A dispute over the local economic benefit of a liquefied natural gas (LNG) receiving terminal at the Port of Long Beach has stalled negotiations between Sound Energy Solutions (Mitsubishi, ConocoPhillips) and the City of Long Beach. The city and SES are scheduled to meet Monday, and following those discussions city energy department head Chris Garner will give an oral report to the city council at its meeting Tuesday night, Garner told Daily GPI Friday.

A written report by a Cal State University Long Beach economics professor commissioned by Sound Energy Solutions (SES) concludes that the proposed $500 million, 1 Bcf/d LNG receiving terminal in the city’s harbor would generate $10.3 million in annual tax revenue to the city and another $8 million annually to the state. Construction would mean 400 jobs and a $100 million payroll while the facility is being built. But a separate study by a consultant hired by the city denounces the project as offering too little.

Although Garner, the head of the city Gas & Oil Department, isn’t publicly discrediting the SES economic study, the city elected leaders are critical of the plant’s potential economic benefits and skeptical about the safety claims, despite a draft joint federal-Port of Long Beach environmental impact report that said the project is “acceptable.” Garner told the Long Beach Press Telegram that SES isn’t living up to some of the city’s demands that call for the LNG facility to bring local residents “significant value” through discounted natural gas and a “consistent stream of money into the city’s general fund.”

“They’ve got to make it worthwhile; the whole idea going back three and half years is that they were going to make the city glad it had this facility in its backyard,” Garner said. “The residents have to get some significant benefits out of it, and so does the city.” For residents that means a discounted stream of gas the city utility can pass along at cost to residents, and for the city coffers, the proposed pipeline is what Garner called a “vehicle for getting value whether we own or operate it, or do some other type of arrangement.” (The pipeline dollars to the general fund would be in addition to SES’s estimated $10 million in annual local taxes.)

It has been nine months since the Long Beach City Council on a 5-4 vote instructed its municipal staff to continue negotiations with SES regarding long-term supplies for the city’s municipal gas utility and a pipeline interconnection with the proposed LNG terminal (see Daily GPI, May 26, 2005). Garner is unsatisfied with the progress, although SES’s top executive, Tom Giles, has told local news media that the company’s offer is just a starting point.

In a status report memo last Tuesday to the mayor and city council, Garner called the SES LNG plans “controversial” for the city, and as such, “during negotiations SES has been told repeatedly that any offer it submits to the city must provide substantial ongoing value and benefits to both the citizens of Long Beach as well as the city itself. SES offered a proposal (characterized by SES as an ‘initial’/ offer) with some specific monetary terms.

“The SES proposal is unacceptable and severely lacking in fair value as it would not result in substantial savings in natural gas bills for Long Beach residents, and would not provide substantial ongoing revenue available to the [city] general fund,” Garner said as part of a four-page memo and four-page attached analysis, all of which were highly critical of the SES offer so far.

SES President Giles told the Press Telegram he was surprised by Garner’s statements. “We’re in the very, very beginning discussions of how and what benefits can come to the city and its citizens,” he said in the newspaper’s report. SES has pledged to “continuing the dialogue” with the city and assured news media that no final decisions have been made.

Garner said the city and SES have been talking for three years now since the city council authorized him to negotiate with the then-Mitsubishi Corp. subsidiary that subsequently has partnered with ConocoPhillips on the project. SES is pushing to build the first LNG receiving terminal along California’s coast. Several other offshore proposals are in various stages of development and permitting — all along the Southern California coast.

Public input has now been completed on the draft environmental impact report, and the ball has been placed in SES’s court to respond to various questions from the general public and various levels of state and local government. That response period is just getting started, Garner said.

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