The researchers' findings will guide the Federal Energy Regulatory Commission as it rules on the siting of liquefied natural gas terminals in the region.

01:03 AM EDT on Saturday, May 21, 2005

BY TIMOTHY C. BARMANN
Journal Staff Writer

The proposal to build a new terminal for liquefied natural gas in Fall River got a major boost yesterday from a key report by federal regulators that concluded the facility could be operated safely and would not harm the environment.

But a separate report found that a proposal to expand a Providence LNG facility would not meet current safety standards, casting doubt on that project's future.

The two reports, called Final Environmental Impact Statements, were issued by the staff of the Federal Energy Regulatory Commission. The FERC is charged with evaluating and approving onshore LNG projects.

The reports will guide the FERC's four commissioners when they vote on the Providence proposal by KeySpan LNG L.P., and the Fall River proposal by Weaver's Cove Energy.

The commissioners will have a public meeting Wednesday in Washington, D.C., though it's unlikely the commission would vote so soon after the release of the reports, a FERC spokesman said. The next two meetings are June 15 and June 30.

KeySpan has proposed a $100-million upgrade to its LNG facility in the Fields Point area so it can accept deliveries by tanker. Right now, the 600,000-barrel LNG tank is filled by truck.

Weavers Cove Energy and Hess LNG have proposed building a new LNG terminal on a 73-acre industrial site in the northern section of Fall River.

The FERC report on the KeySpan proposal said a "significant issue" with the project was that it would not comply with current safety standards.

"KeySpan LNG has not provided any data to show that the proposed import terminal can be brought into compliance . . .," the report said.

However, the report also said that if KeySpan could bring its facility into compliance, the proposed facility could operate with "limited adverse environmental impact."

The report on the Weaver's Cove project was more favorable.

"We conclude that if it is constructed and operated in accordance with Weaver's Cove Energy's proposed mitigation and our recommended mitigation measures, the proposed action would meet federal safety standards, [could] be operated safely, and would have limited adverse environmental impact," the report concluded.

Elected officials in Rhode Island and Massachusetts, who almost unanimously oppose both projects, welcomed the conclusions of the KeySpan LNG report and questioned those of the Weaver's Cove analysis.

The two reports are a "split decision" for Rhode Island, said Attorney General Patrick Lynch, one of the more outspoken opponents of both proposals.

"FERC has confirmed what we've been saying all along -- that KeySpan's ill-conceived proposal represents a substantial change in the use of the existing facility," and that complying with current safety regulations is "unfeasible."

"The threat from an LNG project in Fall River is almost equally dramatic to our Ocean State," he said, because LNG tankers destined for Fall River would travel 26 miles through Narragansett Bay and Mount Hope Bay.

Fall River Mayor Edward M. Lambert Jr., who's been battling the Weaver's Cove project for years, said the favorable report was not unexpected because FERC has "taken on the role of cheerleader for the energy industry."

He vowed to continue to fight, calling the project "not only dangerous for Fall River and the surrounding area, but also [one that would] set bad precedent for other communities around the nation."

Providence Mayor David Cicilline said the KeySpan report was "good news . . . but we're going to continue to express our opposition very strongly."

Governor Carcieri said he hoped the report on the KeySpan project would "put an end to KeySpan's efforts to build a marine terminal in the Port of Providence."

About the Weaver's Cove report, Carcieri said: "It does not appear that FERC sufficiently took into account the safety and security issues associated with bringing large amounts of liquefied natural gas through coastal waters."

East Providence Mayor Joseph Larisa Jr. said the KeySpan report was "tremendous news. . . . If not the death knell, it's a substantial impediment to the expansion of that facility."

U.S. Sen. Jack Reed questioned the FERC staff's endorsement of a Coast Guard security plan for the Weaver's Cove project. Part of the plan includes Coast Guard boats protecting LNG tankers as they enter Narragansett Bay.

"It is still not clear how the Coast Guard, whose budget is already stretched by existing homeland-security responsibilities, would pay for the extra cost," Reed said in a statement.

He said the FERC approval process for siting LNG terminals was "deeply flawed" and lacked a regional analysis of how many facilities were needed and where they should be.

Despite the report's findings, KeySpan expressed no signs of abandoning its project. A statement issued by the company highlighted favorable aspects of the report.

"The FERC staff agrees with our view that the LNG project is a key part of helping Rhode Island meet its growing energy needs," David J. Manning, executive vice president and chief environmental officer at KeySpan, said in a statement.

He added that "overall, it makes a very strong statement on behalf of our project."

In an interview, Manning declined to say whether KeySpan would try to apply the current safety regulations to its proposal.

He said the company's position was that it would not have to meet current safety regulations because its expansion plans did not represent a significant change from existing operations.

KeySpan previously said that complying with current regulations would be unfeasible. It would require taking its tank out of service for two or three heating seasons in order to modify the tank's foundation.

And it would require the company to acquire legal control of eight adjacent properties to expand the "thermal exclusion zone" -- the space between the terminal and other facilities in the immediate area to protect the public from the heat in the case of an LNG vapor fire.

Those additional steps could triple or quadruple the cost of the project, KeySpan has said.

Weaver's Cove Energy issued a short statement by Gordon Shearer, the company's chief executive officer.

"Obviously, we are encouraged by the findings with respect to the safety of the project and its limited adverse environmental impact," he said.

With reports by David McPherson, Gene Emery and Richard Dujardin.

Timothy C. Barmann covers energy issues, utilities and technology. He can be reached at tbarmann [at] projo.com