(May 12, 2003) -- Following-up on plans first reported in March by LBReport.com, the Port of LB's Development Committee (Harbor Commissioners as a committee of the whole) voted to advance to the Board (to themselves) a Letter of Intent and Summary of Terms (details below) with a firm seeking to build a Liquefied Natural Gas (LNG) receiving terminal and regassification facility on roughly 27 acres of land at the eastern end of the general area where the LB Naval Shipyard once stood. [Pier T, formerly Pier Echo, by our unofficial rough (very rough) estimate, approx. two miles from LB City Hall.]

The general terms of the Letter of Intent between the Port of LB and Sound Energy Solutions (SES), a wholly owned subsidiary of Mitsubishi Corporation, are summarized in a Port staff report posted by LBReport.com. A previous Port release said the firm proposes to develop the LB terminal so it can import LNG from overseas.

If Harbor Commissioners subsequently vote as a Board as they did on May 12 as a Committee, the Letter of Intent will give SES the exclusive right to pursue developing the LNG receiving terminal at the site until their earlier of (1) the time SES determines the project isn't feasible; or (2) the Federal Energy Regulatory Commission (FERC) denies the project; or (3) 37 months after the date of the letter. The Summary of Terms indicates the Port would assign SES a berth and backlands consisting of roughly 27 acres for a term of 40 years.

An agendized memo to Harbor Commissioners from Director of Port Properties Kathryn McDermott indicates "the process for obtaining permits for this project differs from other types of commodity terminals, as the Federal Energy Regulatory Commission (FERC) regulates LNG. We anticipate an extended permitting and approval process conducted by FERC, in additional [sic] to permitting and approvals required by PoLB [Port of LB] and other governmental agencies."

Meanwhile, LB city management is asking the City Council to vote at its May 13 meeting to approve entering a Memorandum of Understanding (MOU) with SES for the purpose of discussions about a future long-term gas contract and the feasibility and development, financing, construction, operation and maintenance of gas pipelines to the proposed LNG Facility.

"While it is contemplated that the proposed LNG Facility and gas pipelines would not be operational until the end of 2007, SES has requested the MOU to be signed as soon as possible to assist SES in its ability to market the potential of an LNG terminal in Southern California to potential customers and to regulatory agencies," LB Dept. of Energy Dir. Chris Garner says in an agendized memo to Councilmembers, posted by LBReport.com.

City management's request that Councilmembers vote on May 13 to approve entering into a MOU -- still being negotiated but presumably reflecting some level of support for an LNG terminal in LB -- comes without prior serious Council discussion of the proposal, including risk and safety issues and (since Sept. 11) security issues.

Permitting an LNG terminal at LB could give the City-operated Energy Dept. the ability to tap into LNG supplies, presumably at competitive (and possibly advantageous) rates.

The Port staff memo says the Letter of Intent provides that "[c]oncurrent with any final agreement between PoLB and SES, SES will enter into an arrangement for the benefit of the citizens of Long Beach, the Long Beach Energy Department, and PoLB to provide liquid natural gas/natural gas."

But this would not necessarily mean cheaper rates for LB utility consumers. Under the LB City Charter, the city-operated utility must charge rates commensurate with those prevailing in the southern CA area...meaning if LB Energy received LNG at rates lower than other So. Cal. utilities, the "profit" could be used for utility maintenance, reserves...or sent to City Hall's General Fund where Councilmembers could spend it on anything from police and fire to travel and perks.

If LB's LNG terminal were approved and built first, it would be the first on the west coast...because the Northern California city of Vallejo, a port community about 30 miles northeast of San Francisco, became the site of fierce opposition to a proposed LNG terminal on Mare Island...a former Naval Shipyard on the western edge of the city.

The Vallejo LNG proposal did not involve SES. It was proposed by other parties and arguably differed in some respects.

However, Mare Island itself bears some eerie parallels to LB. Located on the western edge of Vallejo, Mare Island was the site of a once bustling Navy Shipyard. In 1993, the Defense Dept. Base Realignment and Closure (BRAC) Commission advised closure of Mare Island Naval Shipyard...which was completed in April 1996.

A reuse plan was suggested for Mare Island that included an LNG project with a 600- to 900-megawatt natural gas power plant, receiving terminal and storage facility at Mare Island's southern tip.

According to vallejonews.com, a cybernews outlet which covered the LNG story in detail, supporters of the project included business and union groups which argued the facility could provide jobs and tax revenue. Opponents raised concerns about safety, pollution and the possible impact on other businesses and the city's image.

(Opponents also established their own internet web site to communicate on a mass level...and didn't didn't rely on traditional media outlets).

Eventually, key proponents of the Vallejo LNG plan pulled out...and that city adopted a reuse plan for Mare Island that designated the site once considered for the LNG terminal as an open space and recreation area.

As previously reported by LBReport.com, a March 2003 Port of LB press release quoted LB Mayor Beverly O'Neill as saying, "This proposed project could be a major benefit to the Long Beach environment and the economy, while giving us the potential for lower natural gas costs for our residents and business."

The Port's March release quoted Acting City Manager Gerald Miller as saying, "As the port of entry, Long Beach could be assured of a reliable long-term source of natural gas. This would give us the opportunity to stabilize our prices."

The release also quoted Harbor Commission President John Hancock as saying, "The LNG terminal would provide the state with a cost-competitive alternative source of natural gas, while creating additional jobs and revenues at the port."

The Port said the LNG terminal "would facilitate the 're-powering' of diesel-powered heavy-duty vehicles such as shipping terminal tractors and other vehicles."