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    LB LNG Applicant Seeks Fed Authority To Build 2.3 Mile Natural Gas Pipeline From Port Site To Connection Point To So. Cal Gas Lines

    (Sept. 14, 2004) -- Mitsubishi subsidiary "Sound Energy Solutions" has amended its application to the Federal Energy Regulatory Commission (FERC) to build and operate an LNG facility in the Port of LB to now include authorization to build and operate a 2.3 mile natural gas pipeline connecting the LNG facility to So. Cal Gas lines at the Port/WLB area "Salt Works Station" site.

    LB city staff previously indicated that City Hall could build such a pipeline...and presumably charge for its use and produce a new revenue stream for City Hall. It's unclear as we post to what extent, if at all, City Hall could charge fees, and in what amounts, if SES were to build and operate the pipeline instead of City Hall.

    In a businesslike but bluntly worded September 8 filing with FERC, SES says in pertinent part:

    By this amendment, SES is now requesting authority, pursuant to Section 3 of the Natural Gas Act to construct, own and operate the 2.3 mile sendout pipeline described in its original application as necessary to connect the LNG import terminal facilities to the SoCal Gas local distribution system. While negotiations with Long Beach Energy are continuing at this time the City of Long Beach to [sic] has not made executive decision to construct, own or operate the pipeline. SES, therefore, is amending the application in order to receive Section 3 authorization for construction, ownership and operation of the sendout pipeline as part of the LNG Terminal...

    A May 2003 Letter of Intent between the Port of LB and SES indicated that finalizing the LNG project would involve LB Energy (and thus the City Council. presumably related to City Hall building a pipeline), a proviso that appeared to give Councilmembers some say in the project (that will otherwise be decided by LB's non-elected Board of Harbor Commissioners).

    (Portion of Letter of Intent: "Finalization of the preferential assignment agreement will involve SES and the Energy Department of the City of Long Beach entering into an arrangement for the benefit of the citizens of Long Beach, the Energy Department, the Port of Long Beach and SES.")

    If SES' amended application is accepted by FERC and allowed to proceed, the following hardball dynamic could arguably result: if City Hall doesn't build the pipeline, SES could build it; if City Hall builds the pipeline, it would ultimately involve Council assent, thus removing a possible hurdle to the project. Either outcome would give the SES LNG facility natural gas connectivity to the Port area/WLB Salt Works Station site. As previously reported by, the Salt Works site was recently identified by the CA Public Utilities Commission as one of three new connecting sites for natural gas entry into CA.

    LB Citizens for Utility Reform (LBCUR) leader Bry Myown, a critic of the project, reacted to the developments, telling, "This was foreseeable and preventable. This project is out of control because the City, instead of looking after its residents, has allowed the Port of Long Beach and Long Beach Energy to run amok."

    Sound Energy Solutions CEO Tom Giles told, "This all has to do with permitting. It doesn't have to do with the ultimate ownership [of the pipeline] which we still believe will be some city entity. Really, this is sort of a non-event from our standpoint. This is part of the process of getting our project permitted. We actually believe nothing has changed between us and the city."

    After FERC issued its declaratory ruling asserting exclusive-jurisdiction in the LNG proceeding, LBCUR and other grassroots groups filed materials in opposition. However LB City Hall's position focused on maintaining City Hall control of the pipeline if City Hall were to build and operate it. FERC ultimately agreed with City Hall that LB Energy, as a municipal utility, could build the pipeline without FERC permission. However, FERC added that it has the power to grant others authority to build and operate a pipeline in connection with the LNG project. SES has now cited FERC's position as a basis for its amendment.

    The Port, via its Board of Harbor Commissioners, still presumably retains authority to say "yes" or "no" to the entire LNG project. However, LB's Harbor Commission and City Council have recently been at odds over other Port actions, including Port opposition to AB 2042, "no increased air pollution with port growth." The Port's opposition to the bill (which the City Council supported) prompted Councilmembers Reyes Uranga and Gabelich to agonize an item to pursue possible City Charter changes that controls how the Port is governed. On the same day, Harbor Commissioners attached a hardball proviso that required the Council to approve the Port's latest budget "as submitted"...or the Port would reexamine its offer to transfer immediately over $6 million to City Hall's cash strapped Tidelands Operating Fund.

    Two Councilmembers (Gabelich and Lerch) voted against approving the Port's budget and the Council held off proceedings on a Charter Amendment -- for now. Quarterly meetings are reportedly in the works between Councilmembers and Harbor Commissioners.

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