NY State's rejection of Broadwater LNG project does not necessarily create impasse

Three weeks after winning Federal Energy Regulatory Commission approval, a large floating liquefied natural gas terminal, storage and regasification project which has been proposed for construction in Long Island Sound was rejected by New York's state government.

Secretary of State Lorraine A. Cortes-Vazquez said on Apr. 10 that the Broadwater LNG project, a joint venture of TransCanada Corp. and Shell US Gas and Power Co., does not meet requirements under New York's coastal zone management plan. The installation aims to deliver up to 1.25 billion feet per day of regasified LNG to electric power plant and home heating customers. FERC approved the project on Mar. 20.

Cortes-Vazquez said that the proposed project is not consistent with six policies under the sound's coastal zone management program. "This was a very complex and difficult decision. The thorough analysis in today's ruling makes clear the importance of protecting the character of Long Island Sound, as it points the way to sensible alternatives for meeting New York's long-term energy needs," she said.

"The needs must be balanced with a positive trajectory of improving the health of the Long Island Sound ecosystem. One cannot predict the future, but a correct decision can influence it," Cortes-Vazquez continued.

At first glance, it would appear to signal an impasse between the federal and state governments. But the federal LNG project permitting process provides a means for Broadwater's sponsors to appeal New York's action and give the state an opportunity to fully describe its concerns. The state also has proposed two alternative sites.

Energy board reactivated

In announcing the decision, Gov. David A. Paterson said he will establish a state energy planning board, led by Deputy Secretary for Energy Paul DeCotis and comprised of representatives from the state's major energy, environmental, economic and transportation agencies, to prepare a comprehensive energy plan for New York.

The state's energy planning statute expired in 2003 and it has not had an energy plan since despite advances in science and technology and the emergence of global climate change as an issue, he noted.

Paterson also directed that the state's two major power agencies, the Long Island Power Authority and the New York Power Authority, to "aggressively pursue energy conservation." Finally, he said he would begin to investigate alternative proposals as well as LNG to increase natural gas pipeline capacity to Long Island and the downstate region.

"One of my goals as governor is to protect Long Island Sound, by preserving it as a valuable estuary, an economic engine for the region, and a key component to making Long Island's quality of life one of the best in the country. Broadwater does not pass that test. Shame on us if we can't develop a responsible energy policy without sacrificing one of our greatest natural and economic resources," he declared.

Paterson said that his concerns regarding the proposed LNG project include its size, its potential disruption of commercial and recreational fishing, and its allegedly not guaranteeing low-cost gas to Long Island consumers.

'Dangerous precedent'

It would be the first time in Long Island Sound's history that such a large section of open water was handed over to a private company to the public's exclusion, according to the governor. Privatizing open water would be fundamentally wrong and be a dangerous precedent for industrializing a body of water that people have spent years and millions of dollars trying to clean up, he maintained.

Paterson, who chaired the state's renewable energy task force when he was lieutenant governor, said that the Broadwater project might not even be needed if alternative technologies are aggressively pursued.

In response, John Hritcko, Broadwater's senior vice president and the project's director, said he was disappointed and concerned by the state's decision. "We specifically designed this project to be consistent with the State's coastal management policies and offered a number of additional commitments that would further enhance the State's coastal resources," he said on Apr. 10.

Broadwater's sponsors will review specific aspects of the state's decision before deciding on their next steps, he continued. In announcing the decision, Cortes-Vazquez said that there were two other sites on the Atlantic Ocean side of Long Island outside state boundaries where a floating storage and regasification unit could be constructed and conform to New York's coastal management plan. The first, which would be 13 miles offshore in about 80 feet of water, could be connected by a submerged pipeline to the existing Transco-Long Beach pipeline. The second, some 22 miles south of Fire Island Inlet in approximately 130 feet of water, could be connected to the Iroquois Gas Transmission System through offshore and onshore pipelines.

"We continue to believe that the Broadwater project, as proposed, is the best option for New York State to meet its growing demand for clean, affordable, reliable natural gas – and does so with no near shore or onshore impacts. Further, the US Coast Guard and [FERC] have determined that with the mitigation measures proposed by Broadwater and those they have recommended, Broadwater can operate safely and securely in Long Island Sound and will have less environmental impacts than any other alternative," Hritcko said.

Another possible step

The project's developers also could appeal to the US Commerce Secretary Carlos Gutierrez and seek a ruling on whether the state's decision is, in fact, consistent with New York's coastal management plan under the federal Coastal Zone Management Act. Broadwater is not the first East Coast LNG project to encounter state and local government opposition: AES Corp.'s proposed onshore terminal and regasification installation at Sparrows Point near Baltimore has generated strong protests from Maryland state, county and local government officials.

But Bill Cooper, president of the Center for Liquefied Natural Gas in Washington, said that Paterson's idea of having an energy task force develop a comprehensive strategy for New York is hardly new. "It's not an uncommon refrain. People in the Northeast agree they need more natural gas. The question still is where to put the facilities," he told OGJ Washington Pulse on Apr. 17.

Markets determine the need for projects while the federal and state governments protect the environment and surrounding communities, he continued. "Certainly, there's demand for the gas Broadwater would provide. You have only to look at the New York city gate spot prices through each winter to see this," Cooper said.

FERC's Mar. 20 approval of the Broadwater LNG project after more than three years of deliberation does not necessarily mean it will go ahead at its current planned location, he added. The decision essentially provided a working document with more than 80 conditions which developers will have to meet before the federal energy regulator issues a construction permit, he said.

"The important point is that the process apparently is moving forward. And yes, developers of other LNG projects are watching closely as it does," Cooper said.

Contact Nick Snow at nicks@pennwell.com

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