Transportation of Liquefied Natural Gas

Transportation of Liquefied Natural Gas

September 1977

NTIS order #PB-273486

Honorable Warren G. MagnusonChairman, National Ocean Policy StudyU.S ● SenateWashington, D. C. 20510

.

Honorable Ernest F. HollingsVice-Chairman, National Ocean Policy

StudyU. S. SenateWashington, D. C. 20510

Gentlemen:

On behalfwe are pleasedTransport at ion

of the Board of the Office of Technology Assessment,to forward the results of this assessment of Theof Liquefied Natural Gas which was requested by your

Commit tee.

This report provides a concise analysis of current LNG tech-nology and possible t rends in the use of LNG. I t a l s o i d e n t i f i e sand d i scusses the ma jo r po l i cy i s sues . We hope this report willbe a useful resource to your Committee and to the Congress whenit debates energy quest ions in which LNG is a factor .

S i n c e r e l y ,

S i n c e r e l y ,

. . .111

—

Foreword

This r epor t i s an a s sessmen t o f thetransportation of liquefied natural gas (LNG).The assessment was requested by the SenateNational Ocean Policy Study for use in con-sideration of major new projects for the im-portation of natural gas, and of the competingalternatives for transporting natural gas fromAlaska through Canada (pipel ine al l theway), or through Alaska only and thence viaLNG tankers to the lower 48 States.

This report is divided into three parts:Chapter I presents a factual description of theLNG systems and facilities and the Federalregulatory process governing the developmentand operation of such systems. Chapter IIpresents a critical review of key portions of theLNG system where technological or politicalproblems may occur. Chapter III outlines thekinds of actions desired by interested parties.

The report identifies nine areas which maybe of concern to the Congress as it considerspossible new legislation, oversees Federalagencies, and appropriates funds for agencyoperations and research. The areas of near-term concern are: the design and constructionof LNG tankers, the regulation and inspectionof LNG tankers and their operat ion, theregulation and inspection of LNG terminalsand their operation, the Federal decisionmak-

ing process in the certification of LNG importprojects, and the status of current research onLNG and the need for further inquiry.

The areas of longer range interest are:regulations and criteria for the siting of LNGfac i l i t i e s , l i ab i l i ty fo r LNG acc iden t s ,reliability of foreign suppliers of LNG, andpolicies for pricing LNG.

One LNG import terminal is currentlyoperating in the United States. By early 1978,two others will be operational. As a result ofthese operations and other projects now pro-posed, LNG could make up 5 to 15 percent ofthe total U.S. natural gas consumption by1985. Several pieces of legislation to regulatethis growing industry are now before the Con-gress. Hence the timeliness and importance ofthis assessment for the Congress.

Two related studies for Congress are cur-rently in progress: a safety study by theGeneral Accounting Office, and an energyfacility siting study by the Office of Tech-nology Assessment.

This assessment was performed by PeterJohnson, project director, and the OceansProgram staff, under the overall direction ofRobert W. Niblock, the Program Manager.

DANIEL De SIMONEActing Director

v

OTA Oceans Program Staff

Robert W. Niblock, Program ManagerPeter A. Johnson, Project Director

Prudence S. Adler Anne FennKathleen A. Beil Emilia L. GovanThomas A. Cotton Judith M. RoalesRenee’ M. Crawford Bennett L. Silverstein

Karl Vischer

Consultants

Gary BahamRichard C. Raymond

Ralph Smalley

Ad Hoc Panel on Transportation of LNG

Irvin BuppHarvard University

Gene CosgriffBring Legal Action to Stop the Tanks

Robert DevoreAmerican Gas Association

Martin EnglerEl Paso LNG Company

Mike EatonSierra Club

Max LevyColumbia LNG Corporation

Ruth MathesMaryland Conservation Council

O.W. MoodyAFL-CIO Maritime Trades Department

Gene SchorschSun Shipbuilding and Drydock Company

Bruce TerrisAttorney

Robert WestreichNew Jersey Department of Public Advocate

vi

It is possible that during the next twodecades 5 to 15 percent of the U.S. naturalgas consumption could be filled with LNGfrom Alaska or foreign countries. This wouldbe a major increase over present LNG importlevels. This gas will reach the United Statesby means of a complex and expensive systemconsisting of liquefaction facilities, specializedcargo tankers, and regasification and storagefacilities.

To date, there have been few seriousproblems in the operation of small-scale LNGfacil i t ies exist ing in the United States .However, new ships and plants will be con-siderably larger than exist ing ones, andproblems of scale and limited experiencemake it difficult to predict with any degree ofcertainty the safety of the LNG system.

It appears that the most serious incidentscould occur as a result of an LNG tanker acci-dent. Therefore, while the tankers appear tobe well designed and constructed, better con-trol of vessel traffic in U.S. ports and water-ways, improved inspection procedures afterthe ship has been commissioned, and man-da to ry c rew and inspec to r t r a in ing a reneeded.

At the onshore facilities where LNG isreceived, stored, processed and sent into a gasdistribution pipeline, improved inspectionprocedures are also needed to enhance thepublic safety. However, the major issue sur-rounding the onshore facilities is the questionof where they should be located. There arecurrently no Federal guidelines for choosingsites of LNG or any other energy facility.There is considerable public pressure for suchguidelines, particularly criteria which wouldlimit facilities to unpopulated areas.

Summary

Regulation of LNG systems is hampered byjurisdictional overlaps (particularly betweenthe Federal Power Commission and the Officeof Pipeline Safety Operations), some gaps inenforcement (particular the lack of inspec-tion to assure compliance with stipulations inFPC permits), and the lengthy Governmentprocedures which do not result in timely deci-sions for the applicant and do not give thepublic adequate participation in decisions(particularly in the FPC licensing of LNGprojects).

In addition, the lack of firm Governmentpolicy on such matters as LNG import levels,pricing mechanisms to be used, and theFederal role in siting of facilities makes plan-ning difficult for both the gas industry and thepublic.

Past research has produced conflictingresults and predictions about the safety ofLNG and it is unlikely that future researchwill resolve the differences and come to firmdecisions. For that reason, public policy deci-sions about LNG systems will probably bemade principally on the basis of nonquantita-tive approaches. These decisions should resultin prudent siting of facilities and strict design,construction and operation standards.

This report identifies nine areas which maybe of concern to the U.S. Congress in its con-sideration of possible new legislation, over-sight of Federal agencies with responsibilitiesfor LNG systems, or appropriation of funds foragency operations and research.

The first five areas are concerns about ex-isting equipment and procedures for facilitieswhich are already operating or will be operat-ing in the near future. Regulatory changes in

vii

these areas must be such that they can be ap-plied to ongoing projects. These areas are:

●

●

●

●

●

tanker design and construction (pages42-45);

tanker regulations and operations (pages46-49);

regulation of terminal operations (pages50-52);

decisionmaking process in certification ofimport projects (pages 53-57);

safety research on LNG (pages 58-62).

The second four areas addressed have morelong-range implications and will affectpolicies and facilities for future projects.These areas are:

. LNG facility siting (pages 63-67).

. liability for LNG accidents pages (68-70).

. reliability of supply (pages 71-75).

● pricing policy (pages 76-78).

. . .Vm

—

Acknowledgments

The staff wishes to acknowledge the help and cooperation of the follow-ing groups and individuals during the preparation of this study:

Algonquin Gas Transmiss ion Company(Massachusetts)

Roy Alper, California Citizen Action GroupAmerican Gas Association (Washington, D. C.)Rober t Apple , The S tanwick Company

(Virginia)Larry Ask, Southern California Gas CompanyHoward Bertolucci, Massachusetts Depart-

ment of Public UtilitiesBarbara J. Bockert, New Jersey Coastal Zone

Management OfficeJoe Bodovitz, California Coastal Zone Con-

servation CommissionTim Brick, Campaign Against Utility Service

Exploitation (California)Pat Brown, California Council for Environ-

mental and Economic BalanceJohn Callahan, Rhode Island Public Utilities

CommissionJames Carroll, California Council for En-

vironmental and Economic BalanceGordon Carruth, Georgia Coastal Zone Com-

missionJohn Chadwick, (California)Columbia LNG Corporation (Delaware)Rev. Thomas D. Corrigan, Massachusetts

Fair ShareJim Cromley, Na t iona l Pa rk Res iden t s

Organization (New Jersey)Department of Commerce: Marit ime Ad-

ministration (Washington, D. C.)Department of the Interior: Bureau of Mines

(Washington, D. C.)Department of State (Washington, D. C.)Department of Transportat ion: Office of

Pipeline Safety Operations (Washington,D. C.)

Department of Transportation: U.S. CoastGuard (Washington, D. C.)

Distrigas Inc. (Massachusetts)Frank Dorrigan, Providence City Council

(Rhode Island)Energy Research and Deve lopment Ad-

ministration (Washington, D. C.)James Fay, Massachusetts Institute of Tech-

nologyFederal Power Commission (Washington,

D. C.)Larry Forelich, Central Power and Light

Company (Texas)Harry Fritz, New Jersey Public Utilities Com-

missionGeneral Dynamics Corporation (Massa-

chusetts)John C. Gerard, Los Angeles Fire DepartmentRobert Gresimer, United Gas Pipeline Com-

pany (Texas)Edwin Hood , Sh ip Bu i lde r s Counc i l o f

America (Washington, D. C.)John Howard, First State Bank and Trust

Company (Texas)Frederic John, California Public Utilities

CommissionTsujio Kate, Mayor of Oxnard, Calif.Mrs. Terry King (New York)Elizabeth Kleban, Sewaren Civic Association

(New Jersey)Helen Linker, Natural Resources Defense

Council (California)Hank Marcus, Massachusetts Inst i tute of

TechnologyPhilip W. Marking, Point Conception Preser-

vation Committee (California)K e s h a v a n N a i r , Woodward-Clyde Inc .

(California)

i x

Joe D. Porricelli, ECO Inc. (Maryland)Louise Potter, Concerned Citizens of Cumber-

land (Rhode Island)Eldred Rich, New York Department of En-

vironmental ConservationHerman Rhodes, Gulf Coast Conservation

Association (Texas)Charles Romick, Gloucester County Planning

Department (New Jersey)Adm. N. Sonenshein, Global Marine Develop-

ment Inc. (California)

David Lee von Ludwig, Bring Legal Action toStop the Tanks (New York)

Andrew Wall, Al Larson Boat Shop (Califor-nia)

Harold R. Wesson, Wesson and AssociatesInc. (Oklahoma)

Mrs . Raymond Wes t , Wash ing ton ParkCitizens Association (Rhode Island)

Sidney Wolf, Environmental Policy Center(Washington, D. C.)

Contents

Chapter PageI. Description of LNG Technology and Import System . . . . . . . . . . . . . . . 1

Volumetric Conversion Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Supply and Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Description of LAG...... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Safety Record of Early Use of LNG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Regulation of Import Projects. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9LNG Tanker Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10LNG Tanker Certification and Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . 18LNG Terminal Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20LNG Terminal Siting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23LNG Terminal Regulation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24Trends in LNG Use and Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26Existing and Proposed LNG Projects, In Brief . . . . . . . . . . . . . . . . . . . . . . . 29

.

II. Critical Review of Components of LNG Import System . . . . . . . . . . . . 39

Paper 1—LNG Tanker Design and Construction.. . . . . . . . . . . . . . . . . . . . 42Paper 2—LNG Tanker Regulations and Operations. . . . . . . . . . . . . . . . . . 46Paper 3—Regulation of Terminal Operations . . . . . . . . . . . . . . . . . . . . . . . . 50Paper 4—Decisionmaking Process in Certification of LNG Projects . . . . 53Paper 5-Safety Research on LNG Facilities . . . . . . . . . . . . . . . . . . . . . . . . 58Paper 6-LNG Facility Siting . . . . . . . . . . . . . . . . . . . . . . .’. . . . . . . . . . . . . . . 63Paper 7—Liability for LNG Accidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68Paper 8-Reliability of LNG Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71Paper 9—LNG Pricing Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

III. Public Awareness and Concerns About LNG. . . . . . . . . . . . . . . . . . . . . . . 79

Actions Desired By Gas Utility Companies . . . . . . . . . . . . . . . . . . . . . . . . . . 82Actions Desired By Organized Labor Groups . . . . . . . . . . . . . . . . . . . . . . . . 83Actions Desired By State and Local Officials . . . . . . . . . . . . . . . . . . . . . . . . 83Actions Desired By Related Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84Actions Desired By Public Interest Groups . . . . . . . . . . . . . . . . . . . . . . . . . . 85

IV. Appendixes ● .***... .**.**.*. ● ******** ● ***.**.* ● ***.**.* .***..... . . 87

A.B.c.D.E.

Cove Point, Md., Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89Federal Agencies Involved in LNG Import Projects . . . . . . . . . . . . . . . 96Laws and Cases Relevant to LNG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97Congressional Hearings Conducted on LAG...... . . . . . . . . . . . . . . . . 99Pending Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

xi

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LIST

Figure. .

1.2.

3.4.5.6.

7.8.9.

10.11.12.13.14.15.16.17.18.19.200

21.22.

123.24.25.26.27.28.29.30.31.32.33.

34.35.36.

37.

38.

