Part II: Lake Charles Cameron LNG Terminal: Model for Success or Recipe for Disaster?
that matters most
Get the latest maritime news delivered to your inbox daily.
The Lake Charles Cameron LNG Terminal is a safe, secure and appropriate addition to the industrial complex on the Calcasieu Ship Channel. Furthermore, their unique, one-of-a-kind berthing arrangement is as safe as any facility on that channel. That’s Sempra Energy’s story, and they’re sticking to it. A MarEx interview last week with Darcel L. Hulse, president and chief executive officer of Sempra LNG was long on reassurances that Sempra had done everything right in their quest to secure permits for their ongoing project, but short on specifics to back up those claims. Industry observers who have watched the Sempra permitting process say that it is just this kind of vague and generic rhetoric which has frustrated concerned channel users and neighbors from day one.
As they try and understand the risks involved with the project and the measures which are supposedly in place to mitigate them, local industry and citizens say that they find the permitting process cloaked in secrecy. Because of it, the $750 million project, otherwise a model for success with the potential to pump millions of dollars and much needed-energy supplies into the local economy, finds itself at odds with a small, but vocal group of detractors. Fortunately for Sempra, there are others - the Lake Charles Pilots, for one - who are not shy about defending the merits of the terminal.
Darcel Hulse insists that Sempra’s “first and foremost objective, is safety.” By itself, there is no reason to doubt his passion for this policy. He says that Sempra is the first LNG firm in the United States to construct full containment tank technology, consisting of robust, concrete reinforced walls of at least 20” in thickness. The measures, in place at the Sempra Terminal in Lake Charles, are not yet required by regulations, but, he says, “They are the right thing to do.” He then went on to describe Sempra’s investment in specialized buoys deployed on the ship channel to monitor surge and current conditions, all of which was fed into their modeling, simulation and testing programs.
Hulse also said that the controversial (angular 45 degrees to the channel) dock design of the rapidly developing marine terminal was intended to allow for “quick extraction of vessels, if necessary.” It also allows Sempra to dock vessels expediently without blocking the ship channel, according to Hulse. A short discussion about Sempra’s planned, new-generation tractor tugs, which would be on standby and solely dedicated to the berth, ended the technical briefing for safety and security measures related to the terminal. Further MarEx questions about technical issues were deflected by putting the onus on other, existing facilities in the area to prove the value of their own safety and security measures.
Sempra’s Hulse concluded his remarks to MarEx by saying, “I take great exception to the title of this series of articles. LNG has had a remarkable safety record. This sort of thing only feeds the fire.” He also bristled at the implied inference that Sempra had been the recipient of any special treatment at any time during the review and permitting process. “We are successful because we’ve done our homework and complied with the rigorous requirements of the regulatory parties.” The Sempra CEO also went to great lengths to stress that while permits come from government authorities and not the other users of the channel; everyone has had the opportunity to take part in the debate. “It’s a fair and impartial process,” he said.
The Lake Charles Pilots took the argument a step further. Captain Mike Miller, the President of the local pilot group, says that in fact the only voice complaining about the facility to the Coast Guard and FERC is CITGO Petroleum. At this point, he’s probably right, at least where it concerns high profile companies. A few individuals are clearly angry at the way Sempra has gone about the process, but MarEx calls to a number of Calcasieu Ship Channel corporations and shippers failed to produce anything more than neutral and off-the-record opinions. Early interveners such as British Gas (BGLS) have long since moved on to other business, but not before voicing complaints about certain aspects of Sempra’s dock designs and other aspects of their proposed terminal.
To Sempra’s credit, they did listen and respond to some of the early scoping comments, especially the ones put forth by BGLS. Early plans for vessels large enough to transport 250,000 m3 were scrapped after British Gas outlined serious concerns about channel limitations. In fact, the BGLS scoping comments remarked that BGLS “would like to enjoy the economies associated with these larger LNG tankers.” BGLS also concluded that the use of 250,000 m3 LNG tankers “was not feasible due to Calcasieu River channel limitations.” In the end, the Sempra Terminal was not and is not currently permitted to receive vessels of that size.
But aside from the early debates, both BGLS and Cheniere, another LNG terminal operator, have largely moved on. Cheniere’s planned facility at the mouth of the Calcasieu River won’t be impacted by additional escort tug costs because their ships will never need to go that far up the river. A Cheniere executive in Houston even went as far as to “wish them the very best with their facility.” BGLS, citing stringent safety precautions of their own, already utilizes escort tugs for their vessels passing the Sempra Terminal site. Beyond this, the roughly six hour transit to their berths would not be impacted by (potentially) increased transit times necessitated by slowing passing traffic, hence their pilotage rates would remain the same.
The Lake Charles pilots continue to maintain that the current battle over design, safety and security issues at Sempra’s Terminal revolves around money, and money only. The rest of the noise, says Mike Miller, is just a smokescreen. According to Miller, “If Sempra had agreed early on to provide escort tugs on their account, then this would have been settled and this article never would have been written.” He goes on to point out that CITGO does not pay the tug bills for other third party vessels passing their own facilities, yet they demand this of Sempra. CITGO’s Ron Foster was contacted by MarEx to respond to this seemingly legitimate point and he responded that the use of tugs in the areas surrounding CITGO’s facilities was a pilot decision, not required by CITGO or any government authority, and was chiefly a safety move designed to help the pilots maneuver and manage the curves in the ship channel which occur before their berths.
