this matter," he noted.

"We believe that the security interests are paramount" in the Sparrows Point case, O'Malley said. The siting of an LNG terminal near Baltimore "would absolutely stretch [the state's] resources" for ensuring the safety and security of the public. In addition, the economic impact on Maryland of an LNG accident or attack would be significant, he noted.

"If something would happen to the [Chesapeake Bay] Bridge," which provides access to the Maryland and Virginia shores, "that would have a devastating impact on tourism," O'Malley said.

O'Malley sent a letter to the Federal Energy Regulatory Commission earlier this year expressing the state's objections to the project (see Daily GPI, Feb. 9). The letter accompanied an "Advisory Report" that outlined in detail state and local concerns about the proposed terminal, which would be built at the site of a former steel mill on a peninsula that juts out into Chesapeake Bay in Baltimore.

LNG import projects planned near large population centers have not fared well in recent years, and Sparrows Point would be less than two miles from the nearest residential housing. Baltimore County already has passed an ordinance that bars construction of LNG terminals within five miles of homes. AES has filed a lawsuit in federal court challenging the ordinance.

In January, members of the Maryland congressional delegation also expressed their opposition to the Sparrows Point LNG project in a letter to FERC Chairman Joseph Kelliher (see Daily GPI, Jan. 31).

"We don't have a lot of arrows in the quiver" to block the 1.5 Bcf/d Sparrows Point, James T. Smith Jr., county executive for Baltimore County, said during the field hearing. "We really don't have much [authority]," while FERC has been given "absolute" authority over the siting and approval of LNG projects, he noted.

Rep. C.A. "Dutch" Ruppersberger (D-MD), whose district would include the proposed Sparrows Point terminal, called it the "wrong" project for Baltimore County and the Chesapeake Bay. While he noted that the U.S. Coast Guard was a "quality organization," he questioned whether it had sufficient resources to protect the public from a potential accident or disaster.

Sen. Barbara Mikulski (D-MD), a chief opponent of the Sparrows Point project, raised similar concerns, saying that the federal government's underfunding of the Coast Guard has made their job more difficult. Mikulski unsuccessfully tried to block the reopening of the Dominion Cove Point LNG terminal in Calvert County, MD, in 2002.

Subcommittee Chairman Elijah Cummings reported that currently 12 LNG terminals are under construction. "If you don't match up [funding] resources with the demand, something's going to break...We're stretching, stretching, stretching" the Coast Guard, he said.

Captain Brian Kelley of the Port of Baltimore said the Coast Guard has entered into memoranda of agreement with local Maryland counties to assist in enforcing security zones for LNG tankers. He noted that Dominion Cove Point is "forking over a bucket of bucks," said to be over $1 million, to Calvert County to help with security when LNG tankers are moored. Kelley said the delegating of authority to the counties was based on policy, rather than insufficient funding by the federal government.

So "we're training the local sheriff to be the Coast Guard by proxy," Mikulski said. Kelley assured her that the Coast Guard still was in charge, with armed guards on LNG tankers if necessary, personnel onboard vessels to monitor the transfer of LNG and inspectors at the dock.

Richard Hoffman, director of gas, environmental and engineering at FERC, defended the agency against criticism that approval of LNG projects is almost guaranteed. There's a concern that the "end result already [has been] dictated before the process even [gets] started" at the Commission, said Cummings.

"We go through these facilities with a fine-tooth comb," Hoffman told the House panel. He noted, however, that FERC has rejected only one LNG project -- a KeySpan project in Providence, RI.

Aaron Samson of AES Corp., the sponsor of Sparrows Point, defended his company's project to the critics. "It's important to note that the AES terminal is even further from residential areas" than the Cove Point terminal, which had been mothballed and then reopened in April 2002, Samson said.

He further said AES had hired Richard Clarke, former White House security advisor to three presidents on natural security and counterterrorism, to review the Sparrows Point project. Clarke "saw the location as a low-risk level," and concluded that any risks could be "effectively managed," Samson said.

In addition, he reported that vessel traffic in the Chesapeake Bay to the Port of Baltimore has "significantly decreased" over the past few decades, from a little more than 4,000 vessel arrivals in 1975 to just over 2,100 arrivals in 2005.

Samson said a number of other tankers for which security zones are required -- petroleum vessels, propane ships and ethanol vessels -- already navigate the Chesapeake Bay. "The introduction of additional LNG traffic in the Chesapeake will have limited or no impact on existing large vessel traffic in the bay or for vessels calling at the Inner Harbor" in Baltimore, he noted.

"Once at the terminal site, LNG ships would have no impact on large vessel traffic as that traffic would be well outside the established security zone," Samson said. However, LNG ships in the bay may cause "minor inconveniences" to smaller vessel traffic during the enforcement of the security zones.

AES formally filed its application for the Sparrows Point project in January (see Daily GPI, Jan. 9). The project 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.

The project, including three LNG storage tanks, would be located on 80 acres within the existing Sparrows Point Industrial Complex in Baltimore County.

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