O F F I G U R E S

No. Page

U. S.-Natural Gas Consumption 1971 -1976 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3World Proportional Natural Gas Reserves By MajorSupplier Country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Existing International LNG Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4U.S. LNG Import Projection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Status of U.S. LNG Import Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Sources and Destinations of Major Planned LNG ImportProjects/1978-1985 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6International LNG Trade Routes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Total Capacity of World LNG and LPG Tanker Fleet . . . . . . . . . . . . . . . . 12LNG Tankers On Order or Under Construction in U.S.Shipyards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Profiles of Typical LNG Ships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Comparison of LNG Tanker and Crude Oil Tankers . . . . . . . . . . . . . . . . . 14Inboard Profile of LNG Tanker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Free-Standing Spherical LNG Tank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16Free-Standing Prismatic LNG Tank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17LNG Membrane Tank. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Comparative Characteristics of Some LNG Tank Systems . . . . . . . . . . . . 18Specially Constructed Tankers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21Aboveground LNG Storage Tank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22Layout of Cove Point, Md., LNG Receiving Terminal . . . . . . . . . . . . . . . . 23Cove Point, Md., Facility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23Storage and Diking at Onshore LNG Plant . . . . . . . . . . . . . . . . . . . . . . . . . . 25Projected Future LNG Imports (Based on ProposedProjects and Reasonable Approval Time) . . . . . . . . . . . . . . . . . . . . . . . . . . . 27Artist’s Rendering of Offshore LNG Terminal . . . . . . . . . . . . . . . . . . . . . . . 28Project Data Sheet:Project Data Sheet:Project Data Sheet:Project Data Sheet:Project Data Sheet:Project Data Sheet:Project Data Sheet:Project Data Sheet:

Distrigas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30Phillips/Marathon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31El Paso I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32Trunkline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34Pacific-Indonesia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35El Paso II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36Pacific Alaska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37El Paso-Alaska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Average Vessel Capacity of World LNG Tanker Fleet. . . . . . . . . . . . . . . . 44Procedure for FPC Certificate of Public Convenienceand Necessity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56Typical Fault Tree for Leak Which Is Not Listed . . . . . . . . . . . . . . . . . . . . 61Distances a Vapor Cloud May Travel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66States Dependent on Companies Using LNG as Part ofGas Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73Percent of LNG in State Consumption and CompanySupplies (Imports from Foreign Countries Only). . . . . . . . . . . . . . . . . . . . . 74Percent of LNG in State Consumption and CompanySupplies (Including Alaskan Gas) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

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Description ofLNG Technology

and Import System

Volumetric Conversion Table

VOLUME RELATIONSHIPSLNG Gas/Liquid Ratio 619.8 to 1

1086 Btu/Cu. Ft. Spec. Grav. 0.465

LNGConversion

Factors

1 MCF

1 Gallon

1 Imp, Gal

1 Cubic Foot

1 Barrel

1 Cubic Meter

1 Metric Ton

1 Therm

Gas

CubicFeet MCF

1000.0 -

8 2 8 5 0 0 . 0 8 2 8 5 0

9 9 5 0 3 0 . 0 9 9 5 0 3

619.80 061980

348008 3.48008

21,886 21,886

4 7 , 1 0 3 4 7 1 0 3

9 2 0 8 1 0 , 0 9 2 0 8

Liquid

Imp. Cubic Cubic MetricPounds Gallons Gal. Feet Barrels Meters Tons

46758 1 2 0 7 0 1 0 . 0 5 1 1,6134 0.28735 0.045692 .02123

3.87390 - 0.8327 0.13367 0,02380 0,003785 0001759

4.6526 1,201 - 016054 0.02858 0,004546 000211

28.981 7.4811 6.229 - 0.17810 0.02832 0.01316

162,72 42,005 34,97 5,6148 - 0,15901 0.07388

1023,3 264.16 220,0 35314 6.2888 - 0.46463

2202,4 568,53 473,4 75.996 13.535 2.1522 -

4,3055 1.1114 0,92546 0,14856 0.02646 0,00421 0.00195

10.860

0.89975

1,08059

6.7311

37,794

32768

511 54

Chapter I

S U P P L Y A N D D E M A N D

Description of LNG Technologyand Import System

Natural gas is a major source of energy forthe United States, supplying 20 trillion cubicfeet, more than one-quarter of the total energyconsumed in this country, during 1976.1

Although U.S. production of natural gashas been declining since 1971 (figure 1), thereare significant supplies of natural gas inseveral regions of the world where there is lit-

Figure 1. U.S. Natural Gas Consumption 1971-1976

YearlyTotal 25ConsumptionTrillionCubicFeet 20

15

10

5

1971 1972 1973 1974 1975 1976

U S Production

Source Federal Energy Administration Monthly Energy Review, March 1977

1Federa] Ener~ Administration, Monthly EnergyReuzew, March 1977.

Figure 2. World Proportional Natural Gas ReservesBy Major Supplier Country

Country Percentage

USSR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33Iran’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Algeria*. . . . . . . . . . . . . . . . . . . . . . . . . . . 10Abu Dhabi* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Total 75

● Countries with little or no gas demand.

Source Department of the lnterior World Natural Gas Annual – 1975

tle or no gas demand (figure 2). To date, muchof this natural gas has been wasted—in 1975,6.5 trillion cubic feet were vented or flaredworldwide. z

To use the natural gas which would other-wise be untapped or wasted, importation ofnatural gas is one of several supplementalsupply schemes used by those areas of theworld with large energy demand, primarilythe Uni ted S ta tes , Europe , and Japan .Natural gas has been carried overland by con-ventional pipelines, and about 1 trillion cubicfeet of natural gas is imported in that mannerfrom Canada to the United States each year.However, in order to import natural gas in aform practical for water transportation fromEastern Hemisphere nations, a system hasbeen developed to convert the gas to liquidform at about l/600th the volume. The lique-

U.S. Department of the Interior, Bureau of Mines,World Natural Gas Annual (Washington, D. C.: U.S.Department of the Interior, Bureau of Mines, 1975).

3

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4 CH. I – DESCRIPTION OF LNG TECHNOLOGY AND IMPORT SYSTEM

fied natural gas (LNG) is then shipped inspecially constructed tankers, introducing amarine link in the supply and demand ofnatural gas. This marine link is a large com-ponent, consisting of the liquefaction facility

Figure 3. Existing International LNG Trade

Amount per DayDate Started Supplier to Importer (million cubic feet)

19721977196419691969196919641971

Brunei to JapanIndonesia to JapanAlgeria to FranceLibya to ItalyLibya and Algeria to SpainAlaska to JapanAlgeria to United KingdomAlgeria to Boston, Mass.

73755040023516013510044

Source Pipeline and Gas Journal, June 1977

Figure 4. U.S. LNG Import Projection

at the source of the gas, the LNG tanker, andthe receiving terminal and regasif icat ionfacility at a location near a gas distributionnetwork. It is a very capital-intensive system,which can cost more than $1 billion to con-struct. A large 500 million cubic feet per dayproject with four ships could require a $2bil l ion capital expenditure for l iquefac-tion/export facilities ($1 billion), ships ($150mill ion each), and import /regasif icat ionfacilities ($300 million to $400 million). Im-plementation of all announced LNG projectscould require capital expenditures in excess of$35 billion worldwide. In the United Statesalone, construction of facilities and ships forthe import of LNG could require $20 billion. a

:1’’LNG Rep&rt,” Pipeline and Gas Journal 204 (June1977).

— —

S u c h h u g e c a p i t a l e x p e n d i t u r e s a r egenerally financed by a multinational mix ofgovernments and private firms. The U.S.Government has already provided about $716million in subsidies, loans, and loan guaran-tees in connection with LNG projects. Morethan two-thirds of that support has been givento the foreign portions of the projects. A

Europe became the first steady market forLNG in 1964 (figure 3). Japan took over as thekey market about 1972, receiving about 49percent of the LNG moving in internationaltrade. However, the United States—which hasused very limited imports of LNG only since1971–is projected to become a major LNGcustomer if ventures now planned go for-ward. b

The United States is presently a net ex-porter of LNG. More than 32 billion cubic feetof natural gas in the form of LNG has beensent to Japan from southern Alaska each yearfor the past 5 years, while only about 15billion cubic feet per year is imported fromAlgeria to Everett, Mass. The LNG importedto Everett is a very small amount, less thanone-twentieth of 1 percent of the U.S. con-sumption of natural gas in 1976.6 According toindustry representatives, however, LNG couldbe 5 to 15 percent of the total U.S. gas con-sumption by 1985 (figure 4).7 Projects are nowproposed which could bring as much as 3.5trillion cubic feet of LNG per year to theUnited States from foreign sources within thenext 10 to 15 years (figure 5).

41nterview with Officials of Export-Import Bank ofthe United States, Washington, D. C., June 16, 1977.

JDavid Hawdon, World Transport of Energy 1975 to1985 (London: Stanil and Hall Associates Limited,April 1977), p. 39.

6Federa1 power commission, “Table of LNG Importsand Exports for 1976,” News Release, June 3, 1977, andFederal Energy Administration, Monthly EnergyReview, March 1977.

TOffice of Technology Assessment LNG panel meet-ing, Washington, D. C., June 23, 1977.

Figure 5. Status of U.S. LNG Import Projects

Project Start-up Date Supply Source Status (AGA/FPC) Quantity(billion cubic feet/y r.)

Existing & Firm Foreign Imports

Distrigas I 1972 Algeria Existing/Operational 1,6Distrigas IV 1978 Algeria Firm/Pending 42*El Paso I 1978 Algeria Firm/Approved 365Note -- Eascogas project IS deleted here because of 407recent questions regarding approvals and project viability

Probable Foreign Imports

Panhandle EasternPacific Lighting IntEl Paso II

Possible Foreign Imports

Tenneco-N B. CanadaOccidental-El PasoBrown/Root-TennecoKalingasEl Paso-IranShell-BP

198019801980-82

19851985 +/-

1985 +/-1985 +/-1985 +/-1985 +/-

AlgeriaIndonesiaAlgeria

AlgeriaUSSRUSSRIranIranNigeria

Probable/ApprovedProbable/ApprovedProbable/Pending

Possible/Filed

Possible/Not FiledPossible/Not FiledPossible/Not FiledPossible/Not FiledPossible/Not Filed

179197365741

397365547285547237

2,378

Grand Total 3,526

● Replaces Distrigas 1. Sources American Gas Association and the Institute of Gas Technology,

9 6 - 5 9 7 0 - 7 7 - 2

— .—

Note Other possible future sources of LNG include Iran, Russia, and NIgerIaBcf/y = billion cubic feet per year

Source OTA.

Ultimately, the supply of natural gas islimited, But since it is currently an under-utilized resource in many foreign countries,importing it as LNG could satisfy a significantportion of the U.S. energy demand for at leastthe next 20 years.

Imports of LNG could be part icularlyuseful in alleviating near-term fuel shortagesin certain sectors of the economy or parts ofthe country. In California, which accounts for11 percent of U.S. natural gas consumption, sLNG could help to alleviate projected energyshortfalls and air quality problems.

If presently planned and approved projectsmove forward, Algeria would be the majorsource of the increased imports (figure 6). Asmaller amount of LNG would come from In-donesia, and there is a possibility of suppliesfrom the U.S.S.R, Iran, and Nigeria after1985.9 The stability of these foreign suppliesand likely results of possible curtailment ofLNG shipments to the United States has beenidentified by this study as one of the potentialproblems of the LNG system. Foreign supplyis discussed further in the critical review sec-tion which follows this chapter.

~Douglas M . Considive, cd., Energy TechnologyHandbook (New York: McGraw-Hill, 1977).

gAmerican Gas Association, Gas Supply Review, 5(February 1977).

CH. I – DESCRIPTION OF LNG TECHNOLOGY AND IMPORT SYSTEM 7

In addition to foreign natural gas, new gasdiscoveries in Alaska could be transported tothe west coast as LNG. This possible supply ofgas from the North Slope and southernAlaska could be more than 1 trillion cubic feeta yea r a s ea r ly a s 1984 .10

The North Slope is by far the largest of thetwo Alaskan supplies of natural gas. Themethod of transportation to be used to bringthe North Slope gas to the west coast was to bedetermined by the President in September? Aproposal to transport this gas by pipelinethrough Canada was being weighed against aproposal to use an LNG system.

D E S C R I P T I O N O F L N G

Liquefied natural gas is not the only haz-ardous cargo transported in the United Statestoday, or is it necessarily the most dangerous.Other cargoes which pose unique hazardswhen transported in large volumes includeliquefied petroleum gas (LPG), chlorine,acids, and gasoline.

Liquefied natural gas and LPG are similarin many ways and are treated together as “liq-uefied gases’ by most regulators. Liquefiedpetroleum gas, however, appears to be betterknown and accepted by the public. In 1976, 10million tons of LPG were moving in worldtrade, most of it going to Japan from the Mid-dle East countries. It is estimated that by1980, LPG trade will more than double, andthat U.S. demand will be as much as 12

*NOTE: On September 8, 1977, the Presidentannounced that an agreement had beenreached with Canada for a pipeline to carrynatural gas across that country from Alaskato the west coast of the United States. TheCongress has 60 days after formally receivingthe President’s plan in which to disapprovethe choice if it so desires.

IOFedera] power ~o~missio~, Recomme~da~~on to

the President Alaskan Natural Gas TransportationSystems (Washington, D. C.: Federal Power Commis-sion, May 1, 1977) p. I-44.

million tons.11 In 1977, there were 441 LPGtankers operating worldwide with a capacityof 3.5 million cubic meters. In comparison, 30LNG tankers were operating worldwide at thesame time with a capacity of 2.2 million cubicmeters.

Some unique properties of LNG whichaffect the design of tankers or terminals are:

●

●

●

●

●

●

●

it has an extremely low temperature of–259° F;

it weighs about 28 pounds/cubic foot,slightly less than half the weight ofwater, and would therefore float;

a t normal ambien t t empera tu res , i tevaporates very rapidly and expands toabout 600 times its liquid volume;

in the vapor state, and when still verycold, the gas is heavier than air and, inthe event of a spill, would hug to theearth’s surface for a period of time untilsubstantially dissipated;

when the vapor warms up, reaching tem-peratures of about –100° F, it is lighterthan air and would rise and dissipate inthe air;

in the vapor state, it is not poisonous, butcould cause asphyxiation due to the ab-sence of oxygen;

in the vapor state, concentrations of 5 to15 percent natural gas are flammable.

