[StBernard] Governor Blanco calls on industry to produce environmentally sound LNG strategy

[Westley Annis]

Governor Blanco calls on industry to produce environmentally sound LNG
strategy 

BATON ROUGE, LA--Today, Governor Kathleen Babineaux Blanco announced her
decision to deny the Freeport McMoran application for new liquefied natural
gas facilities off the coast of Louisiana. As she has consistently stated
over the past two years, Louisiana stands ready to encourage the development
of this growing industry. However, we must have sound scientific evidence to
show that these emerging technologies will not seriously harm our already
fragile Gulf ecosystem or the fisheries that are so crucial to our fishing
industry. 

"After considerable consultation with biologists, conservationists, business
developers, and Governor Bob Riley of Alabama and Governor Haley Barbour of
Mississippi, I have come to the conclusion that insufficient evidence exists
at this time to approve this application for an open rack vaporizer (ORV)
system. The Freeport McMoran application is only one of many pending LNG
projects. We must avoid the harm presented by the cumulative impact of
multiple offshore LNG facilities," said Governor Blanco. 

"I insist on two conditions that must be met in order to move forward with
LNG expansion. 

First, until reliable data on the ORV systems is produced, I will only
support offshore LNG terminals using a closed loop system known to have
negligible impacts to marine life. This was my longstanding and
well-documented position to the industry. 

Second, I will insist on Louisiana receiving a share of the revenues gained
from LNG projects. This is only right. Louisiana has learned a tough lesson
in not receiving a share of offshore revenues from the oil and gas industry.
We cannot make the same mistake. I am asking the LNG industry to engage in
revenue sharing with the coastal producing states from the outset. 

I take my role as a steward of Louisiana's natural resources and public
trust seriously. I also take seriously my efforts to expand industry
investment in our state. We must maintain the delicate balance between
protecting the environment and exploring economic opportunities. Today's
decision did not come lightly but it did come with clarity. It was the right
decision.

I look forward to working with the LNG business community as the technology
evolves. I urge Freeport McMoran and others in the LNG industry to apply
using the environmentally sound closed loop system. We see these closed loop
systems throughout the coastal United States. What's good for the Atlantic
is good for the Gulf. Let's go back to the drawing board and come up with a
solution that is in the longterm interest of Louisiana." 


-30-

BELOW IS THE TEXT OF GOVERNOR BLANCO'S LETTER REGARDING THE APPLICATION OF
FREEPORT MCMORAN LLC FOR THE MAIN PASS ENERGY HUB 

May 5, 2006


Ms. Julie A. Nelson
Acting Deputy Maritime Administrator and Chief Counsel Maritime
Administration U.S. Department of Transportation Room 7221 (MAR-221) 400
Seventh St SW Washington, DC 20590-0001

Re: Application of Freeport McMoran LLC for the Main Pass Energy Hub Docket
No. USCG 2004-17696

Dear Ms. Nelson:

On May 17, 2005, I wrote to Acting Administrator Jamian regarding the
development of liquefied natural gas regasification facilities off the coast
of Louisiana, and I expressed my concerns regarding the potentially harmful
effects of using open rack vaporizer (ORV) systems at those facilities. In
that letter, I stated that:

As a state supportive of LNG development, we have tried to work within the
current licensing system to allow offshore LNG development, but also protect
our fisheries resources. Despite our best efforts to work with your agency
and LNG developers, based on the inadequacy of current data, we are unable
to reach an acceptable comfort level with the potential risks presented by
the cumulative impacts of multiple offshore LNG facilities that use the open
rack vaporizer system.

Considering these ongoing concerns, I will oppose the licensing of offshore
LNG terminals that will use the open rack vaporizer system. Until studies
demonstrate that the operation of the open rack vaporizer will not have an
unacceptable impact on the surrounding ecosystem, I will only support
offshore LNG terminals using a closed loop system having negligible impacts
to marine life.

At my direction, the Louisiana Department of Wildlife and Fisheries has
continuously monitored the progress of the pending applications for the
construction and operation of LNG facilities in the Gulf of Mexico. That
monitoring process included review of all available, reliable scientific
data regarding the safety and environmental impacts of ORV and alternative
regasification systems, and review of the docketed comments and
recommendations filed in connection with this application. The findings,
analysis, and recommendations of the Department are contained in the letter
of May 2, 2006, from Secretary Dwight Landreneau to me. A copy of the
Secretary's letter is enclosed for your information. 

After weighing all of the potential economic and environmental benefits and
risks of this proposed project, I regret that I cannot find sufficient basis
for modifying my original opinion of May 17, 2005, as repeated above.

