- $500M for LNG plant not worth it

LONG BEACH - Financial negotiations over the placing of a liquefied natural gas terminal in the Port of Long Beach have broken down despite offers of up to $500 million by the company proposing the project.
In a memo to City Council members and the mayor on Tuesday, the city's energy director said Sound Energy Solutions' offer does not adequately benefit the city or residents.
As a result, "the value offered by SES is not nearly sufficient to recommend to the City Council that negotiations continue forward," said Chris Garner, director of Long Beach Gas and Oil.
Wednesday, Garner said the terminal would provide the city with a fraction of the estimated $2 billion the project would gross in natural gas sales annually.
"What they were offering, in my opinion, was not fair and reasonable for a project of this magnitude," Garner said. "One of the major keys of this deal is that the residents get a good deal out of this, and I don't see that."
SES issued a separate memo Wednesday detailing its offer of $500 million over 40 years in franchise and wharfage fees, property taxes, user fees and other funds.
That money includes $100 million for the General Fund, a $4 million "groundbreaking"
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bonus and slightly discounted rates for Long Beach Gas customers.
The deal also would include an estimated $10 million annually in property taxes and wharfage fees after the terminal is built.
SES officials said they've negotiated in good faith, but have received mixed signals from the city.
"The city and the port have always been fair to us, but the characterization of the financial negotiations right now have not been fair," said Tom Giles, SES president.
Giles said SES agreed to put up $100 million for the city's General Fund because the city indicated it needed the money for more police and fire services.
"But instead of getting specific feedback, they would say that this or that isn't good enough, and we'd be sent back, without any direction, to come up with another proposal," Giles said.
At this point SES only wants a stalled environmental impact report on the project to be completed, Giles said.
"Finishing the EIR is the only logical and fair thing to do," Giles said. "That's how you credibly determine if the project is safe and secure."
The proposal to build an LNG terminal on Pier T in the port has been a political hot potato since it was announced three years ago.
Concerns over potential safety and security risks have dominated despite SES' assertion, backed by a U.S. Coast Guard statement, that the terminal poses little risk.
The $750 million project could produce as much as 10 percent of the state's natural gas supply and about 20 percent of Southern California's needs.
Proponents say it would create well-paying jobs and a steady source of government revenue.
They also cite its value as a clean source of fuel to help reduce dangerous emissions from trucks and other equipment in and around the port.
Under the plan, LNG, a supercooled form of methane, would be delivered to the port from points in Australia and Asia, reheated and moved as natural gas along pre-existing pipelines to points throughout the state.
In addition, some of the LNG would be offloaded in its cooled state for use as engine fuel.
Opponents have cited liquefied natural gas' potentially volatile nature as their main concern for not wanting the terminal here - the fear being that a terrorist attack, natural disaster or industrial accident could kill or injure thousands of people in the port and downtown Long Beach.
Garner's memo this week was spurred by a letter Long Beach Harbor Commission President James Hankla sent to city leaders on Dec. 4 seeking direction on the project's stalled EIR.
In the letter, Hankla alludes to a May 2003 memorandum of understanding between the port and city that any final LNG deal include a financial negotiation that benefits Long Beach residents, the Gas and Oil Department, the Port of Long Beach and SES.
"The failure of the City Council to enter into an agreement with SES relating to pipeline and long-term natural gas supplies suggests that the city does not support the project," Hankla stated.
Hankla's letter also indicates the port will "not divert additional staff resources to the LNG project without a clear understanding that the city is prepared to support that project."
The letter prompted Councilwoman Tonia Reyes Uranga to ask City Manager Gerald Miller for an update on the financial negotiations between the city and SES, which came in the form of the Garner memo late Tuesday.
Reyes hopes to schedule a closed session or study session in the near future to discuss the financial offer with other council members and city staff.
"I feel like in the past six months, the council's been ignored, left in the dark and kept out of the loop regarding these negotiations," Uranga said Wednesday.
In June, the council voted 5-4 to continue financial talks and proceed with the final EIR, which authorities initially hoped to have completed by last summer.
"We should get this process completed, because we can only make a decision and have this discussion on safety when the EIR is on the table," Uranga said.
Mayor Bob Foster, who opposes the project, said that regardless of the financial deal, the terminal doesn't make sense for Long Beach because of security risks.
"This isn't about SES or anyone doing anything wrong, because they've put together a good project," Foster said. "Long Beach just isn't a good place for this."
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