Liquefied natural gas is odorless and color-less. It looks much like water. Except for itsextremely cold temperature, which requiresspecial handling techniques and materials,the liquid is relatively safe. In bulk form itwill not burn or explode. Momentary contacton the skin is harmless although extendedcontact will cause severe freeze burns, On con-tact with certain metals such as carbon steelship decks, LNG can cause immediate crack-ing.

1 IH. Magelssen, “LPG-Transportation Cost, MarketPotential and Future Charterers,” Gastech 76 Proceed-ings LNG and LPG Conference, New York, Oct. 5-8,1976, (Herts, England: Gastech Exhibitions, 1977).


The behavioral patterns of LNG vapor inthe atmosphere, however, are not so well un-derstood and may create hazards. If spilled onthe ground, LNG would “boil,” (vaporize)very rapidly for 2 or 3 minutes unt i l theground was frozen and no longer emittingheat to the LNG on top of it. This would slowthe rate of vaporization and minimize cloudformation dangers.

If spilled on water in a large-scale accident,it is unlikely the water would freeze. Insteadthe water would continue to warm the floatingLNG, vaporizing it and forming a spreadingcloud. Researchers currently disagree on theshape, size, movement, and composition of thevapor cloud and the factors which will affectit. It is believed that the concentration of LNGvapor within the cloud is not homogeneous. Atthe edge of the cloud, where the greatest mix-ing with ambient air occurs, the concentrationof gas is lowest. At the core of the cloud, theconcentration is highest. Where the concentra-tion falls within the flammable limits of 5 to15 percent, the cloud may be ignited and burnback toward the source of the spill. It isgenerally agreed that, if the vapor from alarge LNG spill ignites, it would be beyond thecapability of existing firefighting methods toextinguish it. 12 Therefore, the key to reducingthe hazard of an LNG fire is a strong preven-tion program.

The hazards of transporting LNG are some-what similar to those of LPG, if the two areconsidered in equal volumes. However, LPG issomewhat more dense than LNG vapor atcomparable temperatures. In the event of aspill of either liquid on water, the liquidwould rapidly spread by gravity until a largevapor cloud would form. LNG would vaporizeconsiderably faster than LPG because LNG ismore volatile. Thus, the LPG vapor cloudwould evolve over a longer period of time, andwould be more cohesive than the LNG cloud.LPG has the greatest potential for detonationboth in open air and confined. LPG stored in

1 ~Society of Naval Architects and Marine Engineers,Proceedings of Second Ship Technology and Research(STAR) Symposium (San Francisco, Calif.: May 25-27,1977), p. 396.

tanks continually heated by a surroundingflame causes a rise in pressure which leads todetonation. Open-air detonations of LPG 13

have been demons t ra t ed by exper imen twhereas the same is not true of LNG. 14

Research into the behavior of spilled LNGand an LNG cloud is another critical area dis-cussed in the next chapter.

SAFETY RECORD OF EARLYUSE OF LNG

Liquefaction of natural gas is achieved bycooling the gas to –259° F. The process wasdeveloped on a large scale during the firstquarter of the 20th century to simplify thetransportation and storage of natural gas,since the liquid state is l/600th the volume ofthe gaseous state.

Until recently, LNG was utilized primarilyin operations which produced the liquid andstored it for use only during peak demand, forexample, in cold winter weather. There are 89of these facilities operating in the UnitedStates today to produce and/or store domesticLNG. Known as “peak shaving plants,” theyhave a combined storage capacity of 2 millioncub ic mete r s .15 In addit ion, one plant inBoston imports and stores foreign LNG. Itscapacity is 146,000 cubic meters. The peakshaving plants have existed safely for years,without much public attention to either theirlocation in heavily populated areas or theiroperations. Only one major incident has mar-red the safety record of these plants.

That accident occurred at the first LNG in-stallation in 1944. At that time, a storage tankowned by East Ohio Gas Company in Cleve-land ruptured, spilling 6,200 cubic meters ofLNG into adjacent streets and sewers. The liq-uid evaporated, the gas ignited and, whereconfined, exploded, The disaster remains the

l~elephone interview with staff of the Bureau ofMines, Pittsburgh, Pa., Sept. 7, 1977.

ld’l_’elephone interview with staff of Naval WeaponsLaboratory, China Lake, Calif,, Aug. 25, 1977,

15A~erican Gas Association, LNG Information Book1973 (Arlington, Va.: American Gas Association, 1973).

. —


most serious LNG accident anywhere in theworld. It resulted in 128 deaths, 300 injuries,and approximately $7 million in propertydamage . l6

Based on investigations made by the U.S.Bureau of Mines after the accident, it wasgenerally agreed that the tank failed becauseit was constructed of 3.5 percent nickel steel,which becomes brittle on contact with the ex-treme cold of LNG. Since the Cleveland dis-aster, it has become standard practice in theLNG industry to use 9 percent nickel steel,aluminum, or concrete and to surroundstorage facilities with dikes capable of con-taining the contents of the tank if a ruptureoccurs.

The only other significant accident relatedto LNG to date occurred at a Staten Islandimport facility in 1973; where 40 workmenrepairing an empty LNG tank were killedwhen the roof of the tank collapsed as a resultof a fire.

While the Staten Island tank disaster pre-cipitated active local opposition to LNG, thegas industry has repeatedly argued that theaccident was not due to any characteristic orhandling of LNG17, but was an industrial ac-cident involving an insulation fire. However, aBureau of Mines study of the accident indi-cated that there was enough LNG in the in-sulation that it could have been released veryquickly into the tank once igni t ion hadstarted. 18

The only other accident in the UnitedStates mentioned in connection with LNG

IGU.S. Department of the Interior, Bureau of Mines,Report on the Investigation of the Fire at the Liquefac-tion, Storage and Regasification Plant of the East OhioGas Company, Cleveland, Ohio, Oct. 20, 1944.(Washington, D. C.: U.S. Department of the Interior,Bureau of Mines, February 1946).

[email protected] Systems, Inc., Environmental Im-pact Report for the Proposed Oxnard LNG Facilities,Safety, Appendix B (Los Angeles, Ca.: Socio-EconomicSystems, 1976), p. 10.

18U.S, ConWess, House, Staten Island Explosion:Safety Issues Concerning LNG Storage Facilities. Hear-ings before the Special Subcommittee on Investigationsof the Committee on Interstate and Foreign Commerce.93rd Cong., first sess., July 10, 11, 12, 1973, pp. 143, 145.

took four lives in Oregon. This accident,however, took place during construction of thestorage tank before LNG had ever been in-troduced into the facility.l9

Over the past 10 to 20 years, the peak shav-ing facilities have been engaged in all phasesof LNG handlings: liquefaction, regasifica-tion, loading and unloading, storage, andshipment by pipeline, truck, rail, and barge.However, new LNG projects involve muchlarger scale facilities entirely dependent onmarine shipment, and these are the focus ofthis study.

R E G U L A T I O N O F I M P O R TP R O J E C T S

Before any LNG import or export projectcan begin operation, more than 130 permitsmust be obtained from Federal, State, andlocal agencies (see appendix A), and 12different Federal agencies are involved in ap-provals and controls. The Federal PowerCommission (FPC), the Coast Guard, and theOffice of Pipeline Safety Operations (OPSO),are the agencies most involved in LNG andare discussed in appropriate sections of thischapter. The others are explained in appendixB.

The most crucial agency in this milieu is theFederal Power Commission, which under theNatural Gas Act of 1938, has power to ap-prove or reject any proposed project in threeways: 20

●

●

●

it must determine whether of not thepublic interest will be served by LNG im-portation;

it must authorize construction or exten-sion of any facilities to be used in thet r anspor t a t ion o r sa l e o f in t e r s t a t enatural gas;

it has the authority to establish the priceat which the gas is sold.

lg’’LNG Scorecard,” I%”peline and Gas Journal 204(June 1977): 22.

2015 U.S.CO ~ 717 f (c) (1970).


The Federal Power Commission has broaddiscretionary powers in determining what isand what is not in the public interest and instipulating conditions which must be met inorder to meet the public interest.

To date, the FPC has been asked to rule onone LNG export project and 10 LNG importprojects (see figure 5). The export project, withliquefaction facilities in Kenai, Alaska, hasbeen approved and is operating. Of the importprojects, three have received final approval;one has received initial approval, subject toreview. One import project with its terminaland regasification plant in Everett, Mass., isin operation. Another, with import facilities ‘inCove Point, Md., and Savannah, Ga., isscheduled to begin operation later this year.Facilities for the approved project at LakeCharles, La., have not yet been constructed,nor have facilities for the Oxnard, Calif., ter-minal which has received only initial ap-proval.

The FPC approves the import projects bymeans of an express order authorizing impor-tation and certificates of public convenienceand necessity (authorization and stipulationsfor construction and operation of facilities).The approvals are obtained by means of acomplicated quasi-judicial procedure whichroutinely takes several years from the time anapplication is filed until it is approved. First,an evidentiary hearing is held before an ad-ministrative law judge, in which the appli-cant, staff, and interveners each present theirviews of the nature of the project, cost esti-mates, the need for additional supply of gas,and environmental consequences of the proj-ect. The evidence presented also includes anenvironmental impact statement prepared bythe FPC, an engineering and safety review bythe cryogenics division of the National Bureauof Standards, and a risk analysis by the FPCstaff. On the basis of this evidence, the FPCadministrative law judge makes an initialdecision.

“ Second, there is a period of review duringwhich any of the parties may file exceptions tothe decision. At the end of the review period,the commissioners make a final decision

which may uphold the initial decision orchange it completely. The final decision is sub-ject to an appeal in one of the U.S. Courts ofAppeal.

Since the historic role of FPC has been toregulate the entry of suppliers into the inter-state natural gas market and to ensure thatinterstate sales of gas take place at prices thatare “just and reasonable,” 21 the agency haslimited its activities to licensing and ratemak-ing. There is little onsite inspection to assurecompliance with stipulations contained in thelicenses. The exception to this general rule oc-curs when a company wishes to expand exist-ing facilities and submits a new application.In that context, FPC engineers inspect thefacility to judge its operating performance.22 Acritical analysis of the decisionmaking processwhich leads to certification of LNG projectsand the difficulties of pricing policies are dis-cussed in the next chapter.

LNG TANKER TECHNOLOGY

Liquefied natural gas import projects in-volve a complex consortia of energy andtransportation companies. The gas supplier isusually represented by a foreign governmentor State-owned subsidiary company. Therecipient of the gas at the import terminal isgenerally a consortia of gas utilities and/orpipeline companies, which use the gas in theirown systems and sell to other distribution orutility companies. The supplier and receiverare connected by a transportation company,the subsidiary of an oil, gas, or pipeline com-pany, which owns and operates the LNGtankers.

Liquefied natural gas tanker technologyhas been developed over the past 20 years tothe point where, currently, about a dozenworldwide trade routes are either in opera-tion, planned, or proposed for LNG shipping(figure 7). Growth in the world LNG fleet has

2115 UOS.C, $ 717 ~ (a) (1970).221n~rvi~w~ with Federal Power commission s t a f f ,

Washington, D. C., May 31 and June 24, 1977.


o

& i Q

a

0


Figure 8. Total Capacity of World LNG and LPG Tanker Fleet

26 51 39 28 32 44 34 22 30 67 66 60145 172 209 242 274 307 339 352 379 404 418 441

vessels 4 6 9 13 23 24 28 45 49 42 435 5 5 5 8 11 14 17 20 27 35 39

Total 176 232 259 284 327 385 411 419 475 547 561 583

8,000

been rapid (figure 8). Seventy-two ships willbe operational by 1980, with a possibility that33 more would be required if all planned LNGprojects go through. 23

Source Liquid Gas Carrier Register 1977

Currently, only one LNG tanker is engagedin regular import t rade with the UnitedStates, that is the French ship, the Descartes,which has brought 25 shipments from Algeria

23Edward Faridany, LNG: 1974-1990 Marine Opera-tions and Market Prospects for Liquefied Natural Gas,(London: Economist Intelligence Unit Limited, June1974), p. 69,


Figure 9. LNG Tankers On Order or Under ConstructionIn U.S. Shipyards

No. of ContainmentShipyard Vessels System Design

Avondale 3 Conch

General Dynamics 10 Kvaerner-Moss

Newport News 3 Technigaz

Sun Shipbuilding 2 MacDonaldDouglas/GasTransport

Self-supportingaluminum alloyprismatlc tanks,British design

Spherical aluminumalloy tank,Norwegian design

Stainless steelalloy membraneFrench design

Invar ( nickel-steel),American/Frenchdesign

to the Distrigas peak shaving plant in Bostonsince July 1975.24 Nine more LNG tankers willjoin the U.S. trade early next year when im-port terminals under construction at CovePoint, Md., and Savannah, Ga., begin opera-tion, and five more when an import terminalat Lake Charles, La., is online about 1980(figure 9). If other projects now proposed areapproved, it is possible that 12 additionalLNG tankers will be required for imports tothe United States and 14 for shipments fromAlaska to the continental United States. By1985, a total of 41 tankers could be calling atcontinental U.S. ports. (In addition, twotankers are involved in export of LNG fromAlaska to Japan through 1985).25

ziInterviews with Officials of Distrigas Inc., Boston,Mass.,

2 5 a ,

b.

c.

d,

.June 15, 1977.“LNG Scorecard,’ Pipeline and Gas Journal 203(June 1976): 20.American Gas Association, “Update of Status ofLNG Projects,” Gas Supply Review 5 (February1977): 8.U.S. Department of Commerce, Maritime Ad-m i n i t r a t i o n , Sta tus o f LNG V e s s e l s(Washington, D. C.: U.S. Department of Com-merce, Maritime Administration, March 15,1977).U.S. Department of Commerce, Maritime Ad-m i n i s t r a t i o n , Status of LNG Pro j e c t s(Washington, D. C.: U.S. Department of Com-merce, Maritime Administration, September1976).

