Part III: Lake Charles Cameron LNG Terminal: Model for Success or Recipe for Disaster?
It could be just a matter of time before Sempra’s Lake Charles Cameron LNG Terminal is completed, commences trading operations and begins to provide the type of economic benefit to the local community that its supporters say is sure to come. There are many compelling economic reasons to allow the controversial terminal to come to fruition. Not surprisingly, the lucrative windfall which will come from this potential, new supply of LNG benefits some of the facility’s most vociferous supporters. As the project steamrolls on, however, the concerns of those parties who stand to lose the most from Lake Charles’ newest industrial player are being cast aside like litter from a runaway trash truck. Beyond the financial implications, detractors of the new terminal are saying that the FERC and Coast Guard vetting process, until now thought to be the ultimate strength of this terminal, is being shown for what it is: critically flawed.
The question of whether Sempra’s Cameron LNG Terminal is a safe, secure and appropriate addition to the industrial complex on the Calcasieu Ship Channel is a foregone conclusion, according to the US Coast Guard’s LCDR Buddy Reams, Commanding Officer of the Lake Charles USCG Marine Safety Unit (MSU). According to Reams, the USCG Captain of the Port (COTP) has the ultimate authority to decide what is necessary in terms of both safety and security measures for the nascent marine terminal. But, he says, issues of security and safety for the terminal are far from settled. “We don’t know enough to say which specific measures must be taken.” He also told MarEx via telecon on Wednesday that “Safety parameters have not been set in stone.” Reams went on to say that the Coast Guard’s Waterway Safety Assessment had been completed, a recommendation had been made and that there was little chance that any of that would change. Despite this posturing, Sempra’s Cameron LNG Terminal might be ready to receive its first ship in the summer of 2008, but the Coast Guard’s requirements for safety and security at the facility, apparently, are not.
Any proposed LNG project in the United States must run the gauntlet of requirements demanded by the Federal Energy Regulatory Commission (FERC), United States Coast Guard (USCG) and the U.S. Maritime Administration (MARAD). Despite the difficulty in navigating the government maze, Sempra has so far made the onerous approval process seem easy, both in Lake Charles and at their Baja California, Mexico (Energy Costa Azul) Terminal. In fact, in September of 2003, when Sempra received FERC authorization to move forward with the Cameron LNG facility, a Sempra press release quoted Donald E. Felsinger, group president of Sempra Energy Global Enterprises, as saying, “Sempra Energy stands alone as the first and only company to successfully acquire authorization from the federal regulatory commissions of the United States and Mexico for the construction of two new North American LNG facilities, Cameron LNG and Energia Costa Azul in Baja California, Mexico.”
Preliminary FERC approval of the Lake Charles facility took little more than seven months, an enviable achievement after it was first applied for in May of 2002. At Lake Charles, Sempra also issued an expansion proposal to the Federal Regulatory Energy Commission (FERC), “to amend the Section 3 authorization issued in Docket No. CP02-374, which authorized construction and operation of a liquefied natural gas import terminal near Hackberry, Louisiana, to modify the berthing facilities to accommodate larger LNG tankers.” It was this request for amendment, received in 2004 by FERC that solidified growing local opposition to the terminal by a consortium of local ship channel users. As a direct manifestation of this effort, the Lake Charles Harbor Safety Committee, spurred largely by CITGO Petroleum and other major channel users, has commissioned a “Calcasieu Channel Passing Study” for the facility.
The $200,000 consulting project, due to start this week, will attempt to determine whether previous studies and computer modeling were flawed or indicative of serious marine safety issues with the way the terminal’s docks are being constructed. Ron Foster, CITGO’s local marine consultant and former Gulf Coast Manager for Marine & Pipeline Operations says that they are. The Lake Charles pilots, the professional group who will have direct responsibility for ensuring the safety of all deep draft vessels in the channel, disagree.
A unanimous vote by the Calcasieu River Waterway Safety Committee (CRWHSC) has authorized additional “analysis of passing vessel effects on docked LNG tankers” with Oceanic Consulting, a Canadian-based marine consulting group. Given the intense negotiations which preceded the agreement to perform the modeling again, the results of the upcoming simulations will be telling. But, the Coast Guard’s Buddy Reams said Wednesday that “Coast Guard decisions regarding safety precautions at the Cameron terminal will not necessarily be linked to the results of the CRWHSC study.” When pressed to describe what data might influence their decision process, he said simply, “As safety concerns come up, they will be addressed, as necessary.”
Although the Coast Guard’s official position on Sempra’s proposed Lake Charles Terminal might come as a surprise some in maritime community, CITGO’s Ron Foster says that it is consistent with previous Coast Guard actions with regard to the Cameron LNG facility. In March of 2005, Lake Charles pilot and Chairman of the local Navigation Safety Subcommittee George Mowbray sent out an E-mail which said “LCDR Mark McCadden and I request your participation in an ad hoc working group of the Navigation Safety Subcommittee to assist the U.S. Coast Guard with assessing potential waterway impacts associated with the Cameron LNG Berthing Amendment filed in December 2004.” The E-mail went on to say “We anticipate holding a series of three meetings spaced approximately two weeks apart with the intention of resolving any issues through the Navigation Subcommittee in a short span of time.” The e-mail also described the Coast Guard’s willingness to host the meetings at their facilities and the first meeting took place as scheduled.
