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    City Mgr. Miller & City Att'y Shannon Jointly Agendize Item Seeking Council Policy Direction Re LNG

    (May 20, 2005) -- In a significant item agendized under New Business on the May 24 City Council agenda, LB City Manager Jerry Miller and City Attorney Robert Shannon have jointly requested policy direction from the City Council on whether LB City Hall should terminate, pursue or continue to suspend a 2003 Memorandum of Understanding (MOU) with Mitsubishi subsidiary Sound Energy Solutions (SES/Mitsubishi) related to an 80+ million gallon Liquefied Natural Gas (LNG) facility that the firm proposes to build and operate in the Port of LB.

    The Miller-Shannon memo notes that the Port of LB has entered into a separate MOU with SES/Mitsubishi which states in part:

    "'Concurrent with any final agreement with the Port of Long Beach, SES will enter into an arrangement for the benefit of the citizens of Long Beach, the Long Beach Energy Department, and the Port of Long Beach to provide liquid natural gas (natural gas.)' Therefore, no final agreement with the Port will occur under the Portís existing MOU unless SES successfully concludes negotiations on the two issues discussed in Long Beach Energyís MOU approved by the City Council."

    The Council-approved MOU was authorized in a May 13, 2003 action that took roughly 87 seconds. (Following a brief city staff report, Mayor O'Neill said, "This is a good agreement"; she was the only elected official to speak.) The Council voted 9-0 to enter into an MOU for potentially reduced natural gas costs for LB's City Hall-run gas utility if the LNG project were completed. Neither the Council MOU nor the Port MOU granted SES/Mitsubishi permission to build the facility or committed to do so.

    However, since the two MOUs were entered into, no LB official has voted to oppose the project.

    In June 2003, LB Mayor Beverly O'Neill wrote U.S. Senator Dianne Feinstein (D., CA), asking her to help speed the project. After published the letter, Mayor O'Neill acknowledged to rankled Councilmembers that the Council, not the Mayor, makes city policy.

    Since then, the Council has not taken a policy position on the LNG proposal.

    On January 4, 2005, Councilwoman Rae Gabelich agendized an item that stated in part, "[s]erious concerns have been raised about the safety of...[a proposed] LNG facility in Long Beach, as well as the ultimate benefit to the residents of Long Beach" and requested a study session within 60 days to receive staff and public input on the appropriateness of locating an LNG facility in Long Beach.

    The study session took place on April 2, 2005...but to date, no Council policy decision has followed.

    On April 22 -- one day after the House of Representatives voted to pass its version of a federal Energy bill with verbiage giving FERC virtually complete federal siting and regulatory authority with regard to proposed LNG terminals -- the Council's Federal Legislation & Environmental Affairs Committee (chair Colonna, members Kell & Reyes Uranga) held a specially convened meeting at which LBPD and LBFD officials reported on a recent visit they'd made to a Boston-area LNG facility.

    LBPD said Boston area officials indicated they were incurring unreimbursed LNG-related security and public safety expenses. LBFD described the potential impacts in the Boston area of an LNG-related fire.

    The Miller-Shannon May 24, 2005 memo continues:

    Shortly after the City Councilís [May 13, 2003] authorization, negotiations on gas supply and the pipelines did commence between Long Beach Energy and SES/Mitsubishi. However, while the general business term concepts were discussed, no agreement with specific terms has been reached and Long Beach Energy and SES/Mitsubishi long ago suspended negotiations. The dormant status of negotiations has been communicated to the City Council both publicly and privately on several occasions over the past year.

    Recently, the SES/Mitsubishi LNG project has gained significant additional attention. This is due primarily to proposed controversial federal legislation, which would grant the federal government virtually complete federal siting and regulatory authority with regard to any proposed LNG terminal, all at the expense of state and local law. This is especially significant in light of local concerns relating to public safety and the financial impacts associated with mitigating potential hazards. These issues were discussed in some detail at the recent LNG public forum hosted by the City Council and at the April 22, 2005, meeting of the Federal Legislation and Environmental Affairs Committee.

    Because of the foregoing, the City Manager and City Attorney request that the City Council provide policy direction with regard to the continuation or termination of negotiations with SES/Mitsubishi.


    Policy direction from the City Council is requested as soon as possible to assist staff in communicating the Cityís position.

    The memo's proposed options:

    Authorize the City Manager to formally terminate negotiations with Sound Energy Solutions (SES/Mitsubishi) regarding a long-term natural gas supply and the feasibility of constructing and operating interconnecting gas pipelines to the proposed liquefied natural gas (LNG) facility, per the Memorandum of Understanding approved by City Council on May 13, 2003; or continue the current suspension of such negotiations; or authorize the City Manager to resume such negotiations. (Citywide)

    Bry Myown of LB Citizens for Utility Reform, an opponent of the proposed Port-sited LNG facility, said:

    "City Attorney Shannon and City Manager Miller have done the public a service in giving the Council an opportunity to protect our neighborhoods, our people and our Port."

    Developing maintains a link on our front page to a compilation of our LNG coverage. To view it, click here.

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