Liquefied natural gas tankers are bulkcargo ships which require unique design andmaterials to handle the very low-temperaturegas.

Most LNG tankers range in size from about40,000 cubic meters to planned ships of165,000 cubic meters (figure 10). The industrystandard has become the 125,000- to 130,000 -cubic meter ship. Each ship this size carriesenough LNG to heat a city of 100,000 popula-tion for 1 month.26

Figure 10. Profiles of Typical LNG Ships

METHANE PRINCESS27,400 cubic meters

DESCARTES50,000 cubic meters

Source National Maritime Research Center

zGInterview with official of General Dynamics Com-pany, Boston, Mass., June 15, 1977.


By comparison to the better known crudeoil tankers, the largest LNG ships are one-halfto one-fourth the total size of the very largecrude carriers (VLCC or “supertanker’ )(figure 11), some of which are more than400,000 deadweight tons. A 130,000 cubicmeter LNG tanker with a 143-foot beam and a900- to 1,000-foot length is roughly equivalentto a 100,000-deadweight ton oil tanker.

The LNG tanker is a shallow draft vessel,about 36 feet, on which the cargo-carryingcapacity is increased by adding to the lengthinstead of the depth. It has an unusually largeamount of freeboard, rising about 50 feet outof the water. Because of its visible length andheight, the LNG tanker appears larger thansome VLCCs.

The LNG tanker is a high-powered, high-speed ship, with an optimum service speed inthe 20-knot range, about 5 knots faster thanmost oil tankers.

New LNG tankers are fueled by their owncargoes. Immediately upon being loaded inthe tanker, LNG begins to evaporate and con-tinues to do so throughout the entire voyage.In a typical design, the vapor produced duringthe voyage is used as the ship’s fuel and maybe sufficient to meet 100 percent of the fuel re-quirements. However, safety regulations re-quire that the ship carry, and be equipped touse, fuel oil as well. After the ship is unloaded,

a small percentage of the LNG cargo is re-tained in the tanks for cooling purposes andthis supplies part of the fuel requirements forthe return trip.

The tankers are equipped with specializedsystems for handling LNG and for combatingpotential hazards associated with l iquidspillage and fire. These include high-expan-sion foam and dry powder fire protectionsystems, water-spray systems for floodingdeck piping, and pressure-, temperature-, andleak-monitoring systems. Cargo handlingsystems are provided for loading and dis-charging LNG, for cooling down and warmingup tanks, for transmittal of boiloff gas to theship boilers and, most importantly, to provideinert atmospheres in the spaces surroundingthe cargo tanks and in the tanks themselvesprior to and after aeration at the time of dry-docking.

Each LNG tanker is a complicated vessel,representing approximately a $100- to $150-mil l ion investment .27 Most U.S. flag LNGtankers are financed with a variety of aidsfrom the Maritime Administration, includingconstruction differential subsidies, operatingdifferential subsidies, and ship mortgageguarantees.

zT’’General Dynamics Gets Tanker Job for $310million, ’ Wall Street Journal, July 28, 1977.

Figure 11, Comparison of LNG Tanker and Crude Oil Tankers

A comparison of the Principal Dimensionsa, Cargo Deadweightb, and Full-Load Dlsplacementc of a 125,000 Cubic Meter LNG Ship and a Variety of CrudeOil Tankers

80,000 dwt 100,000 dwt 137,000 dwt 125,000 cu/m 476,000 dwt 554,000 dwtOil Tanker Oil Tanker Oil Tanker LNG Ship Oil Tanker Oil Tanker

Length 811 848 974 936 1,243 1,359

Breadth 125 128 134 144 203 207

Depth 57 65 85 82 118 118

Draft 44 50 54 36 93 94

Dwt 80,459 100,300 137,010 63,100 476,025 553,700Full-Load Displacement 105,000 128,500 172,500 94,500 509.000 631,000

‘IN FEETblN LONG TONSCIN LONG TONS Source Engineering Computer Opteconomics Inc

—


To date, the Maritime Administration hasauthorized approximately $270.3 million forsubsidy of all LNG tankers.28 (Federal finan-cial aids are also provided by the Export-Im-port Bank, although that aid is made availa-ble to foreign governments in order to promotethe use of U.S. goods and services in their proj-ects. To date, the Export-Import Bank hasprovided approximately $483 million in loansand loan guarantees to Algeria to support

28’’$ubsidized Shipbuilding Contract Awards’Statistical Quarterly (First quarter 1977),

construction of liquefaction plants and re-lated facilities.)29

The construction cost of an LNG tanker isroughly twice that of an oil tanker of similarsize. Most of the increased cost for LNGtankers is due to special design features of thecontainment system which holds the low-tem-perature, low-density cargo.

The standard 125,000 cubic meter LNGtanker usually has five cargo tanks, each witha capacity of about 25,000 cubic meters (figure12). An eight-story building could fit inside

zgInterview with officials of Export-Import Bank ofthe United States, Washington, D. C., June 16, 1977.

Figure 12. Inboard Profile of LNG Tanker

Liquefied natural gas tankers con-structed by General Dynamics use fivespherical tanks of about 25,000 cubic meterseach Tanks for the ships are constructed inSouth Carolina and towed by barge to theshipyard at Ouincy, Mass , where they aremounted into the ship hull

—


each of these large cargo tanks, which func- ters which are welded to the ship structure.tion in the same way as the common Thermosbottle. A cold product—LNG—is introduced With the membrane design (figure 15), theinto the container and the insulation sur- ship’s hull, in effect, becomes the outer tank.

I n s u l a t i o n i s i n s t a l l e d t h e r e o n , a n d arounding the tank (comparable to the vacuumjacket in the Thermos bottle) is the sole means membrane placed on the inside to retain theby which the cargo is kept cold. No refrigera- liquid. The inner surface of this “double hull’tion is employed on the LNG carrier. is either high nickel steel or stainless steel.

From the 15 or more cargo tank system The unique design problems associateddesigns, two basic types have become most with LNG tankers stem primarily from the

common: the freestanding tank and the need to contain and insulate the extremelymembrane tank. cold LNG cargo and from the fact that many

materials such as mild steel will become brit-The freestandin g tanks are self-contained, tle and fail at very low temperatures. Special

usually spherical or prismatic in shape, made materials used for the interior of cargo tanksof aluminum alloy or 9 percent nickel steel must be able to withstand both the very lowwith layers of insulat ion on the outside temperatures when filled with LNG and the(figures 13 and 14). The tanks are welded to normal temperatures when empty. Whencylindrical skirts or otherwise tied to suppor- metals are subject to these temperature

Figure 13. Free-Standing Spherical LNG Tank

Source U S Maritime Administration

18 CI-I. I – DESCRIPTION OF LNG TECHNOLOGY AND IMPORT SYSTEM

changes of as much as 300 degrees, they ex-pand and contract and, in the case of free-standing tanks, the whole structure of thetank interior must be able to move within theship. In addition, up to 2 feet of very efficientinsulation is necessary around each tank inorder to minimize heat leak into the tank dur-ing the voyage from liquefaction plant toreceiving terminal and back.

So far, none of the containment systems inuse has been established as clearly superior tothe others (figure 16), and it is too early in thehistory of LNG carriers to have determinedmeaningful l i fe-cycle cost comparisons.However, each of the present systems is basedon many years of design and testing, andresearch is continuing into new containmentsystems using materials such as concrete andglass-reinforced plastic.

Safety analyses conducted for LNG projectshave constantly identified a ship accident asthe most likely event that could trigger themost serious type of LNG accident. A ship col-lision could result in the rupture of one or

Figure 16. Comparative Characteristics of Some LNG Tank

more cargo tanks and spill a large amount ofLNG onto the water. A water spill wouldspread much farther and evaporate muchmore quickly than a land spill. While it ismost likely that a collision would producesome source of ignition which could fire theLNG vapor around the ship, a huge vaporcloud could be generated if no ignition oc-curred.

A critique of LNG tanker design and con-struction is included in the next chapter.

LNG TANKER CERTIFICATION ANDR E G U L A T I O N

The Coast Guard has primary responsiblityfor the safe construction and operation of theLNG tankers and activities in ports where thetankers call.

Under the Ports and Waterways Safety Actof 1972 and the Dangerous Cargo Act of 1970,the Coast Guard is required to establish andenforce design and construction standards for

Systems

Safety in event of vesselgrounding/collision orother emergency.

Reliability of ContainmentSystem. -

Most ship years operatingexperience and most experiencewithout primary barrier failure.Structure can be analyzed andrisk of fatigue failures minimized.Tanks can be constructed and100% inspected prior to instal-lation in vessel.

Safest system in event of groundingor collision — tank structureindependent of hull and most voidspace between vessel hull and cargotanks. Spherical tanks can bepressurized for emergency dischargein case of cargo pump failure.

Tank system easiest to analyzestructurally: therefore can be mademost reliable,

Source National Maritime Research Center

CH. I – DESCRIPTION OF LNGT ECHNOLOGY AND IMPORT SYSTEM 19

U.S. flag LNG tankers and foreign flag LNGtankers entering the 3-mile territorial watersof this country. It does so by letters of com-pliance for foreign vessels and certificates ofinspection for U.S. vessels.

The criteria used for both are essentiallythe same, however, Federal regulations whichare specifically applied to U.S. flag ships aresimply used as guidelines for foreign ships.

The Letter of Compliance program which isnow in operation requires that the CoastGuard review the vessel with respect to cargocontainment, cargo safety, and the safety oflife and property in U.S. ports. Featurescovered by the review include:30

●

●

●

●

●

●

design and arrangement of cargo tanksand cargo piping and vent systems;

arrangement and adequacy of installedfire extinguishing system and equipment;

safety devices and related systems whichcheck the cargo and surrounding spacesto give warning of leaks or other disor-ders which could result in a casualty;

isolation of toxic cargoes;

compatibility of one cargo with anotherand with the materials of the contain-ment system; and

suitability of electrical equipment in-stalled in hazardous areas.

The review is accomplished by inspection ofdetailed plans and specifications submitted inwriting by the vessel owner, inspection ofdocumentation that the vessel is accepted by arecognized foreign classification society whosestandards provide the same degree of safety ascomparable U.S. standards, and inspection ofthe ship itself on its first visit to a U.S. port.Coast Guard boarding parties examine thevessel’s arrangement and cargo systems,tanks, piping, machinery, and alarms. Theyalso observe the condition of the vessel, vesseloperation, cargo handling operations, fire-

tollepartxnent of Transportation, U.S. Coast Guard,Liquefied Natural Gas, Views and Practices Policy andSafety (Washington, D. C.: Department of Transporta-tion, U.S. Coast Guard, Feb. 1, 1976), p. III-B (2).

fighting capability, and personnel perform-ance. Serious problems, such as any involvinginoperative safety equipment, leaking cargopiping, or nonexplosion-proof electrical in-stallations, may require immediate correction.Minor problems may require correction priorto a return trip to the United States.

If the vessel meets all applicable require-ments, a Letter of Compliance will be issuedand the vessel must continue to meet thestandards of the first visit on all subsequentcalls at U.S. ports. To assure continued com-pliance, the Coast Guard makes a less exten-sive examination of the vessel each time it en-ters U.S. ports.

The Coast Guard requirements for thedesign, construction, and testing of U.S. flagvessels are contained in 46 CFR 38. Newregulations are being drawn up but are not yetcomplete. The Coast Guard has also proposedregulations which would set minimum stand-ards for persons employed on U.S. flag LNGships and is working with internationalgroups to develop standards for foreign crews.The regulations now in effect cover ships t a b i l i t y a n d s u r v i v a b i l i t y , s h i p h u l lmaterials, gas dangerous areas, electrical ar-rangements, firefighting arrangements, ven-tilation, cargo containment systems, tem-perature and pressure control, and instrumen-tation of the ship. They also cover systemsrelating to the transfer of LNG, such as themeans of loading and offloading the cargo,piping materials, piping insulation, valving,’instrumentation, construction, and testing ofthe systems.

Inspections for compliance with thesestandards are carried out during constructionof the vessels. In general, requirements resultin the design of ships which the Coast Guardbelieves to meet a consistent and reasonablelevel of safety and provide for means of deal-ing with casualties such as tank overfilling,overpressuring, and emergency shutdowns. Ingeneral, the vessels are designed tO Survivetwo-compartment flooding from collision orstranding with reserve stability. They are notdesigned to withstand a major collision orstranding without cargo release, but the

—


design does limit the release to the tanksdirectly involved in an incident.

In addition to minimizing the possibility ofcollisions, strandings, or other incidents, theCoast Guard has specified operational con-trols on the vessels while entering, moored, orleaving a U.S. port. By regulations promul-

gated under 50 USC 191, Executive Order10173, and the Ports and Waterways SafetyAct of 1972, the Coast Guard Captain of thePort has control over any vessel within theterritorial sea and may prescribe conditionsa n d r e s t r i c t i o n s f o r t h e o p e r a t i o n o fwaterfront facilities.31 Under the regulations,the Captain of the Port in Boston has drawnup an Operations/Emergency Plan 32 for LNGshipments coming into the Everett, Mass.,LNG facility. Similar plans will be drawn upfor all LNG import terminals. The plan takesin to accoun t t he ind iv idua l geograph icfeatures and environmental characteristics ofeach import terminal and surrounding water-way as well as the unique nature of the LNGcargo. The result is a set of operational con-straints on LNG vessels in order to enhanceport safety. These constraints may includesuch things as the requirement for a CoastGuard escort; enforcement of a “sliding safetyzone,’ which is an area around the LNG shipfrom which all other vessels are excluded asthe LNG tanker proceeds to its berth; restric-tion of operations to certain times of day;prohibitions against certain other types ofwork, such as welding, or the transfer of othertypes of cargo, such as LPG, during dischargeof LNG; and others.33

The regulation of LNG tanker constructionand operations is discussed in the followingchapter.

