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    LB Harbor Commission Halts LNG Project

    (Jan. 22, 2007, updated Jan. 23) -- LB's Board of Harbor Commissioners voted today (Jan. 22) to halt environmental review of a proposal by Sound Energy Solutions to build a Liquefied Natural Gas (LNG) facility at the Port of Long Beach.

    Following a closed session, the Harbor Commission issued the following statement:

    "After deliberation, based upon an opinion [link to full text below] from Long Beach City Attorney Robert Shannon, who concluded that the Environmental Impact Report on the proposed LNG project ‘is and in all likelihood will remain legally inadequate,’ and since an agreement between Sound Energy Solutions and the City does not appear to be forthcoming, the Board of Harbor Commissioners disapproves the project and declines to pursue further negotiations."

    LNG project applicant SES posted on its web site the following statement by its President/CEO Thomas Giles:

    "We are surprised by the action taken by the Harbor Commission and the Port of Long Beach. We just resumed negotiations last week with the City at the direction of the City Manager. We are currently reviewing all of our options."

    The Port of LB has posted the opinion by City Attorney Shannon on its web site...and in the public interest, we link to it here. To view it, Jan. 8 2007 memo to LB Harbor Commissioners (scroll past the release text for memo).

    The Jan. 22 Harbor Commission action caps a series of fast-breaking developments.

    • Dec. 4: Following a closed-session Harbor Commission vote, LB Harbor Comm' President James Hankla sent a letter addressed to LB's Mayor and City Council stating that Port of LB "will not divert additional staff resources to the LNG Project without a clear understanding that the City is prepared to support that project." The letter says the City Council's "failure to enter into an agreement with [LNG project proponent] SES [Sound Energy Solutions] relating to pipeline and long-term natural gas supplies suggests that the City does not support the project. If this is incorrect, we need to be so advised as soon as possible." [To view the letter, click here.]

      LNG project proponent Sound Energy Solutions issued a written statement from its President/CEO Thomas Giles, "From our viewpoint, the Long Beach City Council has voted twice to continue negotiations and complete the environmental review process on our project. The release of the final environmental document that will address all issues surrounding the project is imminent and we continue to believe that the CEQA process should be completed."

    • Dec. 7: LB Mayor Bob Foster by letter informed SES that he will not support its LNG proposal, stating in part, "Nothing in my continuing review of the EIR, response to questions from the Port, commentary by the California Public Utilities Commission or other documentation has substantiated the viewpoint that this project ensures the safety of Long Beach residents to my satisfaction. Further, I continue to believe that locating such a large processing and storage facility at the gate of America's commerce pipeline is simply ill advised. As such, this letter is to inform you that I will not support of [sic] a Sound Energy Solutions LNG facility proposal at the Port of Long Beach." [To view the Mayor's Dec. 7 letter in its entirety, click here.]

    • Dec. 12: LB city management sends Mayor Foster and City Councilmembers a four page memo (with multiple attachments) providing an update on negotiations with SES. The memo, by City Hall's Director of Gas & Oil, Chris Garner, to City Manager Jerry Miller, for the Mayor & City Council, 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-mile 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.

    • On or about Dec. 12: Sound Energy Solutions (SES) released a letter publicly disclosing salient terms of the firm's then-offered financial package to the City. SES (originally a wholly owned Mitsubishi subsidiary; in May 2005, ConocoPhillips joined Mitsubishi in a 50/50 partnership for the development of the terminal) called it "one of the most financially beneficial packages ever offered to the Port of Long Beach or the City." The letter dated December 13, 2006 said that after at least four meetings between SES and Long Beach Gas & Oil, SES' latest offer to the city consisted of:

      Term -- 25 years; Discount to Long Beach citizens -- $0.15/MMBTU discount to Southern California weighted average cost of natural gas (value of approximately $1 million per year); Up to $100 million to be paid over the life of the project into the General Fund for Police, Fire or any other use the City Council should decide upon; Closing bonus to the City in the amount of $4 million at ground breaking; Approximately $10 million per year in additional wharfage fees and property tax fees paid by the terminal, once built.

      "We believe the details of the financial package have not been brought to the attention of City Council members," the SES letter stated.

    • [Update Jan. 23]. In a Jan. 23, 2007 memo to Councilmembers prompted by a report in the Press-Telegram, city management describes items it said were included in a January 19 offer by SES to the city. To view city management's Jan. 23, 2007 memo, click here.

