Distrigas of Massachusetts LLC declared force majeure Friday — which means that it is unable to meet the contract demand of its 20 “or so” large customers — only days after the U.S. Coast Guard banned a tanker filled with liquefied natural gas (LNG) and destined for the company’s Everett, MA, terminal from entering Boston Harbor due to safety and security concerns, a federal regulatory spokeswoman said.

The Coast Guard extended its freeze on tanker shipments to include the Distrigas LNG tanker into Boston Harbor last Wednesday, saying that the ship would be denied entry until it has provided an “approved safety and security plan and all response agencies are confident that appropriate safety and security measures are in place.”

The Coast Guard said its action applied only to the tanker that was transporting about 33 million gallons of LNG from Trinidad to the Distrigas terminal in Everett. However, it noted that the Coast Guard would work with its “partners in industry and the government to review this process for each ensuing delivery” of Distrigas-bound LNG into the harbor. Distrigas currently is the only active LNG importer on the East Coast.

The ban — particularly if it remains in place for an extended period — could have a significant impact on New England, given that Distrigas provides an average of 15% to 20% of the region’s natural gas supplies on an annual basis. This climbs to about 35% during winter, as the company supplies LNG to local storage facilities for peak shaving, said Distrigas spokeswoman Julie Vitek. She noted that existing LNG supplies in the region are “very limited,” but she declined to estimate the level.

“We don’t have an exact timeframe at this point” as to how long the Coast Guard freeze on Distrigas LNG shipments will be enforced, Vitek said. She refused to say how many other LNG cargo shipments were or would be bound for the Everett terminal in the immediate future, and similarly would be refused entry.

The Coast Guard acknowledged that there have been no specific threats to LNG tanker shipments in the Boston Harbor area, but nevertheless it decided to take this action in response to the heightened awareness and safety concerns in the wake of the Sept. 11 terrorist strikes in New York City, suburban Washington DC, and western Pennsylvania.

Vitek noted the tanker that was turned away, Michael, was being diverted to a southern U.S. port to off-load. “We haven’t made a determination as to whether it will go to [Trunkline’s LNG terminal in] Lake Charles, LA, or Elba Island” in Georgia, said Vitek. Trunkline’s facility is the only other operating LNG terminal in the continental United States, while the El Paso Corp.-owned Elba Island facility remains mothballed. However, Vitek noted Friday it “may re-open in coming days.”

El Paso spokeswoman Norma Dunn said she couldn’t pinpoint specifically when Elba Island would be re-activated, but she noted “I’m sure it will be soon.” The company previously had said it hoped to open it “early this fall.” Dunn confirmed that a “final determination” hadn’t been reached on whether the Distrigas shipment would be diverted to Elba Island.

A Trunkline spokesman also declined to say if the Distrigas tanker was destined for its facility, which still was receiving shipments last week. “We don’t disclose publicly information about customers’ shipments,” he told NGI.

Assuming the Distrigas LNG tanker is off-loaded at Lake Charles or Elba Island, Vitek doubts that the LNG supplies could be trucked or transported over pipelines to New England to meet the region’s energy needs. It’s “possible but not probable” to truck LNG “because the quality of the fuel would change during transport.” And while “LNG can be revaporized and sent into the pipeline system” in the South, she said “essentially that energy would not benefit New England.”

Energy Secretary Spencer Abraham said last week that his department was reviewing existing energy supplies for New England following the diversion of the LNG shipment from the region. Reviews of this nature “normally don’t take very long,” said a Department of Energy (DOE) spokesman, adding that “perhaps it would be completed [this] week.” Both the DOE and Federal Energy Regulatory Commission were in contact with Distrigas last week, Vitek said, but she declined to discuss details. “We are working with a variety of federal and state authorities to address the security concerns,” she noted.

A FERC spokeswoman reported that “our staff is providing technical advice on the nature of liquefied natural gas,” such as the chemical composition of the fuel, so that Distrigas officials can “work out a [security] plan to bring the ship back” to Boston Harbor. Other than that, the Commission has no role in the ship’s safety or destination, she said.

To obtain LNG, natural gas is liquefied in a process involving intense pressure and refrigeration. “It’s no more different than any other fuel being attacked,” said an expert, when asked about the combustible potential of LNG. “If you have an ignition of any fuel, it’s not a good situation.” He noted he didn’t believe the Coast Guard in Boston overreacted by freezing LNG tanker traffic. “You can’t rule out anything in this world anymore.”

In fact, “everybody’s looking at things differently in light of the attacks on Sept. 11,” Vitek said. But, she added, “we’ve had a 30-year working relationship with the Coast Guard, and we hope to resume that soon.”

While Distrigas recognizes the impact of the Sept. 11 terror attacks on the nation, “we also recognize the importance of LNG to the New England energy supply, particularly as we approach the winter heating season. We look forward to working with the Coast Guard, the mayors of Boston and Everett, and with the governor to resume safe transportation of LNG into New England as soon as possible,” the company said in a prepared statement. “We hope any delay will be temporary and that we can resume bringing much-needed energy into the area,” noted Distrigas CEO Richard Grant.

U.S. Rep. Edward Markey (D-MA) called on Transportation Secretary Norman Mineta last week to give “urgent attention” to the safety of LNG transportation and storage at the Everett facility. “LNG is a critical component of the energy supply of our region, a supply source that has been interrupted by the events of Sept. 11. It is critical to everyone in the Boston area that this supply be restored at the earliest opportunity, but only in a way that ensures the safety of the community,” he wrote in a letter to Mineta.

Markey and others are concerned that LNG tankers could in some cases be sitting ducks for terrorists. “While it is important to recognize that this gas can quickly and harmlessly vaporize when exposed to air, thus reducing its value as a terrorist target, it is highly flammable under some circumstances, and its ignition could result in a fire that could cause significant loss of life and property,” he said.

The lawmaker underscored the value of the Distrigas facility to New England’s economy and its energy portfolio. Distrigas, a unit of Tractebel North America, received 46 LNG shipments last year and has a storage capacity of 3.5 Bcf. It has a sendout capability of 450,000 MMBtu/d by reconversion into natural gas at its onsite vaporization facility and 100,000 MMBtu/d by truck, Markey said. Construction currently is underway to more than double the LNG vaporization capacity at the Everett terminal to over 1 Bcf/d by late 2001.

“Given the importance of the Distrigas facility to New England’s energy infrastructure, I believe it vitally important that every reasonable effort be undertaken to assure the facility is able to safely continue its operations and that the surrounding community is protected from the consequences of such an attack,” he noted.

Markey urged Mineta to put “appropriate protections” in place for all LNG facilities in the United States to “secure them from the potential for terrorist attack.” While the Distrigas and Trunkline are the only LNG terminals currently operating, efforts are underway to resurrect mothballed LNG facilities in Cove Point, MD, as well as on Elba Island.

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