3133 C-FOR. $$6.04.8, 6.14.1 (1976),qz~partment of Transportation, U.S. Coast Guard,

The Port of Boston, LNG-LPG Operation/EmergencyPlan (Boston, Mass.: Department of Transportation,U.S. Coast Guard, Mar. 29, 1977).

qqwpartment of Transportation, U.S. Coast Guard,Liquefied Natural Gas, Views and Practices Policy andSafety, p. IV-3.

The Coast Guard claims jurisdiction overthe entire portion of the LNG system that con-nects the tanker to the distribution system.Existing regulations give the Captain of thePort authority to control and monitor LNGwaterfront operations. However, there cur-rently are no Coast Guard regulations whichspecifically apply to the terminal facilities.Development of these regulations is under-ways 34 and publication is expected in the fall of1977.

LNG TERMINAL TECHNOLOGY

The proposed LNG import projects andprojects to receive LNG which may come fromAlaska require the construction of large ter-minals to receive and store the product andgasification plants to return the liquid to itsvapor form. A large terminal capable of sup-plying 500 million cubic feet of gas per day canrepresent an investment of more than $350million by the sponsoring companies.

The technology for these terminals is an ex-trapolation of many small LNG peak shavingplants which have been operating for years.This technology has been proved opera-tionally satisfactory for the small plants.Even so, baseload LNG import terminals,which are intended to provide a continuousflow of gas into commercial pipelines, aredesigned to meet much more stringent re-quirements than smaller peak shaving units.35

Offloading of the LNG tankers is ac-complished at a specially constructed pierwhere the tanker is connected to pipelines byarticulated unloading arms and the cargo ispumped ashore (figure 17).

The LNG is stored in large insulated tankson shore and later pumped to regasificationfacilities before it enters the distribution

Wbid., p. IV-4.ssConversation with officials of Columbia LNG Cor-

poration, Cove Point, Md., June 8, 1977.

CH. I – DESCRIPTION OF LNG Technology AND IMPORT SYSTEM 21


Figure 18. Aboveground LNG Storage Tank

Source Scientific American.

system (figure 18). The storage capacity of thetanks is roughly equivalent to twice thecapacity of a single LNG ship, but—unlikepeak shaving storage tanks—the import ter-minal tanks are intended to hold LNG onlybriefly.

In either type of facility, the storage tanksrepresent a significant portion of the costs,and the gas industry has spent much time andmoney in research to develop effective storagesystems.

Currently, there are four storage concepts:double-wall metal tanks, prestressed concretetanks,’ frozen holes, and mined caverns. Tech-niques for storing liquids in abovegroundtanks are well established and the LNG in-dustry has drawn on these techniques. In ad-dition, the tanks are surrounded by earthendikes. These dikes are a safety measure, inthat they could contain the entire contents of atank in the event of a spill. However, they in-crease the land requirements for abovegroundstorage several times over. Much research hasfocused on the idea of underground storagetanks because little or no insulation otherthan the earth appears to be needed and thereis no need for diking to contain spills.

Underground storage tanks have been builtfor LNG in the United States, Algeria, Eng-

land, and Japan. The U.S. tanks were built forpeak shaving operations in New Jersey andMassachusetts, but have since been aban-doned in favor of other types of storagebecause the units failed to perform satisfac-torily.

In any type of tank, the one hazard mostoften mentioned in connection with thestorage of LNG is a phenomena known as“roll over.’

Peak shaving plants have a greater poten-tial for rollover due to weathering of the LNGand/or introduction of new LNG into a par-tially filled tank.

Rollover refers to the convection or motionof fluid which occurs when liquids of differentdensities exist in a storage tank. If differentdensities or stratification do occur within atank such that a denser and warmer liquid isat the bottom of the tank and subject to heatleak, that l iquid can ul t imately becomeheated to the point that it is less dense thanthe liquid above it, and it will be rapidlymoved by buoyant forces up the tank sidewalls to the surface. At this point, it ex-periences a sudden decrease in pressure andbeing above its normal boiling point vaporizesvery rapidly in large quantities causing a sig-nificant pressure rise in the tank. As a resultof this rapid expansion, cracks or even tankrupture can occur.

However, industry research on rollover hasbeen extensive, resulting in deliberate con-trolled mixing of the tank contents, selectedtop, side, or bottom filling, careful monitoringof the temperature of the LNG contentsthroughout the tank, higher design tankpressures combined with low normal operat-ing pressures, and improved venting. In addi-tion, the potential of the phenomena occurringat a baseload plant is further reduced by anoperational practice of unloading tankers intoempty tanks, not partially filled tanks as canoccur at peak-shaving plants.

From the storage tanks, LNG is pumped tothe regasification plant where it is vaporizedby heating it. Frequently, the LNG is heated insystems using the naturally occurring heat innearby seawater. Other systems use process


heat from other equipment or have heat ex- LNG TERMINAL SITINGchangers fueled with oil, electricity, gas, orambient air. None of the vaporizer systems is There are several factors related to pro-obviously the most economical or technically posed LNG import terminals that set themsuperior. The choice depends primarily on the apart from the existing peak shaving plants.location and design of a specific terminal and The proposed terminals are large-scale opera-environmental regulations. tions located in the coastal zone and major

The regasification facility is one of the leastshipping channels, some in major harbors-or

costly sections of the terminal, but is con-near large population centers (figures 19 and20). They require large

sidered important because if it should fail tooperate, the entire purpose of the plant—to

capital, and represent a

provide natural gas—will have been defeated. energy at a single site.

amounts of land andlarge concentration of

Figure 19. Layout of Cove Point, Md., LNG Receiving Terminal

Source Columbia LNG Corp


The location of a terminal can be a majorfactor in its safety. The magnitude and extentof any damage from an LNG spill can dependon the proximity of the terminal and storagesites to other industrial and residential areas.

The site selection process is currently con-ducted by the company or consortium propos-ing the project. Gas industry officials considersuch factors as accessibility by large tankers,the availability of the market, which is largelydetermined by the proximity of an existingpipeline network; costs of land acquisition;avai labi l i ty of ski l led labor supply; andavailability of public facilities such as roads,electricity, sewers, etc. Some companies alsoconsider area land-use characteristics and en-vironmental sensitivities important aspects ofsite selection. The FPC position is that, unlessotherwise stipulated, FPC approval of thefacility allows Federal preemption of Stateand local laws relating to siting. Therefore,local and State land-use regulations could beoverruled. A company makes application tothe FPC only after it has done as muchpreliminary work as possible, which includesat least gaining control over, if not outrightownership of, the proposed site. Thus, neitherthe general public nor the Federal Govern-ment become involved in the site selectiondecision until it has already been made by thecompany. There are, at present, no Federalsiting criteria, and those projects which arenow proposed have a variety of sites, rangingfrom remote coastal and riverine areas with1,000-acre buffer zones to as little as a 90-acresite on Staten Island.

L N G T E R M I N A L R E G U L A T I O N

The construction and operation of LNG ter-minals are primari ly regulated by threeFederal agencies; the Federal Power Commis-sion (FPC), and the Office of Pipeline SafetyOperations (OPSO), and the Coast Guard.

Federal Power Commission jurisdictionover the terminals is included in the process oflicensing import projects. The FPC considersapproval of any LNG import project to be “amajor Federal action significantly affectingthe quality of the human environment” sub-ject to the National Environmental Policy Act

requirement that an environmental impactstatement (E IS) be prepared.

As a part of the EIS, the National Bureauof Standards’ cryogenics division in Boulder,Colo., under con t rac t to FPC, rev iewsengineering and safety aspects of the proposedterminal. Also as part of the EIS, the FPCstaff prepare a quantitative risk analysis,which is its principal method for determiningwhether a project can be considered safe. Therisk analysis considers the major events whichmight cause an LNG spill, such as ship colli-sion, grounding, or ramming; failure of theunloading arms or other major pieces ofequipment; and damage to the facility fromnatural phenomena or unusual accidents. Therisk analysis determines the extent of damageand the number of deaths and injuries whichmay result from a disaster and the probabilitythat certain types of disasters would occur.The death probabilities from natural dis-asters are typically about 1 in 10 million. Insome recent applications, the FPC rejected asite because it posed a public risk to life with aprobability of greater than 1 in 10 million.Therefore, that figure has become the infor-mal criteria which projects must meet for FPCapproval .36

The FPC exerts i ts influence over thefacilities by attaching stipulations to the cer-tification of public convenience and necessitywhich it issues if the project is approved.These stipulations are designed to minimizeenvironmental consequences and to promotethe safety of the facility. The applicant is re-quired to comply with these stipulations if heaccepts the certificate. Statements of com-pliance and operating reports are requiredregularly, but there is little or no post-cer-tification oversight by the FPC. Onsite FPCinspection generally occurs only when a com-pany wishes to expand its facilities and sub-mits a new application.37

aG1nterV& with staff of Woodward-Clyde Consul-tants, Washington, D. C., June 28, 1977, and FederalPower Commission, Alaska Natural Gas Transporta-tion System, R“nal Environmental Impact Statement,Vol. 111, p. 425d and 4253. (Washington, D. C.: FederalPower Commission, 1976).

371nt,erview with staff of Federal Power Commission,Washington, D, C., May 31, and June 24, 1977.


Figure 21. Storage and Diking at Onshore LNG Plant

Source El Paso LNG Terminal Co

The safety of the terminal facilities islargely an OPSO responsibility. Under theNatural Gas Pipeline Safety Act of 1968,O P S O i s r e s p o n s i b l e f o r e s t a b l i s h i n gminimum Federal safety standards for allpipeline facilities in or affecting interstate orforeign commerce. Pipeline facilities havebeen given an extremely broad interpretationto include all components of an LNG importterminal, including the offloading facilities,storage tanks, regasification facilities and allassociated pipelines.

Permits are not required by OPSO, whichexercises its authority solely by inspectingfacilities for compliance with Federal stand-

a rds . The s t andards a re cu r ren t ly bu i l taround the safety code of the National FireProtection Association, known as 59(A). Inaddition to setting minimum standards formaterials, equipment, and systems the coderelies upon two basic concepts to protect thepublic from LNG hazards: the requirement fora diking and containment system and the re-quirement that specific distances be main-tained between certain components and be-tween components and the property line.

Dikes are the primary device used to pre-vent the uncontrolled spreading of an LNGspill on land (figure 21). The dikes make it

— —-— —


possible to use either of two methods of con-trol:

● In the event of an LNG spill, the liquidcan be contained within the dike and therate of evaporation slowed by the use ofhigh expansion foam. All sources of igni-tion can be eliminated. In this way, theLNG can dissipate in harmless con-centrations into the atmosphere.

● Or, in the event of an LNG spill, the liq-uid can be contained within the dike andits evaporation controlled or even ignitedso that it immediately burns in the con-fined space where the fire can be con-trolled by known firefighting methods.

The NFPA 59(A) regulations currentlyadopted by OPSO specify the size and con-struction of the dike and the design of relatedequipment necessary for the diking system.

The other technique used to enhance safetyis to establish the distance which must lie be-tween the dikes around the storage tanks andthe property line. The distance required is onewhich would assure that heat from an LNGfire inside the dikes would not be severeenough at the property line to cause death orthird degree burns.

Current regulations require that this dis-tance be 0.8 times the square root of the areainside the dikes.

Regulations also require that the facility bedesigned to meet the maximum earthquakespecifications of the Uniform Building Code.

New LNG terminal standards have beenproposed by OPSO and are being circulatedfor public comment. Generally, the proposedstandards are more strict and cover moreaspects of terminal design than do currentstandards, but in many cases they are lessdefinitive. The standards increase the dis-tance between dikes and property line, requirea vapor dispersion zone or a redundantautomatic ignit ion system, and set morestringent seismic design criteria. 38 It is ex-

pected that the proposed standards wil lseriously limit the choice of sites for LNG ter-minals.

The Coast Guard’s responsibility for ter-minal facilities is an extension of the Captainof the Port’s jurisdiction over waterfrontfacilities. The Coast Guard maintains that itsjurisdiction, with regard to LNG vessel move-ments and waterfront facilities, is sufficient topromulgate and enforce safety requirementsfor the LNG transfer operations at the receiv-ing terminal and, in that light, considers thepipel ines between tanks and loading oro f f load ing equ ipmen t , t he load ing andoffloading equipment, storage tanks, and theentire portion of the LNG system which con-nects the tanker to the distribution system tobe under its jurisdiction. The inland distribu-tion system is not the responsibility of theCoast Guard.

The Coast Guard currently has no regula-tions specific to LNG terminals but has under-taken development of such regulations to im-plement appropriate sections of the Ports andWaterways Safety Act of 1972. In the mean-time, the Captain of the Port in each areawhere LNG is handled exercises authority bydeveloping contingency plans for operations.

A critique of the Government role in theregulation of LNG terminal siting and opera-tions is included in the following chapter.

TRENDS IN LNG USE ANDF A C I L I T I E S

Liquefied natural gas could be an impor-tant short-term energy supply for the UnitedStates over the next few decades and couldhelp alleviate some near-term fuel shortagesin selected sectors of the economy. Ultimately,however, the supply of natural gas which maybe sold to the United States as LNG is limited.LNG is not a major new source of energywhich will allow unrestrained use of naturalgas, and it is unlikely that many import proj-ects will be forthcoming beyond those alreadyproposed.