Several industry sources have provided assurances that the use of ORVs will
have minimal long-term impact on the coastal and offshore environment and
the fisheries resources; however, those assurances have not been supported
by any persuasive scientific studies or data. 

On the contrary, a number of government agencies and councils, both state
and federal, after reviewing the available scientific data, have uniformly
and consistently expressed significant concerns regarding the use of any ORV
system as part of the proposed LNG facilities in the Gulf of Mexico. Those
agencies and councils include, in addition to the Louisiana Department of
Wildlife and Fisheries, the Mississippi Department of Marine Resources, the
Alabama Department of Conservation and Natural Resources, Texas Parks and
Wildlife Department, the Gulf States Marine Fisheries Commission, the Gulf
of Mexico Fishery Management Council, and NOAA's National Marine Fisheries
Service.

As stewards of the public trust, this office and our state agencies and
executive departments, have both a constitutional and a statutory duty to
preserve and protect Louisiana's coastal and offshore marine environment,
ecosystem, and fisheries for the benefit of our current and future citizens.
The approval of the pending license application, without sufficient
persuasive data in support, would be inconsistent with this public trust
doctrine.

Therefore, in discharging my obligations under Louisiana Constitution
Article IX, §1, and acting under authority of the Deepwater Port Act, and
particularly 33 United States Code Sections 1503(c)8 and 1508(b)(1), and for
the reasons expressed above and in Secretary Landreneau's letter, as
Governor of the state of Louisiana, I hereby disapprove the application of
Freeport McMoran LLC for the construction and operation of the Main Pass
Energy Hub.

I sincerely regret that Louisiana has been forced into this position at this
time by an inflexible and all too shortened process established by the
Deepwater Port Act. But, as I have previously stated, unless and until there
is sufficient persuasive data to relieve us of our concerns, any future
approval of this or a similar application by the state of Louisiana will
require the use of a closed loop regasification system or other alternative
system, having negligible impacts to marine life and the marine environment.
Furthermore, to mitigate adverse environmental impacts expected even from
more environmentally friendly technology such as a so called closed loop
system and to assist the people of Louisiana in our America's WETLAND and
America's Energy Coast initiatives, Louisiana will insist on sharing in the
enhanced revenues gained from such a project by our federal government. 

Sincerely, 

Kathleen Babineaux Blanco
Governor
Enclosure

c: Honorable Charles C. Foti, Jr., Louisiana Attorney General Secretary
Dwight Landreneau, Department of Wildlife & Fisheries Coast Guard Docket
Management Facility (Via facsimile and U.S. Mail)

FOLLOWING IS THE TEXT OF THE ABOVE REFERENCED LETTER TO GOVERNOR BLANCO FROM
DWIGHT LANDRENEAU, SECRETARY OF THE LOUISIANA DEPARTMENT OF WILDLIFE AND
FISHERIES

May 2, 2006

The Honorable Kathleen Babineaux Blanco
Governor of Louisiana
P.O. Box 94004
Baton Rouge, LA 70804-9004

RE: Liquefied Natural Gas Deepwater Port Application by Freeport McMoran
(Main Pass Energy Hub (Docket Number USGS-2005-17696))

Dear Governor Blanco:

The state is now in the 45 day window for action on the licensing of the
Main Pass Energy Hub LNG deepwater port. The Department of Wildlife and
Fisheries (LDWF) staff have reviewed the materials available to us about the
captioned project, considering the guidelines you set out for future open
loop LNG facility development in a May 17 2005 letter to Mr. John Jamian,
Acting Maritime Administrator. 

	"As a state supportive of LNG development, we have tried to work
within the current licensing system to allow offshore LNG development but
also protect our fishery resources. Despite our best efforts to work with
your agency and LNG developers, based on the inadequacy of current data, we
are unable to reach an acceptable comfort level with the potential risks
presented by the cumulative impacts of multiple offshore LNG facilities that
use the open rack vaporizer system. 
	
	Considering these ongoing concerns, I [Governor Blanco] will oppose
the licensing of offshore LNG terminals that will use the open rack
vaporizer system. Until studies demonstrate that the operation of the ORV
will not have an unacceptable impact on the surrounding ecosystem, I
[Governor Blanco] will only support offshore LNG terminals using a closed
loop system having negligible impacts to marine life."

We have reviewed the final Environmental Impact Statement (FEIS) and all of
the available additional information since your comments. We have identified
no conclusive additional studies since your statement. Therefore, the
Department recommends against any project that would use open loop
technology in the Gulf of Mexico until sufficient data have been collected
and assessed so that we can clearly understand the impacts of these types of
facilities on Louisiana's fisheries. 