As to CITGO’s worries that the opening of the Sempra facility will result in increased transit times and markedly higher pilot bills for upriver channel users, Miller says that the pilots already slow vessels down in the areas surrounding the Sempra Terminal for other reasons, including but not limited to residential subdivisions, an oil & gas service dock and a shrimp / crabbing dock. Miller says that transit time will not increase by even five minutes. But, one knowledgeable channel user, who asked to remain anonymous, said that transit times could realistically increase by 45 minutes to an hour. For CITGO, whose vessels already take 7 to 7-1/2 hours to reach their berths, this potential change in transit time could cost them as much as $4,000 per trip - and extrapolating it to their entire annual ship traffic volume, as much as $1.2 million annually - because of the proposed tariff requiring a 50% pilot surcharge for any river transit spanning more than eight hours. It remains to be seen who is right.
The Lake Charles pilots have voted, along with the rest of the Calcasieu River Waterway Safety Committee (CRWHSC) to conduct additional “analysis of passing vessel effects on docked LNG tankers” with Oceanic Consulting, a Canadian-based marine consulting group. Ron Foster says that the unanimous vote to conduct new simulations, at a shared cost of at least $200,000 is significant, because it contrasts with the 10-3 vote by a CRWHSC Navigation Sub-Committee back in the fourth quarter of 2005. This is important because the dissenting votes at that time, says Foster, were the Lake Charles pilots, a tug company and, of course, Sempra.
Sempra does not have a vote in CRWHSC, but the pilots do. At the end of the day, their vote to perform the testing again might constitute tacit agreement that previous testing was both inconclusive and flawed. Beyond this, anyone voting against the testing at this point arguably runs the risk of looking foolish in late October when and if the new simulations and modeling show serious safety issues with passing traffic on the terminal’s berthing arrangement. The results of the upcoming modeling will be telling: if one side is proven definitively right by the consulting report, then the debate should effectively end right then and there. But, don’t count on it.
Not withstanding Darcel Hulse’s claims of a “remarkable safety record for LNG,” back in March of this year, a 940-foot LNG carrier broke away from its moorings while discharging its cargo of LNG at an LNG terminal near Savannah, GA. Quick response and safety measures prevented a spill or worse and the Federal Energy Regulatory Commission (FERC) is still investigating the incident, which shut down the dock for 36 hours at a terminal on the Savannah River. The city of Savannah, GA rests just five miles away.
The tanker was pulled some 15 feet from the pier by a surge from a passing ship but was then corralled and brought back to the berth. The story is relevant to the current debate in Lake Charles in more than one way. The vessel which “pulled” the LNG carrier from its moorings was a smaller product carrier, of no more than 30,000 tons, far smaller in tonnage and dimensions than the 100,000 DWT ton vessels which are expected to pass Sempra’s facility every day; and in closer proximity to the berths. More importantly, the berth at which the LNG vessel was moored at was built especially to ensure that a ship-to-ship allision could not occur.
The Savannah terminal’s present berth is a dredged slip, situated well off the channel, at right angles to it. Despite these precautions, the vessel was sucked off the dock anyway. It’s also worth mentioning that the berth was constructed in answer to a previous accident in September 2000 when another tanker struck the terminal’s exposed riverside berth. Fortunately, the terminal was not in operation at the time and the exposed berth is no longer used by the terminal. The story well illustrates the dangers of an exposed berth to the possibility of allisions, as well as the sad truth that even a recessed, well designed one will not guarantee safety from passing deep-draft traffic, no matter how small.
Darcel Hulse is adamant that his Lake Charles terminal is “as safe and secure as any facility on that channel.” That remains to be seen. The simulations scheduled to be run by Oceanic Consulting are due to be performed in late October, meaning that the results of these tests could be available by Election Day. Until then, Sempra LNG remains in the driver’s seat, fully permitted, with construction proceeding at a brisk pace. Once Oceanic’s consulting report is issued and becomes public, the “confidential” nature of Sempra’s FERC filing documentation will become a moot point.
Mike Miller is probably right on the mark. Whenever someone tells you it’s not about the money, you can be sure that it’s about the money. In Lake Charles, a lot of money is in play, but the vast majority of it has nothing to do with CITGO Petroleum. CITGO is an easy target for criticism right now, especially given the nature of current events as they pertain to regional geopolitical battles. But, this is also about safety. A spill of one-tenth of the cargo of a fully loaded LNG tanker at Sempra’s planned LNG facility, if ignited, could burn hot enough to blister exposed skin about a mile away. One has to wonder if the Coast Guard or FERC, prior to issuing the permit for this terminal, ever considered what that type of event might do to the Strategic Petroleum Reserve, located about two miles distant. No doubt they did, but the answers are, of course, “confidential.”