A second meeting of the Navigation sub-committee also took place on April 13th. Up until this point, CITGO personnel prepared documentation and provided input with the understanding that the meetings were to have an impact on the Coast Guard’s decision process. Suddenly, and without any prior warning or notice, the third meeting was cancelled by the Coast Guard and within 14 days, the Coast Guard’s LCDR McCadden issued his edict to FERC with regard to the Waterway Suitability Assessment for the Cameron LNG Terminal. CITGO personnel were stunned to learn that not only had the Coast Guard approved the “Calcasieu River suitable for marine LNG traffic” as it applied to the Cameron facility, but had also done so without “considering the security issues associated with the project.” On Wednesday, LCDR Reams told MarEx that the Facility Security Plan (FSP) for the Cameron Terminal has not yet been finalized, or approved.
Sempra’s CEO Darcel Hulse went to great lengths in Part II of this series to tout the inclusive nature of the debate surrounding his Lake Charles facility. Although he has maintained that everyone was given the opportunity to take part in the debate, his claim of “a fair and impartial process” has diminished somewhat in the face of documentation that shows that Coast Guard decisions were being made on the project even as they cancelled the third, promised Navigation sub-committee hearing. At this point, CITGO’s Ron Foster says that it is all but certain that local Coast Guard personnel had no intention of doing anything but approving the facility, regardless of what transpired in the Navigation sub-committee meetings.
Lake Charles pilot Mike Miller is adamant that opponent’s objections to the Cameron LNG facility revolve around money and money only. There is a great deal of truth to that statement. Many people and businesses will be impacted by the potential arrival of still another LNG player in Lake Charles; one way or another. Local resident Charlie Atherton is one of them. Atherton owns more than a few acres of land to the immediate west of the Calcasieu Ship Channel, some of which he says stands directly in the way of Sempra and another LNG group’s desire to build an LNG pipeline to hook up to the Cameron facility. So far, Atherton says that he has steadfastly refused their overtures, which he says border on ridiculous, as compared to the financial arrangements being thrown at others. MarEx sources indicate that the port of Lake Charles itself stands to make $45,000 per month plus a throughput fee for the Sempra lease. Charlie says, “I want the same thing, and more.”
At first glance, and after a long telephone conversation with Charlie, it is tempting to dismiss him as just another over-the-edge gadfly with an axe to grind. He says that this is exactly how Sempra has treated him, to date. But Atherton knows his business and has spent the past three or four years honing his message. One thing is for sure: Charlie knows exactly where this is headed, and soon. The recent passage of Amendment 5 to the Louisiana Constitution possibly portends the quick and legal seizure of his property for the purposes of economic development. The amendment states that Government bodies cannot appropriate private property for economic development, but specifically (in small print) exempts ports from this statute. What looked like an amendment which would protect the average citizen has had just the opposite effect. Hence, the Amendment 5 waiver does not bode well for anyone with property in and around Lake Charles; especially at this time. Sempra will likely get their pipeline right-of-way, and the Port of Lake Charles could well be the conduit that sees to it.
Other theoretical downstream financial ramifications for the Cameron Lake Charles LNG facility are easy enough to calculate, but go well beyond the seemingly minor troubles of a local, retired citizen who thought had secured some attractive property to fund his golden years. The numbers are staggering, even for people who are accustomed to the inflated world of maritime statistics and dollars:
• Pilotage for Sempra Vessels @ 210 (400 + movements) per year (1): $6 million
• Increased Transit Time ??" increased pilot fees - for Crude Ships (2): $1.4 million
• Tug Boats (LNG): $4 million
• Escort Tugs (400 crude ships @ $5K per trip): $2 million
• Port of Lake Charles: As much as $1 million, no less than $540,000
(1) Vessel traffic figure estimates as per Lake Charles pilots.
(2) Disputed and said to be completely unfounded by local pilots.
The above numbers are conservative figures, designed specifically to withstand the scrutiny of challenge and do not address the possibility (or likelihood) of double-pilot mandates which may or may not come in the near term future for LNG traffic on the Calcasieu River. They do illustrate well the windfall awaiting marine pilots, tug companies, the port of Lake Charles and conversely, the huge financial burden awaiting various other channel players. Failing a last minute reprieve from federal regulators or a change in what is expected to be the standard safety protocol for traffic passing the proposed Sempra Terminal, it’s about to get a lot more expensive to do business on the Calcasieu River.
The expected completion date of computer modeling and full bridge simulations is 21 October, with a consulting report and assessment due in early November. But, according to local Lake Charles Coast Guard officials, this may have little or no impact on their decision-making process for safety arrangements at Sempra’s terminal. Security arrangements are also incomplete, thus opening up legitimate questions as to how the terminal could have been recommended to FERC in the first place. Charlie Atherton says “I’ve never seen a terminal that FERC didn’t like.” While that may be stretching it a bit, it is true that LNG’s success in obtaining the federal OKAY on the Gulf Coast has rarely been a problem. Local politics are another matter altogether, but rarely a problem in the industrial port of Lake Charles, Louisiana.