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    Port of LB Plans Independent Risk Analysis Of Proposed LNG Facility, Paralleling FERC-Port EIR Analysis But Independently Conducted; Port Will Also Seek Explicit Coastal Comm'n Approval

    Port Could Receive b/w $3.5-$4.5 Million/Yr in Rent From Completed Project; City Could Receive Add'l Revenue From Pipe Connecting LB With So Cal Gas

    (March 21, 2004) -- The Port of Long Beach plans to do an independent risk analysis of a proposed LNG project, similar to the analysis being done jointly by the Port and the Federal Energy Regulatory Commission (FERC) for inclusion in the Environmental Impact Report (EIR) but conducted independently of that analysis.

    In remarks at a March 20 forum on LNG held by the LB branch of the League of Women Voters, the Port of LB's Managing Director of Development, Geraldine Knatz Ph.D., also said that under financial understandings already reached between a Mitsubishi subsidiary which is seeking to built the facility, the Port could receive between $3.5 million to $4.5 million per year in rent from the completed project.

    In addition, LB City Hall could levy charges on a pipe conveying the natural gas from LB to So. Cal Gas distribution lines about two miles away. posts extended coverage of Dr. Knatz's remarks below:

    Dr. Knatz: In addition to [what federal and state agencies require], the Port has decided that we also are going to go out to find another risk consultant and ask them to do a similar analysis, like we are doing in our joint document with FERC, totally independent of the analysis that we're doing with FERC.

    So in essence, there's really going to be three risk analyses done of this project: the one that the applicant did as part of their application; the one that the Port and FERC are doing together that's going in the Environmental Impact Report; and the one that the Port has decided that we want to do just independently.

    We just wanted to have analysis that was independent of the analysis that we're working [audibility difficult]. And so we're going to do that analysis. We're in the process of interviewing consultants. [audibility difficult] and so we'll have that separate independent analysis as well.

    And so the one in the environmental document that goes public should hopefully match the one that this third party consultant will do, but it'll be interesting to see what comes out of this whole process. It gave us a great level of comfort, I think, to decide that we were going to do that, and we wanted to do that.

    Dr. Knatz also said that although the Coastal Commission already gave the Board of Harbor Commissioners the legal power to grant permits under a 1970s Master Plan for most Port projects, the Port intends to avoid legal quarrels about whether the Master Plan intended to cover LNG by seeking a Master Plan amendment from the Coastal Commission that explicitly includes the LNG facility.

    "We will seek a full Master Plan amendment and take the project to the Coastal Commission," Dr. Knatz said, adding "So in addition to approval by the FERC...the Coastal Commission will also have an independent review of this project and do an independent review. Now they don't actually issue approval for the project. What they'll really do is they'll review amending our Port Master Plan to give our Board of Harbor Commissioners the authority to issue a permit for the project, so what they really do is they look at the definition of "hazardous cargo" and decide whether they'll put LNG in that definition, and then that means that we're allowed to issue that permit...If the CA Coastal Commission rejects the Port's Master Plan Amendment, the Board of Harbor Commissioners is not going to be able to go forward with issuing a permit for the project."

    She added, "The Port of Long Beach, as part of the City of Long Beach, has the ability to say no. Even if FERC approves the project, the Coastal Commission approves the project, the Board of Harbor Commissioners has the right to say no. It has the right to say yes, too.

    Dr. Knatz also commented on the financial arrangement already reached between the Port and the Mitsubishi subsidiary:

    Dr. Knatz: One of the things we do when we go out with an RFP and companies come forth that are interested in developing a project, and really for a number of years we've had companies come forward who want to propose LNG projects, we selected Mitsubishi as the company that we will negotiate with, and that we will undertake this process for Mitsubishi. That's not the same as approving the project. That's saying we're going to work with you in this project.

    But one of the things that we do when we say OK we're going to work with Mitsubishi is, we talk about money, mainly because we don't want to go through our process for a year or two and say, OK, the Board's ready to approve the project and they [the applicant] come and say, well we only want to pay a dollar a year. We wanted them to be aware of what our leasing policies were and what we would charge for a facility.

    So as part of our understanding with Mitsubishi, if they get the lease, they know what their land rent's going to be. They know, we shared with them our published tariff, and it's like seven cents a barrel for liquid coming off over a berth, and so they know what that is. And basically we had an understanding that there'll be a minimum rent, it's about three and a half million dollars, and if somebody wants I can explain how we arrived at that number.

    If they bring in those seventy ships a year and we collect that tariff, our estimate of revenue to the Port is about four and a half million dollars per year...

    ...So, ultimately the max on the volume that they've estimated for us is about four and a half million dollars, but the tariff applies to that rent, they don't have to pay the base rent and then the full tariff. But we always have a minimum, even if [inaudible] they built it and not one ship came in, they'd pay us three and a half million dollars a year.

    For a compendium of coverage of the LNG issue, see Coverage of LNG Terminal Proposed in Port of LB

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