SNU.S. llepartrnent of Transportation, Office ofPipeline Safety Operations, “Liquefied Natural GasFacilities (LNG); Federal Safety Standards,” FederalRegister 42, no. 77, April 21, 1977, 20776-20800.

— —

CH. I – DESCRIPTION OF LNGT ECHNOLOGY AND IMPORT SYSTEM 27

In the future, it can probably be expectedthat U.S. consumption of natural gas will con-tinue to decline slightly and it is possible asmuch as 15 percent of the total natural gasconsumed could be transported as LNG by1985-95 (figure 22). This figure may be lowerif a pipeline is used to transport Alaskan gasto the continental United States.

Imports of LNG to the United States cur-rently come from Algeria, and there is someconcern about the wisdom of becoming de-pendent upon any one country as the majorsource of supply. However, several other coun-tries also control major portions of the world’snatural gas reserves. For example, liquefac-tion and export facilities are being developed

Figure 22. Projected Future LNG Imports (Based onProposed Projects and Reasonable ApprovalTime)

Trillions Percent of 1976of cubic feet U.S. Natural Gasper year Consumption

4 20%

15%

1977-80 1980-85 1985-90Projects Planned PossibleConstructed Projects Newor Operating Approved Projects

or PendingBefore FPC

El Paso IDistrigas

El Paso IIPanhandlePac/lndonesia

Possible Future Supplies FromUSSR, Iran, and Nigeria

10%O

5 %

in Chile, Nigeria, and Colombia and there is apossibility of additional export projects iftechnology and reserves are proven in Russia,Iran, China, and Australia. 39 It is likely thatsponsors of some U.S. import projects willturn to these exporters for additional suppliesof LNG, thus reducing the dependency onAlgeria.

Changes are also likely to occur in the siteschosen for U.S. import terminal facilities, insome types of equipment which may be used,and in the onshore distribution of LNG.

Currently, public pressure exists for, andthe industry trend is toward, “remote” sitingof LNG terminals and storage facilities. Con-troversy over the meaning of remote and thecharacteristics which make a site acceptablefor an LNG facility, coupled with the difficultyfirms may have in finding acceptable sites,have led to the suggestion that LNG facilitiescould be located offshore, away from popu-lated areas and congested harbors and water-ways.

Several designs have been proposed foroffshore platforms to house LNG facilities, butno detailed design has been developed for anyspecific site. At the present t ime, thesepreliminary designs limit site selection tolocations with water depths of 600 feet. Mostof the design concepts are self-containedfacilities which look like large floating bargesinstalled to a mooring system (figure 23).Other concepts propose that the platforms befloated to a site, then grounded to the beach orseabed. There are also two other, more elabor-ate concepts: One would make use of subseastorage structures, similar to those used in theNorth Sea to store oil, with a semisubmersibleor tension-leg concrete platform mooredabove for the liquefaction or regasificationplant. The other features separate moored orjack-up platforms for the process plant andthe storage structures.

According to industry figures, offshorefacilities will require 3 to 4 years constructiontime. Crude estimates range from $175 million

Source OTA

39JJLNG Report, ’ ~“peline and Gas Journal 204(June 1977).


Figure 23. Artist’s Rendering of Offshore LNG Terminal

to $220 million for a receiving terminal with a limited operating experience now available,500 million cubic feet per day regasification no particular designs for either ship cargoplant and storage for 200,000 cubic meters systems or onshore storage facilities have yetand from $350 million to $425 million for a emerged as obviously superior. Therefore, it is500 million cubic feet per day 40 liquefaction likely that a variety of equipment will comeplant. into use as more projects are approved.

There are many designs for LNG tankers It is also possible that increased use of LNGand onshore facilities. However, with the will result in increased onshore transporta-

tion of LNG to secondary markets by means4{)1bid. other than pipeline. Although the proposed


,

baseload import terminals have no specificprovisions for truck and rail shipment ofLNG, such shipments appear to be possibleand permissible in the future. Shipment bytruck is already a reality at most peak shavingoperations and from the import terminal atEverett, Mass.

Prior to 1969, only a few LNG truckingoperations had been attempted in this coun-try, using equipment originally designed forliquid nitrogen service. Based on the successof the operations, equipment was designedand fabricated especially for LNG. It is esti-mated that there are 75 LNG trucks currentlyin operation in the United States.41 Typical ofthe trucking which has taken place was theshipment of nearly 4.5 million gallons of LNGfrom Philadelphia, Pa., to Lowell, Mass., dur-ing the winter of 1969. Since then largevolumes have been transported all over theUnited States to help supply outlying com-munities, to provide temporary supplies whenservice is interrupted, and to provide smallquantities for experimental work.

Liquefied natural gas could also be movedfrom import terminals or liquefaction plantsby barges or railway tank cars.

The use of barges was first proposed totransport LNG up the Mississippi River to theChicago Union Stockyards, and one barge wasconstructed and tested for this purpose in the1950’s. It was never used commercially.Another barge, the 297-foot Massachusetts,was constructed by Distrigas for distributingLNG from a Staten Island import terminal.However, that barge has been taken out ofservice because of opposition.

Railway tank cars have been proposed as ameans of carrying LNG to isolated areaswhich do not justify construction of pipelines.Tank cars now in use hauling liquid oxygen,nitrogen, and hydrogen would be suitable forLNG service, but the economics are such thatit is unlikely there would be much emphasison rail movement of LNG.

~ I Interviews with officials of Distrigas Inc., Boston,Mass., June 15, 1977.

EXISTING AND PROPOSEDPROJECTS, IN BRIEF

There are two operating LNG marinetransport projects in the United States today,the “Distrigas” project importing gas fromAlger ia in to E v e r e t t , M a s s . , a n d t h e“Phillips/Marathon’ project exporting gasfrom Alaska to Japan. Construction of thefirst large baseload import project to be ap-proved by FPC, “El Paso I,” is nearing com-pletion, and the facility is expected to becomeoperational early in 1978 importing gas fromAlgeria to both Cove Point, Md., and Elba Is-land, Ga., (near Savannah).42

One additional large import project has re-cently been given final approval by FPC, butno construct ion has begun. This is the“Trunkline’ project to import LNG fromAlgeria to Lake Charles, La.43 The “Pacific-Indonesia’ project to import LNG from In-donesia to Oxnard, Calif.,44 has received onlyinitial FPC approval and no construction hasbegun.

Three additional projects have been filedwith the FPC for some time and decisions orapprovals are expected soon. These are: the“El Paso II*’ project to import LNG fromAlgeria to Port O’Connor, Tex., the “Pacific-Alaska” project to transport LNG from CookInlet in southern Alaska to California; andthe “El Paso-Alaska” project to transport thehuge North Slope Alaska gas reserves fromGravina Point, Alaska (after pipelining fromthe North Slope) to California.45

Since these eight projects have a reasonableprobability of being operational in the future(the early 1980’s), a brief description of each isincluded in this section. Other planned or pro-

q~Dean Hale, “Cold Winter Spurs LNG Activity,”Pipeline and Gas Journal 204 (June 1977): 30.

q:~Federal Power Commission, TrunkZine LNG Corn-pany et al., Opinion No. 796-A, Docket Nos .CP74-138-140 (Washington, D. C.: Federal Power Com-mission, June 30, 1977).

~~Federal Power Commission, “FPC Judge ApprovesImportation of Indonesia LNG,” News Release, No.23292, July 22, 1977.

~~Dean Hale, “Cold Winter Spurs LNG Activity,”:31.


posed projects have not been included forvarious reasons. For example: the “Eascogas’project which was planned for Staten Island,N. Y., and Providence, R. I., terminals has beendelayed so many times that its viability is inquestion. A project planned by Tenneco to im-port gas from Algeria to St. John’s, N. B., inCanada, and then pipe the gas to the UnitedState is now in the early review stages byFPC.46 Another recently announced project isone by the Peoples Natural Gas Company ofChicago to import LNG from either Iran orChile to a terminal near Corpus Christi,T e x .47

This report reflects the situation as of thesummer of 1977. Many other projects are inthe early planning states. Many factors affectthese plans, however, and changes are com-mon prior to actual construction of facilities.

1. The Distrigas Project (figure 24)

This project has been in operation since1971. The 50,000 cubic meter LNG tankerDescartes is now on a regular deliveryschedule on approximately a 20-day cycle.48

The ship, which was built in France in 1971and operates under the French flag, 49 h a s

AGIbid., p. 31.ATFederal Power Commission, “NGP-LNG Inc., Ap-

plication and Request for Phased Proceeding,” FederalRegister 42, No. 131, July 8, 1977.

A~Interviews with officials of Distrigas Inc., Boston,Mass, June 15, 1977.

AgU.S. Department of Commerce, Maritime Ad-ministration, Status of LZVG Vessels (Washington, D, C.:U.S. Department of Commerce, March 1977).

Figure 24.Project Data Sheet: DistrigasImport Source: Skikda, AlgeriaImport Terminal: Everett, Mass.

ContractLocation Expected volume

Companies revolved of u s Project operational Bcf/yrterminal designation date (M Mcfd)

Supplier. Sonatrach(Algerian NationalGas Co ).

Shipper. Alocean Everett, Distrigas I Operational 16(Sonatrach subsidiary). Ma,

U S. Importer: DistrigasCorp

Distributors: Various Everett, Distrigasgas companies in New Ma, IllEngland, New York, andNew Jersey

Supplier. Sonatrach. Everett, Distrigas

Importer Distrigas Ma, Iv 2

(Project pending),

since 1971 (43 6)

1977 (1,5 16 totalyr. supple- (43.6)mental con-tract)

1978 42(115)

FPC Number Ships/ Estimated investment ($106) Estimatedstatus S h i p y a r d / price ($)(as of Capacity m3/ Receiving delivered into

9/1/77) Tank design Tankers terminal pipeline/MMBtu— —

Approved 1 / C h a n t i e r - — 33 1.901972, Atlantique l

Reopened (France)/1974, 50,000 m3/Approved membrane1977

—Pending

2.80

Filed 1/Chantiers- — 9 – l o 2.91Feb. Ciotat (added1977 (France)/ investment)

125,000 m3/Sphericalfree-standing

CURRENT IMPORT TERMINAL CHARACTERISTICS 1 The 50,000 cubic meter ship “Descartes’ wiII be taken out of

Storage capacity Regasification Type of storage Number of Terminal service upon arrival of the latest contract (Distrigas IV).

(MMcf) capacity (MMcfd) containers storage tanks acreage2 The Distrigas I and Ill projects will be phased into the Distrigas IV

3250 — 135 A b o v e g r o u n d – -2 37project when the latter commences

9% nickel steel Source OTA


been delivering LNG from Skikda, Algeria, tothe terminal at Everett, Mass., at the rate ofabout 15 trips each year. The terminal is lo-cated on the Mystic River, up from the mainBoston harbor and less than one-half milefrom the Boston city limits, in a highly in-dus t r i a l i zed reg ion wi th bo th LPG andgasoline terminals adjacent to the property. so

The Everett facility has operated withoutmajor incident for 6 years.

The principal market for this LNG is theNortheastern States with distribution madeby both truck and pipeline. At present 40 per-cent of the LNG is distributed by trucks andmore than 60 trucks operate out of the facilityto other satellite storage tanks in the North-east .51 The Distrigas project has contractedfor a supply of 16 billion cubic feet of gas peryear, and in 1976 actual imports totaledslightly over 10 billion cubic feet.52

While this project has received FPC ap-proval, a modification to expand the terminal

~t}Interviews with officials of Distrigas Inc., Boston,Mass., June 15, 1977.

,5 I Ibid.

~~Federal power Commission, United States 1772pOr~S

and Exports of Natural Gas 1976 (Washington, D. C.:Federal Power Commission, May 1977).

and total import volume has been filed and ispending approval by FPC. Under the terms ofa new 20-year contract with the Algerian Na-tional Gas Company, Distrigas would import42 billion cubic feet of gas per year beginningin 1978.53 This contract would replace the ex-isting one and a new 125,000 cubic meter ship,the Mostefa Ben Boulaid, would be used inplace of the Descartes. Additional unloadingfacil i t ies , but no new storage tanks, areplanned for this expansion.54

2. The Phillips/Marathon Project(figure 25)

The oldest operating marine LNG project inthe United States is the project now exportinggas from fields in Cook Inlet in southernAlaska, through a terminal at Kenai , toNeigishi, Japan. This project has been oper-ated by the Phillips Petroleum Company andMarathon Oil Company since 1969.

Two 71,500 cubic meter LNG tankers, the

~:~Dean Hale, “Cold Winter Spurs LNG Activity,”:30.

~qlnterViews with officials of Distrigas Inc., Boston,Mass, June 1

Figure 25.Project Data Sheet: Phillips/MarathonLNG Export Source: Kenai, Alaska (Plant at Nikiski)LNG Export Terminal: Neigishi, Japan

Kenai to Neigishi – 3,280 nmi I— —-

Contract FPC Number Ships/ Estimated Investment ($10°)Location Expected volume status Shipyard/

Companies Involved of u s Project operational— — —

Bcf/yrfacility

(as of Capacity m3/ Receivingdesignation date (MMcfd)

Exported price9/1/77) Tank design Tankers terminal ($)-1976 /MMBtu—

Gas Supplier: Phillips.

and Marathon Plant.Operator: Phillips

Petroleum Kenai. Phillips/ Operational 49,3 Approved 2/K, M, –Shipper: Marathon Oil. Alaska Marathon

—since 1969 (135) Verkstads 1 66Importers Tokyo Electric, 1 5-year (Sweden)/

Tokyo Gas. contract) 7 1 , 5 0 0 m3/ –membrane— —

CURRENT EXPORT SOURCE CHARACTERISTICS

Storage capacity Liquefaction Type of storage Number of Facility(MMcf) capacity (M Mcfd) containers storage tanks acreage—

2300 185 Aboveground 3aluminum

Source OTA

32 CH. 1 – DESCRIPTION OF LNG TECHNOLOGY AND IMPORT SYSTEM

Arctic Tokyo and the Polar Alaska, were builtin Sweden and operate under the Liberianflag with Italian crews.55

The contract to supply Tokyo Electric andTokyo Gas companies is for 135 billion cubicfeet of gas per year, and in 1976 about 50billion cubic feet were actually delivered. 56

This project has operated without a majorproblem since initiation.

