The U.S. Coast Guard reported in a Federal Register notice Tuesday that it has stopped processing an environmental assessment of Chevron’s onshore work associated with its Port Pelican liquefied natural gas (LNG) import terminal offshore southwest Louisiana. Chevron had planned to conduct fabrication activities for the gravity-based structure onshore at Port Aransas in Nueces County, TX, but the company has decided not to renew a lease on the site because it has not lined up LNG supply for the project.

“Port Pelican LLC has now informed the Coast Guard and [Maritime Administration] that it will not pursue its plans for the Port Aransas site at this time, and therefore, the Coast Guard and MARAD are canceling their plans for the supplemental [environmental assessment],” the agency said in its notice.

In November 2003, Port Pelican became the first offshore LNG import terminal to receive a deepwater port license from MARAD (see Daily GPI, Nov. 18, 2003). The proposed $800 million terminal would be capable of handling 1.6 Bcf/d of gas deliveries. ChevronTexaco originally expected to have the terminal in service in 2007, but service now is expected to commence in 2009 or later mainly because of the timing of upstream liquefaction capacity (see Daily GPI, Oct. 19, 2004).

“We decided it wouldn’t be prudent to continue payment on the lease [at Port Aransas] while we are waiting to get alignment with our upstream supplies for Port Pelican,” said Chevron spokesman Nicole Hodgson. “We don’t actually have a date [for commercial service at Port Pelican]. At this point we have not identified upstream supply… The project is on hold.” Hodgson said Chevron is looking at bringing LNG to the terminal from Angola, Nigeria or potentially Venezuela.

However, Hodgson said Chevron’s other LNG import projects in Baja California Norte, Mexico, and Pascagoula, MS, are not on hold. Terminal GNL Mar Adentro offshore Tijuana near South Coronado Island has received all of its major permits for construction. Chevron plans to bring LNG to that terminal from the Gorgon Field offshore western Australia. The Cassote Landing project onshore in Pascagoula is still in the “pre-filing” stages at FERC and has years of design and regulatory work prior to construction.

The regulatory process for offshore Gulf of Mexico terminals also is evolving. For example, it was pretty late in the game when MARAD and the Coast Guard realized the significant environmental impacts of onshore fabrication of the massive gravity-based LNG structures required for these projects. MARAD had to go back to Chevron after issuing a permit for Port Pelican and require supplemental information on the onshore construction process.

The onshore structures for the offshore LNG terminals are very large. Basically, they include a giant hole in the ground 1,000 feet long by several hundred feet wide and 60 feet deep, in which concrete is poured. The hole must be dug near a waterway so that it can be filled with water and the structure can then be floated out to sea. There are many environmental concerns related to such an endeavor, not least of which is what to do with all that dirt. Another major impact would be on the local community and its roads, schools and stores where the facilities are built. MARAD officials are just beginning to address the many environmental issues associated with the onshore construction portion of these terminals.

Meanwhile, a design characteristic of many of the offshore LNG terminals, including Port Pelican, has basically stalled the regulatory process. Officials from the Gulf Coast states have expressed concern about the use of the open rack vaporization (ORV) process, in which LNG containers are warmed with seawater, which is then returned to the ocean. Analysis has indicated that the process would be harmful to fish populations and other sea life because of the way that hundreds of millions of gallons of water per day would be taken from the sea and discharged and because of the cooler temperature of the water once it’s returned to the Gulf (see Daily GPI, May 20, Jan. 24). It is unclear what impact the outcome of this debate will have on Port Pelican and the other proposed offshore LNG terminals.

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