LDWF commented on the Draft Environmental Impact Statement for this project
in July 2005. Our primary concern was "the unknown effect of the ORV [Open
Rack Vaporizer] regasification system's entrainment, impingement, and
discharge characteristics on populations of marine species." We also noted
that neither the USCG nor Freeport McMoran had collected additional site
specific data. We noted that there was no attempt to quantify effects on
crustaceans like shrimp and crabs, both of which are important commercial
species in Louisiana. We noted that the models used by the USCG and e2M are
highly uncertain due to the lack of data supporting the model input
parameters, and we commented that the discussion of cumulative impacts
lacked quantification.

Lack of data has been LDWF's main concern throughout the licensing
deliberations for all of the proposed deepwater port LNG terminals. The
primary impact of open loop vaporizer facilities would be mortality to the
early life stages of marine organisms. The occurrence and density of
organisms at these early life stages are highly variable in both time and
space. Some reasonable level of site-specific knowledge regarding their
occurrence and density is required to evaluate potential impacts. We pointed
out in our July 29 2005 comments on the DEIS that the Southeast Area
Monitoring and Assessment Program (SEAMAP) is a global landscape level
sampling program. The dataset does not provide seasonal, site-specific, or
depth-stratified data, and is not adequate as an environmental baseline or
assessment tool. SEAMAP sampling primarily occurs in late June through
November, so it only captures larval density for the summer and fall.
Species that breed outside of that time wind! ow will not be accounted for
in impingement and entrainment models that use those data. The FEIS actually
draws on 139 samples collected over an 18 year period from a 3000 mi2 area:
an average of less than eight samples per year.

Freeport McMoran funded the University of Louisiana at Lafayette (ULL) to
conduct one-time sampling at their proposed site from July 19 to 23 2005 to
test the hypothesis that eggs and larvae are depth-stratified. The ULL study
helps define some of the issues that need to be examined in a full
environmental evaluation. However, problems with their sampling gear made
quantitative comparisons among depths or stations difficult. In addition,
the study identifies most taxa only to the family level, so information
specific to depth distributions of the life stages for a given species are
not available. The researchers themselves noted that "the significant amount
of spatial variation in distributional patterns and in DVM [diel vertical
migration] make it impossible to accurately predict these patterns for a
specific location such as Main Pass Block 299, thus requiring a
site-specific sampling program. Also, the large amount of variation (both
within and among species) in the! se patterns dictates the need for a
comprehensive survey that includes all the major species that are of
commercial and recreational importance there." The ULL sampling project was
not designed to provide the environmental baseline necessary to evaluate the
impacts of open loop vaporization, nor did it do so.

We also asked for crustacean analyses, and analyses have been provided for
brown and white shrimp. Crabs have not been addressed, and crabs are an
important component of Louisiana's commercial harvest. In recent years, 27%
of the total U.S. harvest of blue crab came from Louisiana. 

Using the limited dataset referred to previously, the US Coast Guard and
their contractor, e2M provided a table of estimated cumulative impacts in
the Gulf of Mexico in the recently-released Final EIS (FEIS). The range
between the high and low values in the FEIS is at least 3 orders of
magnitude. The analyses focus on the effects of a few "representative"
species of fish while potential effects of important species such as
flounders, croakers, mackerels, and mullet are not characterized. The
uncertainty of the magnitude of possible impacts and impacts on individual
species can only be addressed by collecting and evaluating new site-specific
data. 

In 2005, the Center for Liquefied Natural Gas, an industry consortium,
released a study titled, "An Evaluation of the Approaches Used to Predict
Potential Impacts of Open Loop Vaporization Systems on Fishery Resources in
the Gulf of Mexico" prepared by Exponent. The study concludes that SEAMAP
data are sufficient to assess the impacts of open loop vaporization systems
on Gulf of Mexico fishery resources, and that the impacts will be minor. As
we've pointed out, SEAMAP samples primarily in the summer and fall, so there
is a lack of seasonal data. The Exponent study authors used a population
model different than the one developed by NOAA and the USCG to assess
impacts. Both models rely heavily on egg and larval stage mortality
information, and there is very little available information on those topics.
The model the Exponent authors advocate relies heavily on egg mortality
estimates which appear to be based on a single calculation for Atlantic
croaker , in turn derived f! rom general life history parameters for that
one species. In addition, LDWF staff noted that wherever a range of values
was available for use as input variables, the Exponent study tended to use
those values that would reduce the impact of the open loop vaporization
systems thus adding significant bias to their results. The Exponent study
did not address the fundamental issue of the inadequacy of input data.