During the extreme winter of 1977 a specialdelivery of one shipload of LNG was made toEverett, Mass., from Alaska, after a waiver of

MU.S. Ilepartrnent of Commerce, Maritime Ad-ministration, Status of LNG Vessels.

sGFederal Power Commission, United States Importsand Exports of Natural Gas 1976.

Figure 26.Project Data Sheet: El Paso IImport Source: Arzew, AlgeriaImport Terminal: Cove Point, Md. and Elba Island, Ga.

Companies involved

—Suppliers: Sonatrach

(Algerian NationalGas Co. )

Shipper: El Paso AlgeriaCorp.

Cove Point purchasers:Consolidated SystemLNG Co and ColumbiaLNG Co. (also operators)

Elba Island purchasers:Southern Energy Co(also operators)

Drstributors Columbia GasTransmission Corp.,Consolidated GasSupply Co., SouthernNatural Gas Co

the Jones Act prohibiting the use of foreignflag tankers in U.S. trade. A French-built3,5,000 cubic meter tanker, the Kenai Multina,flying the Liberian flag was used. 57 This proj-ect contract expires in 1985. Beyond that, ap-plication may be made to bring the gas tosouthern California.

3. The El Paso I Project (figure 26)

The agreement between El Paso NaturalGas Company and Sonatrach (Algeria) willlead to the ini t ial t ransport of the LNG

s~ean Hale, “Cold Winter Spurs LNG Activity ”,:21.

Arzew to Cove Point– 3,570 n miArzew to Savannah – 3,77o n mi I

Locationof u s Project

terminals designation— —

Cove Point,Md

El Paso I

Elba Island,Ga.

Contract FPC Number Ships/ Estimated Investment ($106) EstimatedExpected volume status S h i o y a r d / . - — — — — — – — price ($)

operational Bcf/yr (as of Capacity m3/dale (MMcfd) 9/1/77) Tank design Tankers

3/Chantiers- Dunkirk

3651 Approved (France)/(1000) 1972, 125,000 m3/

1973: membraneReopened1974

1978 Approved 3/Avondale 11001-1977 (U.S.A.)/ for all

125,000 m 3/ 9 shipsFree-standingPrismatic

3/Newport(U.S.A.)/125,000 m3/Technigazmembrane

Receiving delivered iintoterminal pipeline/MMBtu

350 1.66-181(CovePoint)

127 1.70(Elba Is, )

CURRENT IMPORT TERMINAL CHARACTERISTICSStorage capacity Regasification Type of storage Number of Terminal —

Location (MMcf) capacity (MMcfd) containers storage tanks acreage

Cove Point, Md. 5000 1000 Aboveground, 4 60 (plant, structures)aluminum 300 acres allocated

1100 acre tractElba Island, Ga. 4000 325 — 3 150 acres allocated

800 acre tract

1 Of this amount. Cove Point shall

Ireceive about two-thirds,Elba Island one-third

Source OTA


equivalent of 1 billion cubic feet per day (365billion cubic feet per year) of natural gas tothe United States.

The Columbia Gas System, along with theConsolidated Gas System, has entered intocontract for some two-thirds of this gas. TheLNG will be delivered to a terminal locatedon the Chesapeake Bay at Cove Point, Md.The terminal will be jointly owned by Colum-bia and Consolidated and will become opera-tional early in 1978. The remainder of LNGwill be delivered to Southern Natural Gas at anew terminal under construction on Elba Is-land, Ga.58

The Cove Point terminal has two tankerberths, four storage tanks and several processareas. The two tanker berths are locatedabout 1 mile offshore along a 2,500-foot pierwhich is connected to shore by an under-ground tunnel containing both LNG pipes andvapor return lines. The initial operating planscall for about 140 ship arrivals per year. TheCove Point facility is located on a 1,100-acretract of land along the Chesapeake Bay inCalvert County, Md.59

The gas will be piped from Cove Point to anexisting pipeline in Loudoun County, Va., andthen to markets in middle Atlantic Statesse rved by Co lumbia and Conso l ida tedNatural Gas Companies.

The Elba Island terminal is on an 800-acresite of undeveloped land, wholly owned bySouthern Natural Gas. It is located 5 milesdownriver from Savannah, Ga., and will sup-ply gas to southeastern U.S. markets. ThisLNG is expected to represent about 15 percentof Southern Natural Gas sales when the ter-minal is operational. It is planned that 50LNG tankers will call at the Elba Island ter-minal each year, substantially increasing theship traffic at the Savannah port entrance. GO

Wbid., p. 30.~gMax Levy, “The Cove Point, Maryland LNG Ter-

minal,” Conference on LNG Importation and TerminalSafety, Boston, Mass., June 13-14, 1972.

GoSouthern Natural Gas Company, Facts on Elba Is-land, Savannah, Georgia LNG Terminal, (n. p.:Southern Natural Gas Company, n.d. ).

Nine 125,000 cubic meter LNG tankers areto be used to serve both El Paso I terminals.Three tankers were built in France, are nowcompleted and laid-up, and are planned to beoperated by El Paso under the Liberian flag.Six others are under construction at two U.S.shipyards (Avondale and Newport News), andare planned to be operated by El Paso underU.S. flag.6l

The entire project is about 2 years behindschedule. The principal technical problemwas completion of the large liquefactionfacilities in Algeria. After one U.S. contractorfailed to perform, the Algerian National GasCompany canceled the contract and hired anew contractor. The U.S. terminals and theU.S.-built tankers are now almost completed,after a slow-down to await completion of theAlgerian terminal. The present schedule is forLNG shipments to begin in January 1978.62

The FPC approved the El Paso I project inJune 1972.

4. The “Trunkline’’Project (figure 27)

The Trunkline project was approved byFPC on June 30, 1977, after an appeal of aninitial opinion in April.63

The proposed LNG facility would be nearthe Lake Charles Harbor in Louisiana andwithin the Terminal District Industrial Park.It would be located on a 139-acre site andwould be used to unload, store, and ship LNGimported from Algeria. The LNG terminalwould consist of a berthing dock for LNGunloading, an onshore facility consisting ofthree 600,000-barrel LNG storage tanks sur-rounded by a dike, two 25,000-gallon liquidnitrogen storage tanks, one 250,000 Bunker Cfuel-oil tank for servicing the LNG tankers,and a process area which would containequipment for all LNG transfer operations.

GIU.S. Department of Commerce, Maritime Ad-ministration, Status of LNG Vessels.

621bid.

63Federal Power commission, Trunk/ine LN(j corn.

pany et al., Opinion No. 796-A, Docket N O S.CP74-138-140 (Washington, D. C.: Federal Power Com-mission, June 30, 1977).

——

34 CH. I – DESCRIPTION OF LNG TECHNOLOGY AND IMPORTS SYSTEM

Figure 27.Project Data Sheet: TrunklineImport Source: Arzew, AlgeriaImport Terminal: Lake Charles, La.

Contract FPC Number Ships/ Estimated investment ($106) EstimatedLocation Expected

Companies Involved of u s Project operationalterminal designation date

Supplier Sonatrach - - ‘ - “ –

(Algerian NationalGas Co. )

Terminal builder & Lake “Panhandle’ 1980-81operator Trunkline Charles, ‘‘Trunkline”LNG Co La ‘‘Calcasleu’

Buyer & distributorTrunkline Gas Co(Subsidiary of PanhandleEastern Pipeline Co)

Market Illinois. Indiana,Michigan, Ohio (primarily)

CURRENT IMPORT TERMINAL CHARACTERISTICS. .Storage capacity Regasification Type of storage Number of Terminal

(MMcf) capacity (MMcfd) containers storage tanks acreage

6000 540 Above-ground, 75 (plant,aluminum 3 structures)

(139 acre site)

Ancillary facilities would include offices,equipment for wastewater treatment, fire con-trol and detection, fire protection equipment,water supply, electrical power, and com-m u n i c a t i o n s . 6 4

The project is planned for importing 179billion cubic feet of gas per year using five125,000 cubic meter LNG tankers. Thetankers would reach the facility at the arrivalrate of 65 per year through a 24-mile channelfrom the Gulf of Mexico.65

Subsidiaries of Panhandle Eastern PipeLine Company, Genera l Dynamics , andMoore-McCormack Bulk Transport , Inc. ,have formed a partnership, Lachmar, to build,own, and operate two of the ships. These two

3/125,000 m3/shipyard &design notknown

Source OTA

ships are to be built at General Dynamics’,Quincy, Mass., shipyard. The three othervessels for this project are expected to be pro-vided by the Algeria National Shipping Com-pany .66

5. The “Pacific Indonesia” Project(figure 28)

In an initial decision on July 22, 1977, anFPC Administrative Law Judge approved aproposal to import 200 billion cubic feet of gasper year from Indonesia to a terminal in Ox-nard, Calif. The decision is subject to Commis-sion review. 67 There is considerable contro-versy in California over the site, and someState legislation on siting is pending.

6 4 Federa] power commission, Flnaz ~nuironmentalImpact Statement Calcasieu LNG Project TrunklineLNG Company Docket No. CP74- 138 et al.,(Washington, D.C.: Federal Power Commission, Sep-tember 1976).

b51bid.

GGDean Hale, “Cold Winter Spurs LNG Activity,”:30.

~TFederal Power Commission, “FPC Judge ApprovesImportation of Indonesia LNG.”


Figure 28.Project Data Sheet: Pacific-Indonesia

Indonesia

Projectdesignatlon

Pacific-IndonesiaProject

PROPOSED IMPORT TERMINAL CHARACTERISTICS.

Oxnard, Ca

Sumatra,

Sumatra 10 Oxnard – 8,300 n ml

Contract FPC Number Ships/ Estimated investment ($106 EstimatedExpected volume status S h i p y a r d / — price ($)

operational Bcf/yr (as of Capacity m3/ ‘Receiving delivered intodate (MMcfd) 9/1/77) Tank design Tankers terminal pipeline/MMBtu

61U.S.A. ) / 155 per1 2 5 , 0 0 0 m 3 / U S Tankershipyard &

48 months 200 Initial tank design

after approv- (550) approval not known

al (Liquefac-tion facilitiesm Indonesiaunder con-struction)

Storage capacity Regasification Type of storage Number of Terminal(MMcfi) capacity (MMcfd) containers storage tanks acreage

7700 4600 Above-ground, 4 Plant, -90/0 nickel steel structures

38 (ulti-mately 55)21 O-acresite—

The proposed Oxnard facility would beowned and operated by Western LNG Ter-minals. It would be located on a 210-acre sitein the City of Oxnard, on the coast of Califor-nia. This plant would import LNG at a rate of546 million cubic feet of gas per day formarkets within the State of California. TheLNG storage and vaporization facilities wouldoccupy 38 acres of the site containing two tofour 550,000-barrel , double-wall , above--ground tanks, 240-feet in diameter with anoverall height of 129 feet. The plant facilitieswould require 55 acres of the site, and themarine terminal would occupy 34 acres ofleased subtidal land extending approximately6,000 feet offshore at Ormand Beach. Unload-ing arms at the marine terminal would

6-77, sub-ject to review

2/ Chandlers-Atlantique(France)/125,000 m3/membrane1/Chantiers-Ciotat/125,000 m3/Free standingspherical

270 3 0 6 - 3 6 0

Source OTA

transfer the LNG from the ship to the storagefacilities through 42-inch cryogenic pipes.68

Liquefaction facilities in Indonesia are nowunder construction.

Conditional agreements have been reachedwith shipping companies for nine 125)000cubic meter LNG tankers. Pacific Indonesiawill charter the ships, three of which will beFrench buil t and the remaining six U.S.built. 69 No U.S. ship construction contract hasbeen announced.

68 Federa] power commission, Final EnvironmentalImpa et Sta tern en t Pacific Indonesia Project(Washington, D. C.: Federal Power Commission, Decem-ber 1976).

fi~u.s. Department of Commerce, Maritime Ad-ministration, Status of LNG Vessels.


6. The El Paso II Project (figure 29)

The El Paso II project is pending before theFPC. The proposal is to transport 365 billioncubic feet of gas per year from Algeria to anew facility at Port O’Connor, Tex. TO A fleetof twelve 125,000 cubic meter LNG tankerswould be required. It is planned that six ofthese would be U.S. flag and U.S. built, but noc o n s t r u c t i o n c o n t r a c t s h a v e b e e n a n -nounced.71 Safety reports have been submit-ted and FPC hearings were held during thesummer of 1977. Draft and final environmen-tal impact statements have been issued.72

~[~Federa] Power Commission, Algeria 11 Proj”ect Out-line of Contracts, El Paso Eastern Company, et al.,Docket No. CP77-330, et al. (Washington, D. C.: FederalPower Commission, n.d. )

~IU.S. Department of Commerce, Maritime Ad-ministrate ion, Status of LNG Vessels.

~~Federal Power Commission, Joint LNG SafetyReport of El Paso Atlantic Company et al., Respectingthe Proposed Algeria II Project, Docket No. CP73-258,et al. (Washington, D. C.: Federal Power Commission,Apr. 1, 19’77).

