National Grid has abandoned plans to upgrade its Fields Point fuel facility.

The Providence Journal / Bill Murphy

National Grid announced yesterday that it has abandoned its pursuit of establishing a major liquefied natural gas marine terminal in Providence.

The decision ends a four-year effort by the company’s KeySpan subsidiary to revamp its existing storage facility on the Providence River into a terminal that would receive LNG deliveries by tankers. That appears to be a victory for the citizens, organizations and public officials who fought the proposal.

Although KeySpan’s proposal was rejected by the Federal Energy Regulatory Commission (FERC) in 2005, the company had appealed that decision in federal court. The company was scheduled to make oral arguments on Oct. 26 at the federal appeals court in Washington, D.C.

In a brief statement, National Grid said that on Friday, it met with Rhode Island Attorney General Patrick C. Lynch, who has been among the most vocal opponents of the KeySpan proposal. The meeting was precipitated by Lynch, who last month had called for National Grid to drop the Keyspan appeal.

At the meeting, National Grid told Lynch the company would no longer challenge the proposal’s rejection by federal regulators, National Grid said.

“National Grid executive vice president of business development Steve Zelkowitz advised the attorney general that the company would continue to evaluate natural gas needs in the region,” the statement said.

The company did not explicitly rule out a future expansion of the storage facility, but said it is “committed to work with public officials prior to any future decision impacting the facility.”

“The company believes LNG will continue to play a critical role in both energy reliability and price,” National Grid said.

The statement did not explain why the company had decided to drop its appeal, and spokesman David Graves said he could not elaborate beyond what the statement said.

Shortly after National Grid’s announcement, Lynch issued his own statement in which he hailed the decision. “The public safety issues surrounding this plan were always clear to me,” Lynch said.

Those issues, he said “were confirmed by the experts I retained, including Richard A. Clarke, who prepared an extensive report detailing the perils of locating an LNG terminal in an urban area.”

In an interview, Lynch said that the National Grid officials told him their decision was based in part on the fact that a new LNG marine terminal, off the coast of Gloucester, Mass., will go online shortly, lessening the need for a marine terminal in Providence. Another factor, Lynch said, was the wide opposition to the project.

The officials, however, did not acknowledge the risks and concerns of the project that have been put forth by Lynch and others, the attorney general said.

Several public officials praised the decision.

“Clearly, all the evidence pointed to the fact that the Providence River is not the place for LNG tankers,” U.S. Rep. Patrick J. Kennedy said, in a statement. “The company’s ability to recognize the unfeasibility of this project and proceed on the side of what’s best for the area is a testament to its role as a community-minded business, concerned about the quality of life of all Rhode Islanders.”

“This scheme was riddled with far too many safety, security and environmental concerns,” said Governor Carcieri. “It was never a good idea to build an LNG terminal in a densely populated city. It was also unwise to try to transport large quantities of LNG up Narragansett Bay.”

“This is a victory for our city, our safety and the vitality of our waterfront,” said Providence Mayor David N. Cicilline.

“I thank National Grid for their decision and congratulate them on being a good corporate citizen to the people who live adjacent to and work along Narragansett Bay,” said Rep. Raymond E. Gallison, D-Bristol.

KeySpan became a player in Rhode Island in 2002 when it purchased the 600,000-barrel LNG storage and receiving facility from Duke Energy Corp. for $28 million.

The 138-foot-tall tank, which is prominent along the western bank of the Providence River, was completed in 1974. The plant operates as a “peak-shaving” facility. That means it kicks in to supply the region with fuel during the coldest days of the year — a total of about 30 days each winter. The tank is filled by trucks during the spring and summer months. When full, the tank contains enough energy to heat about 18,000 typical residential homes for an entire year.

In 2003, KeySpan proposed upgrading the facility so that it could accept deliveries by tankers. That would have allowed the facility to supply gas to a regional pipeline year-round. The company said it was the best location on the East Coast for such a facility because it already had a dock and a storage tank in place, and no dredging of Narragansett Bay would be required.

Initially, many public officials supported the proposal, but that support soon fell away. Eventually, the project became almost universally opposed by legislators. Most expressed concern about what might happen in the event of a terrorist attack or an accident aboard an LNG tanker, as well as the potential disruptions that regular tanker shipments would cause to other Bay traffic.

In 2005, FERC rejected the KeySpan proposal. The commission found that the 17.5-acre site was too small to accommodate a “thermal exclusion zone” required by updated federal safety regulations. The rules establish a buffer area to protect the public from being injured or killed in the event of an LNG-fueled fire.

“Without meeting our full spectrum of reasonable safety requirements, we find that KeySpan’s proposals are not consistent with the public interest,” the agency said at the time.

KeySpan challenged that decision, first with FERC itself, and then with the U.S. Court of Appeals.

In August, National Grid purchased KeySpan for $7.3 billion, including its LNG facility in Providence.

Last month, Lynch called upon National Grid, as the new owner, to drop the appeal filed by KeySpan. That led to yesterday’s announcement by the utility company.

Lynch had said he wasn’t ready to celebrate yet because he is still fighting another LNG proposal — this one by Weaver’s Cove Energy, which wants to build a new terminal in Fall River. That project received conditional approval from FERC, but the Coast Guard has raised questions about the safety of tanker transits to that terminal. The agency is expected to issue its final determination shortly.

tbarmann@projo.com