Union Tribune

September 11, 2003

Sempra gets OK for LNG terminal


WASHINGTON Federal regulators gave Sempra Energy the final go-ahead yesterday to develop a $700 million liquefied natural gas terminal in Louisiana, the first time in 26 years that such a project has been authorized.

The move by the Federal Energy Regulatory Commission reflects a growing consensus among policy-makers that boosting imports of natural gas is vital to ensuring adequate supplies of the fuel as demand grows, domestic supplies stagnate and consumers feel the pinch of sharply higher prices.

It also adds to San Diego-based Sempra's growing portfolio of liquefied natural gas, or LNG, projects.

LNG technology allows natural gas to be shipped from distant locations by supercooling the fuel until it condenses into a liquid. It is then reconverted to gas at terminals like the one Sempra is building near Hackberry, La., and distributed through domestic pipelines.

Several companies are seeking federal approval for LNG terminals in the United States. Others are planned for Mexico, including a $600 million facility Sempra intends to build on the Baja California coast.

"It's another milestone for us," Donald E. Felsinger, group president of Sempra Energy Global Enterprises, said of the FERC action. "I think that, coupled with the final permits we received in Mexico, will allow us to have meaningful dialogue with shippers on the timetable that we can go forward with building these facilities."

Sempra has "an interest in building more" LNG plants in North America, he added.

Commissioner Nora Mead Brownell said developing alternative sources of natural gas "is incredibly important as long as we can balance the other issues, which I think this project has done."

The issues she was referring to include concerns about the safety of the volatile fuel and environmental impacts. Local opposition to LNG plants has arisen in the United States and Mexico, although the Louisiana plant was reportedly welcomed by the nearby community as a source of jobs.

Sempra will be required to create 85 acres of coastal marsh to offset 55 acres of wetlands that will be affected by the project, according to a FERC staff report. It also will have to develop a plan to mitigate potential ship traffic congestion near the terminal.

The company hopes to begin operating the plant in early 2007, under the corporate name Cameron LNG, LLC. The plant is in Cameron Parish. Felsinger said the company is in discussions with potential customers.

FERC said it would not require the company to file its customer contracts before starting construction of the facility, bowing to concerns Sempra raised about disclosure of sensitive commercial information.

It also allowed the company to take up to five years to start production, instead of the usual three years.

The 119-acre facility along the Calcasieu River will include three storage tanks, each capable of holding 1 million barrels of LNG, which is equivalent to 3.5 billion cubic feet of natural gas. Sempra will build a 35-mile pipeline to connect the plant to five interstate pipelines.

FERC adopted new regulations in December 2002 designed to encourage the development of LNG terminals. It put the terminals on an equal competitive footing with natural gas production facilities, allowing them to sell fuel in a deregulated market with natural gas from the Gulf Coast.

"They're treating this like a new gas supply source. This will be an unregulated, in many respects, facility," said Felsinger.

The LNG industry got another major boost in June, when Federal Reserve Chairman Alan Greenspan warned of impending natural gas shortages and strongly endorsed LNG as a way to stabilize gas prices.

There are currently four LNG terminals in the United States in Louisiana, Georgia, Maryland and Massachusetts. Until yesterday, FERC hadn't approved a new LNG import facility since 1977, when it authorized one in Lake Charles, La.

More terminals have been proposed in Louisiana, Texas, Florida and California, including one in Long Beach and one about 21 miles off the coast near Oxnard.

The California proposals are expected to be controversial given long-standing opposition in the state to coastal and off-shore energy projects.