    Under former Mayor Beverly O'Neill, the City Council took the following salient actions on the LNG proposal

    • In June 7, 2005, the Council voted 5-4 (substitute motion by Reyes Uranga blocking a Colonna/Lowenthal/Gabelich agendized anti-LNG motion) "to continue 'non-binding' discussions, per Memorandum of Understanding of May 13, 2003 regarding the future long-term natural gas contract for the benefit of the citizens of Long Beach and have the city conduct a risk assessment and a hazard assessment, including the fiscal impact by qualified experts as soon as feasibly possible." The vote was: Yes: O'Donnell, Kell, Richardson, Reyes Uranga, Lerch; No: Lowenthal, Baker, Colonna, Gabelich.

    • In August 2005, the Council voted 5-4 (motion by Kell, seconded by O'Donnell) to declare that the City Council "reserves the right to take a position on the siting of an LNG terminal in the Port of Long Beach as appropriate and in accordance with the California Environmental Quality Act" (which Kell said implies waiting for a forthcoming Port-produced EIR) but remained silent on whether to encourage remote siting. Kell offered her substitute motion to counter an agendized item by Councilmembers B. Lowenthal, Baker, Colonna and Gabelich to oppose the Port site and communicate to the CA Energy Commission that LB encourages remote siting. Kell's substitute motion carried on the following vote: Yes: O'Donnell, Kell, Richardson, Reyes Uranga and Lerch; No: Lowenthal, Baker, Colonna and Gabelich.

      Prior to the August 2005 Council vote, lawyers for Sound Energy Solutions advised City Hall of their position that their client would incur nearly $40 million in damages if the Council approved the agendized item that opposed putting an LNG facility in the Port.

      Cong. Dana Rohrabacher (R., HB-SP-PV) (whose district includes the Port areas) also weighed in, calling the agendized item against port-siting of the proposed LNG facility the "worst form of NIMBY-ism."

    However In the period since the prior LNG votes, the Council's composition has changed. Councilmembers Suja Lowenthal, Gary DeLong and Gerrie Schipske have replaced former Councilmembers Dan Baker, Frank Colonna and Jackie Kell. As of December 2006, Councilwoman Laura Richardson is gone [now an Assemblymember] and her Council seat will be vacant for several months.

    And in mid-July 2006, Mayor Foster succeeded twelve year Mayor Beverly O'Neill. Former Mayor O'Neill supported the LNG project from its 2003 Port-announced inception and didn't use her position in the "U.S. Conference of Mayors" to strongly oppose LNG-related verbiage in the then-advancing federal Energy bill that City Attorney Shannon described as basically preemptive. Although the City of LB (and other coastal cities and states nationally) lost LNG regulatory authority in the federal Energy bill, the Port of LB retained virtually complete control as landlord over whether to permit the LNG facility to be built on Port property.

    Under LB's current City Charter, the Port of LB is governed by five non-elected, non-recallable Harbor Commissioners (chosen by LB's former Mayor). On January 16, 2007 the City Council voted to put several Charter Amendments before LB of which [if approved by LB voters] would empower the Mayor [i.e. LB's new Mayor Foster] to remove members of Charter Commissions -- including the Harbor Commission -- for any reason [instead of the current narrowly enumerated grounds] with concurrence of 2/3 of City Council. And another Charter Amendment would strengthen the Mayor's power by requiring six Councilmembers' votes (instead of the current five) to override a Mayoral action.

    At the January 23, 2007 Council meeting, Mayor Foster has agendized an item seeking Council support [five Council votes are needed] to hold a special citywide election on the Charter Amendments on May 1, 2007.

    And at the same Jan. 23, 2007 Council meeting, Councilmembers Rae Gabelich and Tonia Reyes Uranga have agendized an item seeking to refer to the Council's Charter Amendment Committee a measure that would make the Harbor Commission's current absolute power as landlord over Port property subject to minimal Council oversight control. The Gabelich-Reyes Uranga measure proposes:

    Board [of Harbor Commissioners] action granting development rights or approving leases shall be taken by order or resolution. If the board's order or resolution grants development rights for a project that would extend in excess of five years or approves a lease for greater than five years, it shall be submitted to Council for its approval or disapproval . Unless Council takes action disapproving development rights or lease within 30 days after submission of it to Council, the development rights or lease shall be deemed approved. If Council disapproves the development rights or lease, Council shall return said rights or lease to the originating board for reconsideration and resubmission.

    In their agendizing memo, Councilmembers Gabelich and Reyes Uranga write in part:

    "The Port of Long Beach has a significant impact on the entire Long Beach community, including the city's economy, traffic and air and water quality. The Board of Harbor Commissioners should be able to conduct the daily business of the port. However, the public should have the opportunity to have their elected representatives review significant decisions of the Harbor Commission that will have an impact on the greater Long Beach community..."

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