The FEIS characterizes fishery and Essential Fish Habitat impacts from
"minor to potentially moderate". The Environmental Protection Agency (EPA)
in Regions 4 and 6 assigned two open loop facility applications in the Gulf
(Conoco Compass Port on April 15 2005 (USCG-2004-17659-201) and Exxon Pearl
Crossing on June 13 2005 (USCG-2004-18474-251)) ratings of "environmental
objection" because of the anticipated direct and cumulative adverse
environmental impacts to Gulf waters and habitats. In both cases, EPA noted
that the impacts of concern could be corrected by modifications to the
project or alternative technology. A later policy memorandum from Benjamin
Grumbles dated April 03 2006 discusses the importance of considering
non-water quality environmental impacts and other appropriate factors per
the Clean Water Act (CWA). Mr. Grumbles notes that the CWA provides specific
factors to consider when assessing Best Available Technology, but that EPA
has broad discretion in wei! ghing those factors. In our opinion, this
policy memorandum is not inconsistent with the decisions of EPA Regions 4
and 6 on offshore LNG ports in the Gulf of Mexico. In both cases, the
respective Regional Administrators noted the possible effects of chilled
water, scouring on the sea bottom and associated turbidity plumes, use of
chemical biocides, and the effects of impingement and entrainment. 

Closed loop technology has been proposed and used elsewhere in the United
States. Applicants for deepwater port licenses in the Gulf of Mexico contend
that use of that technology in the Gulf uses up to 2% of their revaporized
gas and is therefore not economically desirable. Of the thirty nine proposed
and existing LNG facilities in the United States, only the three licensed
and four proposed facilities in the Gulf of Mexico would use open loop
technology. A March 02 2006 application, listed on the MARAD website as the
CALYPSO LNG, would be sited in the south Atlantic 20 miles from Port
Everglades, Florida. We understand from published reports that it will be
proposed as a closed loop facility.

Mississippi and Alabama are also designated adjacent states for the purposes
of the Deep Water Port Act for the Freeport McMoran Main Pass Energy Hub
proposal. Governor Bob Riley of Alabama wrote regarding the Compass Port LNG
application on June 15 2005 (USCG-2004-17659-254) that he "cannot support
the development of terminals using the open-loop system unless there is
proof of negligible impacts on the marine fisheries and marine habitat."
Likewise, Governor Haley Barbour of Mississippi wrote on June 16 2005
(USCG-2004-17659-250) regarding the Compass Port application, "I oppose the
permitting of this facility unless assurances supported by adequate
scientific data are provided to ensure our marine resources will be
protected." State fisheries management agencies, including the Alabama
Department of Conservation and Natural Resources (July 25 2005,
USCG-2004-17696-205), the Mississippi Department of Marine Resources (June
21 2005, USCG-2004-17696-159), the Louisiana De! partment of Wildlife and
Fisheries, and the Texas Parks and Wildlife Department have expressed
concern about the possible effects of open loop technology on marine fishery
resources. The state of Texas is not an adjacent state for the Main Pass
Energy application. However, the Texas Parks and Wildlife Department is on
record opposing open loop facilities in the docket for the Pearl Crossing
(USCG-2004-18474-201) and Beacon Port LNG applications (USCG
2005-21232-120). The Gulf States Marine Fisheries Commission, an
organization of the five states whose coastal waters are the Gulf of Mexico,
has recommended that closed loop vaporization technology be the approved
vaporization technology at the MPEH (USCG-2004-17696-306). NOAA's National
Marine Fisheries Service concluded their comments on the FEIS (USCG
2004-17696-303) with this statement, "The comments provided herein briefly
describe a significant but avoidable adverse impact on the marine
environment of the Gulf of Mexico! . Because of the risk to marine
fisheries, and considering NMFS' manda tes to conserve and manage the
nation's marine fishery resources and the legislative requirements of the
Deepwater Port Act, NMFS continues to urge the USCG and MARAD not to
authorize the use of an ORV system at MPEH." The Gulf of Mexico Fishery
Management Council, likewise, recommended the use of a closed loop
vaporization system for the facility (USCG 2004-17696-301).

Freeport McMoran has proposed a number of "mitigating strategies" which
include decreasing the amount of water needed for revaporization, use of
screens, and the ability to move facility intakes as needed. We considered
these strategies when we developed our recommendation. Because there are so
few data, the level of protection in conserving Gulf fishery resources
provided by these strategies is very uncertain.

In a recent study, Southwick Associates estimated that Louisiana's marine
commercial and recreational fisheries had a combined retail sales value of
$2.3 billion in 2003. As the public trustee with responsibility for
protecting, conserving, and enhancing the fish resources of the state and
the Gulf of Mexico, the Department recommends against any project that would
use open loop technology in the Gulf of Mexico until sufficient data have
been collected and assessed so that we can clearly understand the impacts of
these types of facilities on Louisiana's fisheries. 

Sincerely,

Dwight Landreneau
Secretary

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