Citing its high safety standards and concerns about gas supply in New England, FERC Thursday denied numerous requests for rehearing of two prior orders on the proposed Weaver’s Cove liquefied natural gas (LNG) import terminal in Fall River, MA, and KeySpan’s Providence LNG import terminal in Providence, RI. In July, the Commission had conditionally approved the Weaver’s Cove project but had rejected Providence LNG’s application based on safety concerns (see Daily GPI, May 23, 2005).

“I want to emphasize that the actions we take today demonstrate our commitment to high safety standards,” said FERC Chairman Joseph Kelliher. “New England is facing a winter of very high natural gas prices. The region sorely needs additional gas supplies and a stronger energy infrastructure. Both of these projects are needed, yet we approve only one, the one that meets our high safety standards.”

Kelliher noted that the Commission imposed 44 safety and security conditions on the 800 MMcf/d Weaver’s Cove project when it issued its original order in July. However, that wasn’t enough for Rep. Jim McGovern (D-MA), who subsequently added seven lines of text to the Transportation Authorization Bill, later signed into law by President Bush, that blocked the demolition of the Brightman Street Bridge, connecting Fall River and Somerset, MA, to allow LNG traffic up the Taunton River (see Daily GPI, Aug. 10, 2005).

Some parties filed for rehearing because they believed the highway law compelled the Commission to revoke the authorization as moot. However, Kelliher said that since the Commission’s authorization was “not conditioned on removal of the bridge, we decline to revoke authorization.”

There also were concerns about whether the Weaver’s Cove terminal, which has been proposed by Poten & Partners and Amerada Hess Corp., would impair operations of a Navy lab operating a research and development facility for testing and evaluating submarines, unmanned underwater devices and other systems associated with undersea warfare. The Navy had expressed concern that the Coast Guard safety and security zones would negatively impact its in-water testing. Nevertheless, FERC said that the Coast Guard concluded that it could address those concerns. The Navy lab has since withdrawn its opposition to the project and its rehearing request, Kelliher said.

Commissioner Sudeen Kelly voted against the original Weaver’s Cove order and dissented in the Commission’s rejection of the rehearing request on Thursday. “I continue to believe that it would not be in the public interest…to authorize siting construction and operation of the Weaver’s Cove LNG facility because there are reasonable alternatives to this project for meeting New England’s growing demand for natural gas,” said Kelly. “Given this on balance, the safety, environmental and socioeconomic concerns raised with respect to this project in my mind outweigh the benefits of the additional natural gas supply it would provide.”

In response to the Commission’s decision to reject rehearing of the Weaver’s Cove case, Fall River Mayor Edward Lambert said he intends to appeal the decision in federal court. “We believe that we were denied our due process in terms an adjudicatory hearing that FERC’s regulations should have forced them to give us. But we will take that to court and hope to be successful in overturning this decision.”

The mayor said the Brightman Street bridge alone should stop the project, but he’s not counting on that. He said recent activity shows that Weaver’s Cove LNG may be attempting a political solution that would somehow allow the law on the bridge to be changed.

“Even though we think we have the ace in the hole with the [existing law on the bridge], we are going to go ahead with a lawsuit and fight it in every way shape and form,” a spokesman for the Fall River mayor said.

Despite the political and legal battle over the project, it may end up living or dying on market fundamentals alone. With two LNG import terminals already under construction in Atlantic Canada, two terminals proposed offshore Massachusetts, one planned on an island outside Boston Harbor and three planned in Maine, there will be much more than enough regasification capacity to serve New England’s needs. In all likelihood, the first couple projects will be sufficient to meet demand for years to come, and they likely will soak up much of the available global LNG, which is in short supply.

Providence LNG Stymied

In rejecting rehearing of the Providence LNG order, Kelliher said that the Commission previously determined that it “does not comply with the current LNG safety standards. Specifically, the impoundment site is undersized. The thermal radiation and flammable vapor exclusions zones extend off site and the existing tank may not comply with the current seismic standards.

“We deny KeySpan and BG LNG Services joint requests for rehearing as well as other rehearing requests. We also deny the request for conditional authorization of the project for various reasons,” he said. “Among them are the consistent representations by the project developer that conditional authorization was impossible from both a practical and economic standpoint. For example, in order to meet current seismic standards for storage tanks, KeySpan would have to take the existing tank out of service for at least three heating seasons. KeySpan has stated that was legally and contractually impossible.”

He also said to conditionally authorize the project, the Commission would have to determine, among other things, that it is in the public interest to take the existing facilities out of service and reduce the region’s gas storage capacity for at least three heating seasons.”

However, FERC said the companies still can file an amended application with, for example, a proposal to upgrade the existing facilities in conjunction with construction of the proposed facilities.

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