While McMoRan Exploration Co.’s amended application for its $900 million Main Pass Energy Hub (MPEH) project should satisfy one of Louisiana Gov. Kathleen Blanco’s original sticking points, the application does not address her requirements for revenue sharing from liquefied natural gas (LNG) projects positioned offshore of the state.

McMoRan said Monday that its amended application — using the closed-loop vaporization technology suggested by Blanco over the company’s original plan of implementing open-rack vaporization (ORV) technology — was accepted for review by the U.S. Coast Guard and the U.S. Maritime Administration (MARAD) (see Daily GPI, July 25).

“Based on our review and consultation with other Federal agencies, we have determined that the application amendment for a closed-loop vaporization system…in conjunction with the original application to construct, own and operate a liquefied natural gas deepwater port contains sufficient information to continue processing in accordance with the Deepwater Port Act, as amended,” the U.S. Coast Guard and MARAD said in a letter to McMoRan late last week.

The U.S. Coast Guard and MARAD said that while the final environmental impact statement (FEIS) on this project has been fully reviewed, the U.S. Coast Guard in conjunction with MARAD will now prepare an environmental assessment (EA) that will focus on the changes associated with the vaporization technology, which the groups noted was fully evaluated as a “reasonable alternative” in the FEIS.

The Coast Guard and MARAD are expecting to have the EA on the amended application ready by late September. Once it has been released, a 45-day period for comment and public hearings will begin. After the initial 45-day period that will include the governor’s input, the Coast Guard and MARAD will have another 45 days to issue their final decision. Once the license is received, McMoRan estimates it will take three years to construct the terminal.

The closed-loop vaporization design is more expensive, but some consider the design to be less environmentally intrusive than ORV. Changing to a closed-loop process could cost $30 million more in construction and $25 million more per year at current natural gas prices than the implementation of ORV. In her original May 5 veto of the project (see Daily GPI, May 9), Blanco said “insufficient evidence” existed to approve McMoRan’s application for an ORV system.

At that time, Blanco said that in addition to requiring the use of closed-loop technology, she also was seeking LNG royalties from the project. “I will insist on Louisiana receiving a share of the revenues gained from LNG projects,” Blanco said. “This is only right. Louisiana has learned a tough lesson in not receiving a share of offshore revenues from the oil and gas industry. We cannot make the same mistake. I am asking the LNG industry to engage in revenue sharing with the coastal producing states from the outset.”

Winning the vaporization battle might have to be enough for Blanco. In late May, acting Maritime Administrator Julie A. Nelson said the state can only charge the LNG company for costs incurred by the state that are attributable to construction and operation of the deepwater LNG port.

“While the Maritime Administration has broad latitude to approve a variety of fees that may be imposed by adjacent coastal states, the fees, under the Deepwater Port Act, may not exceed the economic, environmental and administrative costs incurred by a state,” Nelson said in May 18 letter to Blanco (see Daily GPI, May 23). “Thus while your May 5 letter indicated that your approval of future applications would require some form of revenue sharing arrangement — any such arrangement that is not tied to a state’s reimbursement costs…is not permissible under federal law.”

For its part, McMoRan said Wednesday that it feels it has addressed Blanco’s major concern but revenue-sharing talks have not been held with the state. “We are certainly optimistic [that Blanco will approve the amended project] because we went with closed loop at her request,” said William Collier, a spokesman with McMoRan. “There are cost-based fees that are provided under the Deepwater Port Act for adjacent states. We are willing to pay reasonable fees as provided under the act, which accounts for any actual cost incurred by the state.

“Certainly, we feel we have made a major concession by going with closed loop,” he added. “We felt that the environment would be protected using the open-loop system, which wouldn’t waste as much gas as we now are going to have to burn to heat the LNG. The amount of gas that is going to be consumed is enough to heat 50,000 homes annually, so it is a significant amount of gas. We made the change to the closed loop to satisfy the governor’s concerns, and we certainly hope that will be adequate.”

The terminal, which would be located offshore about 37 miles east of Venice, LA, would be capable of receiving and conditioning 1 Bcf/d of LNG and could accommodate potential future expansions. The company said it is considering investments to develop substantial cavern storage for a pipeline header system that would allow deliveries into liquid U.S. gas markets. Current plans for the MPEH include 28 Bcf of initial cavern storage capacity and aggregate peak deliverability from the proposed terminal, including deliveries from storage of up to 2.5 Bcf/d. McMoRan has already received approval from the Federal Energy Regulatory Commission to bring gas onshore using its proposed 36-inch pipeline into Coden, AL (see Daily GPI, May 19). The MPEH facilities are estimated to cost $450 million and the pipelines for the project are estimated to cost another $450 million.

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