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News Here's Dec. 12/06 City Mgmt Memo Updating Mayor & Council On Negotiations With LNG Project Applicant SES
(Dec. 13, 2006) -- One day before Sound Energy Solutions (SES) (which seeks to build and operate an 80+ million gallon Liquefied Natural Gas (LNG) facility in the Port of LB) publicly disclosed terms of its latest financial package offered to the City -- which the firm said were not being brought to the attention of City Councilmembers -- LB city management sent the Mayor and City Councilmembers a four page memo (with multiple attachments) providing an update on negotiations with SES.
LBReport.com has obtained and posts below the December 12, 2006 memo by City Hall's Director of Gas & Oil, Chris Garner, to City Manager Jerry Miller, for the Mayor & City Council. It includes a section discussing SES' offer to City Hall (page three) and LB Gas & Oil customers (page two).
In its opening section, the city management memo states, "SES has indicated that its latest offer is representative of the maximum total overall value that SES is willing to provide and has rejected the major points in LBGO's [LB Gas & Oil's] subsequent counteroffer. Therefore, it is not realistic to expect that further discussions with SES would provide any substantial additional value to what has been offered to date by SES." It continues:
From a natural gas supply perspective, competing LNG projects that will provide similar gas supply benefits to Southern California, without the potential siting risks to Long Beach, are either in construction or further along in the regulatory process than SES. Additionally, other gas supply opportunities that potentially provide greater financial savings have also surfaced since discussions with SES began over three years ago.
Based upon information included in this memo and previous memos concerning this subject, the value offered by SES is not nearly sufficient to recommended to the City Council that negotiations continue forward.
NOTE: LBGO's negotiations have not considered security or safety issues, but have dealt solely with the business aspect of the gas supply and pipeline components of the project. Issues related to the suitability of an LNG terminal within the city's boundaries will be addressed in the final Environmental Impact Report/Environmental Impact Study that will be released in December 2006. These issues are under review by federal and state agencies, as well as the City's Harbor, Fire, Police, and Planning and Building Departments.
["Note" section in italics above is part of memo text.]
In its section on SES' offer to LB Gas & Oil customers, city management says the gas price discount (passed through to LBGO customers) would amount to about 60 cents per average residential customer's monthly gas bill. "While the $1.5 million aggregate cost savings to LBGO customers may appear sizable, the individual savings to residential customers would represent less than one percent of their total average monthly utility bill (including gas, water, sewer and refuse)."
In its section on SES' offer to the city, the memo states: "In consideration of the magnitude of this project and the expected revenue stream for SES for 40 to 50 years, it is unreasonable that SES is proposing a limited-term pipeline franchise to the City. If, as original planned, the City were to retain ownership of the 2.4-ile interconnecting pipeline, the City would realize a substantial revenue stream for the life of the pipeline. SES' annual cost for this offer to the City represents only about two-tenths of one percent of SES' estimated $2 billion gross annual gas sales..."
To view the December 12, 2006 city management memo in full, click here.
Related coverage:
LNG Applicant SES Discloses Salient Terms Of Its Latest Financial Package Offered To Port/City
Proposed LB LNG Facility, Further Factoids: Dec. 4/06 Letter From Harbor Comm'n Pres. Hankla To Mayor/Council Was Authorized By Harbor Comm'n In Closed Session Vote; We Post Sept/06 Letter From SES To Mayor Foster Re Their July/06 Meeting; We Post May/06 City Mgmt Report For Mayor/Council Re LB Gas/Oil Dept. Negotiations With SES
Mayor Foster Tells LNG Project Applicant "I Will Not Support...LNG Proposal At The Port of Long Beach"; We Post Mayor's Letter & Recap Recent Salient Actions
LBReport.com collected coverage of LNG terminal proposal
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