Plans for $800 Million LNG Import Terminal in California Shelved

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Researched by Industrial Info Resources (Sugar Land, Texas) -- Sound Energy Solutions (SES) (Long Beach, California), a subsidiary of Mitsubishi Corporation (OTC: MSBHY) (Tokyo, Japan), has placed a liquefied natural gas terminal project in Long Beach, California on indefinite hold. It is not clear when or if the project will be revived.

When the project was first proposed by SES in 2004 it was estimated to cost $450 million and company officials were looking to build the terminal in the Port of Los Angeles. The company filed for regulatory approval from the Federal Energy Regulatory Commission (FERC) in early 2004 and had expected to begin construction in late 2004 and have the terminal operational in 2008. Since then the site had been changed to a 25 acre site at Pier T in the Port of Long Beach and the most recent cost estimates place the project at approximately $800 million.

The proposed terminal was to have re-gasification capacity of 1 billion cubic feet per day and store up to 320,000 cubic meters in LNG in two 160,000 cubic meter tanks. The terminal was to be connected to the Southern California Gas Company pipeline system at its Salt Works compressor station by an approximately 2.3 mile long 36-inch diameter pipeline. Some of the LNG was to be used to fuel LNG-powered trucks and cargo handling equipment at the both the Port of Long Beach and the Port of Los Angeles. Recently the ports have set goals in which no less than half of the new trucks purchased through the port's subsidy program should run on alternatives to clean diesel. At the present time the leading alternative is LNG. The investment on LNG powered vehicles is expected to exceed $2.2 billion.

As previously mentioned SES had filed for permit approval from FERC in early 2004 and a draft environmental impact statement/ environmental impact report (EIS/EIR) was issued in the fall of 2005. Environmental groups attacked the report when it was released. A final environmental impact statement was never issued. In 2007 the Port of Long Beach's Board of Harbor Commissioners voted to stop efforts to continue with the EIS which was expected to cost another $1 million. The Port of Long Beach's decision to halt efforts was because the Port felt that the draft environmental documents were fatally flawed and that is did not make sense to proceed with the review process. In March 2008, the Federal Energy Regulatory Commission suspended their review of the SES Long Beach Import Terminal. Their decision was based on the fact that SES had not made any movement towards securing the lease on the 25 acre site since the Beach's Board of Harbor Commissioners' decision not to proceed with the project. SES had challenged the ports decision in court but to no avail their arguments were rejected by the court. The company since then has decided to suspend its efforts towards the development of the terminal.

ConocoPhillips (Houston, Texas) (NYSE:COP) had agreed to enter into the project with SES in mid-2005. The two formed SES Terminal LLC which was an equally owned joint venture between Sound Energy Solutions and ConocoPhillips. Sound Energy Solutions, a wholly owned subsidiary of Mitsubishi Corporation, was established in 2002 in California to begin the development of the LNG import terminal in California. In September of 2005 ConocoPhillips pulled out of the project.

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