Figure 29.Project Data Sheet: El Paso IIImport Source: AlgeriaImport Terminal: Port O’Connor,

Companies Involved(project status)

Supplier Sonatrach(Algerian NationalGas Co. )

Shipper El Paso Atlanticco

Receiver El PasoEastern Co

Distributors El Paso,LNG Terminal,United Gas Pipeline.

Locationof u s

terminals

PortO’Connor,Tx.MatagordaBay

Tex.

Projectdesignation

El Paso II

CURRENT IMPORT TERMINAL CHARACTERISTICS

7. The “Pacific-Alaska’’ P roject(figure 30)

A project to transport LNG from Cook Inletgas fields near Kenai, Alaska, to California ispending before FPC.73 A terminal is plannedat either Oxnard or Los Angeles, Calif. Ques-tions of terminal siting now being addressedby the State of California are delaying somedecisions on this project. It is planned that ini-tially two 130,000 cubic meter tankers wouldbe used to import 73 billion cubic feet of gasper year. Sun Shipbuilding Company hassigned contracts for these ships with an affili-

~JDean Hale, “Cold Winter Spurs LNG Activity,”:31.

Arzew to Port O'Connor — 5024 n mi

Contract FPC Number Ships/ Estimated Investment (S106) EstimatedExpected volume status Shipyard/ price ($)

operational Bcf/yr (as of Capacity m3 / - Receiving - delivered intodate (MMcfd) 9/1/77) Tank design Tankers terminal pipeline/MMBtu

12125,000 m3, 2,000 457 —

1982-83 365 Pending shipyard &(1 000) tank design

not known

— — — . . ————.

Storage capacity Regasification Type of storage Number of Terminal(MMcf) capacity ( MMcfd) containers storage tanks— acreage

4168 — Aboveground 3— Source OTA


ate of Pacific Lighting Company, but no con-struction has started.74

8. The “El Paso--Alaskan’’ Project(figure 31)

This project is one of the proposed transpor-tation systems to deliver gas from the majorAlaskan North Slope fields to the lower 48States. While the other systems involve gaspipelines through Canada, this project pro-poses a gas pipeline from the North Slopealong the present oi l pipel ine route tosouthern Alaska, A liquefaction facility wouldbe built at Gravina Point, Alaska, and an ini-tial fleet of eight 165,000 cubic meter LNG

74 Feder a 1 power c Ommission, ~ecom mendatzon t.the President Alaskan Natural GUS TransportationSystems (Washington, D. C.: Federal Power Commis-sion, May 1, 1977).

9 6 - 5 9 7 0 - 7 7 - 4

751 bid,


Figure 31.Project Data Sheet: El Paso-AlaskaLNG Source: Gravina Point, Alaska’LNG Terminal: Oxnard, Ca. and/or Point Conception, Ca.

LocationCompanies revolved of u s Project

(project status) terminals designation

Liquefaction plant budder O x n a r d ,and sh ipper E l Paso CaAlaska Co and for

PROPOSED LNG SOURCE AND TERMINAL CHARACTERISTICS 1 via pipeline from the North Slope

Location

Terminals Oxnard, Ca.

Point Conception, Ca.

Source Gravina Point, Ak.

Iiuefactlon or I2 Not the ultimate (combined) terminal , which

Storaqe capacity reqasification Type of storaqe Number of Terminal I will have an estimated cost of $460 million(MMcf) capacity (MMcfd) containers - storage tanks acreage I

7700 4600 Aboveground9% nickel



Under the Alaska Natural Gas Transporta-tion Act of 1976, the President is required torecommend to Congress on the selection of thebest transportation system and Congress willthen have 60 days to review this recommenda-

4 38-55(210 acresite)

4 1000 acres

4Source OTA

tion. The President’s recommendation wasannounced in favor of a trans-Canada gaspipeline on September 8, 1977, but formalrecommendation had not yet been made toCongress at this printing.

Critical Review ofComponents

of LNG Import System

Chapter II

Critical Review of Componentsof the LNG Import System

This chapter presents a series of discussionsand critiques of important aspects of the liq-uefied natural gas (LNG ) system which are es-sentially components of the existing and pro-posed projects described in chapter 1.

The aspects addressed were identified byOTA after consideration of public concernsand analysis of both near-term and longerterm effects of deploying this technology inmany locations around the country. Consider-ing the present status and trends of develop-ing projects and LNG technology, the ninesubjects covered here were judged to bedeserving of attention at the Federal Govern-ment level based on either public concerns,the possibility of significant problems develop-ing, or both.

Since some LNG projects are alreadyoperating or approved and a significantamount of technology is already in place ordeveloped, Federal attention seems to bedesirable in two separate time frames:

a

● attention to near-term problem areas oftechnology, regulation, decisionmaking,or research which could affect many proj-ects already operating or nearly so; and

● attention to longer term policies whichmay be more important as the technologydevelops and becomes more dominant onthe national scene.

Each subject in this chapter is presented ascritical review of the present system with key

problems highlighted. Some analyses of futuretrends and effects are also included.

The first five papers are principally subjectsfor near-term attention and could be used asbasis for congressional review of regulatoryagencies or general investigation of the safetyissue in the context of existing projects andfacilities. These papers are:

1.

2.

3.

4.

5.

Tanker Design and Construction.

Tanker Regulations and Operations.

Regulation of Terminal Operations.

Decisionmaking Process in Certificationof Import Projects.

Safety Research on LNG.

The remaining four papers are principallysubjects which may require longer term atten-tion following determination of policy in thenational interest. There may be need forspecific legislation to influence projects if ma-jor policy changes are determined. Some of thesubjects require further study or investigationand these are noted in the discussions. Thesubjects are:

6.

7.

8.

9.

LNG Facility Siting,

Liability for LNG Accidents.

Reliability of Supply.

Pricing Policy.

41

42 CH. II – CRITICAL REVIEW OF COMPONENTS OF LNG IMPORT SYSTEM

Critical Review: Paper 1

LNG TANKER DESIGN AND CONSTRUCTION

The Coast Guard specifies and enforcesdesign standards for U.S. flag ships and forforeign flag ships calling at U.S. ports. Stand-ards for foreign ships were worked out incooperation with the IntergovernmentalMaritime Consultative Organization (IMCO),and a draft code is under consideration. In ad-dition, the Coast Guard published proposedstandards for self-propelled vessels carryingbulk liquefied gases on October 1, 1976. Theproposed standards for U.S. flag ships differonly slightly from the IMCO code and theeffective date for both sets of standards is thesame. The new standard is intended to replaceboth the Letter of Compliance program forforeign vessels and existing 46 CFR, Chapter Iregulations for domestic vessels.

As of September 1976, the existing fleet andscheduled deliveries of LNG ships totaled 79vessels. All of these vessels and any additionalones contracted for prior to October 31, 1976,or delivered or converted prior to June 30,1980, will not be subject to the new design andconstruction standards. 1 These vessels willcomprise a significant portion of the fleet untilthe end of the century that will not be subjectto the new regulations, although some of thesevessels may still meet the new standards.

H o w e v e r , L N G s h i p t e c h n o l o g y h a sdeveloped over the past 20 years and is cur-rently in use in worldwide trade with onlyminor technical problems. Modern LNG shipshave been in use for the past 5 years in Bostonand 8 years in Alaska. No serious accidentshave occurred and it appears that existingU.S. Coast Guard standards of design andconstruction are probably adequate toassure equally low risks of ship failures inthe future.

There is, however, concern about the risksof a major collision that would penetrate anLNG cargo tank. These concerns are not re-lated to design and construction of the LNGtankers, but rather to the possibility that in-creased numbers of tankers and other shipswill be operating in more and more congestedharbors and coastal areas. This is an opera-tional and regulatory problem which is dis-cussed in the next section.

The two oldest LNG ships in operation ap-pear to be typical of the quality of design andconstruction. The ships, the Methane Princessand the Methane Progress, are 27,000 cubicmeters each, which are about the size of asingle tank on 1977 LNG carriers, and havebeen transporting LNG from Algeria to Eng-land since 1964. No major accidents have oc-curred on these ships with over one millionvoyage miles each. A study done in 1973 pre-sented an analysis of technical problems ofthese ships and the 71,000 cubic meter ships,Arctic Tokyo and Polar Alaska, which havebeen in service from Alaska to Japan since1969.

The Methane ships’ cargo tanks were anearly freestanding prismatic tank design ofaluminum construction. The Alaska ships hada later version of a membrane tank designwith stainless s teel inter ior l ining. TheMethane ships experienced minor problemswith the insulation system, as the cargo tankscaused cold spots on the inner hull and somecracking in the mild steel hull. The problemswere ei ther repaired while in service orpostponed until the next shipyard period. Theaverage number of days out-of-service forrepairs has been 25 per year for each of theMethane ships. This is only slightly higherthan the 20 days per year usually planned forregular repairs to large, complex ships.

IU. S. Department of Commerce, Maritime Ad-ministration, Status of LNG Vessels (Washington, D. C.:U.S. Department of Commerce, Mar. 15, 1977).

CH. II – CRITICAL REVIEW OF COMPONENTS OF LNG IMPORT SYSTEM 43

The Alaska ships experienced much higherout-of-service rates (about 50 days per year)and several more operational problems intheir first 4 years of service. Some factors thatmay have influenced this include: 1 ) the shipswere much larger than previous designs; 2)the voyage from Alaska to Japan is muchlonger than previous LNG routes; and 3) theextreme temperatures and weather in Alaska.The problems experienced by the Alaska shipsinclude damage to membrane and insulationdue to t ank- s losh ing loads , damage tomembrane due to a cable tray failure, over-pressurizing of barrier spaces around tanks,and va r ious mach ine ry fa i lu res . Someredesign and overhaul was necessary to cor-rect the containment problems but nonecaused any serious personnel safety hazard. z

In fact, there have been no serious accidentsor serious safety problems involving any of the32 ships now in the worldwide LNG fleet.3

However, the new LNG tankers now enter-ing the trade are larger and do employ somenew systems. Although they have beencarefully designed and constructed someconcern is merited due to the increase inscale and new containment systemsemployed.

Most of the LNG ships now under construc-tion, built, or designed for the major U.S. im-port projects are of the 125,000 to 130,000cubic meter size. Forty-seven of this size andnone of any other size were under constructionas of March 1977 (figure 32). Plans have beenmade for 165,000 cubic meter ships for theproposed North Slope Alaska to Californiaproject by El Paso but this project is not ap-proved and no ship contract has been let.Some consideration has also been given toLNG ships as large as 300,000 cubic meters toserve offshore terminals, d but no firm plans

zBOOZ.Allerl Applied Research Inc., Analysis Of LNGMarine Transportation (Bethesda, Md.: Booz-Allen Ap-plies Research Inc., November 1973). v.], p. VI-30-38,

:IU. S. Depart m ent of Corn m erce, Maritime Ad-ministration, Status of LNG VesseZs (Washington, D. C.:U.S. Department of Commerce, Mar. 15, 1977).

qHenry Marcus, offshore Liquefied Gas Terminals,draft report (Cambridge, Mass.: MIT Center forTransportation Studies, July 1977).

have been made. The major concern about thedevelopment of much larger ships is that anaccident will have more serious consequences.Before designs are firm it would be prudent toconsider the need for limits on either tanksizes or total ship sizes. Some correlation be-tween siting of facilities, ship or tank size, andresearch into LNG spill behavior may also beuseful.

An interesting example of difficulties whichmay occur in getting a major new technicalsystem in operation is provided by a recent ac-counts of the 125,000 cubic meter LNG tankerHilli. Unloading of the tanker was halted in aJapanese harbor when a metal bolt was foundin the cargo lines. The ship has been taken outof service and, along with two sister shipsscheduled to enter service soon, is undergoingintensive inspections until the source of thebolt is found. It is estimated that the activitymay take 2 months and could cost millions ofdollars. 5

However, such problems with new ships,carefully built, operated, and monitored inearly stages of projects, appear to have anegligible effect on public safety. However, asthe present fleet grows older, risks offailures could increase. Future concerns forprojects now in the design and constructionstages include:

How well each ship will be maintainedand kept in adequate condition.

How well various new containmentsystems will perform over time.

How well inspection and monitoring ofship and machinery condition and opera-tion will be performed.

How well foreign flag operation will con-tinue to adhere to U.S. standards andwhether countries such as Liberia willperform adequate surveys and inspec-tions.

How well shipyard repairs and surveyscan be performed on these complexvessels with tight operating schedules.

S“LNG halt could last months,” Lloyd’s L&~, June 4,1977, p.1.

— —


Figure 32. Average Vessel Capacity of World LNG Tanker Fleet

Cubic Meters(thousand)

90

—

80

—

70

—

60

—

50

—

40

—

30

—

20

—

10

—

●●

●●

●●

●4

●

● 0 0 0 6

I

●● ☛

● “●

●●

● 0004

● **m..,

● *o*g

● “● ** “● *

● 000(

In this study, OTA looked only at LNGtankers. However, the study indicated that itis logical that liquefied bulk gas carriersshould be treated together for purposes offuture controls on design, construction, andmaintenance. Liquefied petroleum gas (LPG)carriers and other gas tankers have been inservice for longer periods and in much morevaried shipping circumstances than LNG car-riers. Some of these other gas carriers have


had more serious accidents .6 In addit ion,many more U.S. ports are regularly receivingor shipping LPG and other gas cargoes.

The Coast Guard and international agen-cies have considered all liquefied gas carrierstogether in the past, and the Coast Guard’smandate for setting design and construction

standards for LNG and LPG tankers stemsfrom the same legislation. T Recently, however,public concern about LNG has forced theCoast Guard to give disproportionate atten-tion to LNG tankers. In all design, construc-tion, and maintenance controls, LNG andall other hazardous cargo tankers should beconsidered together.

Whe Yuyo Maru—a hybrid gas carrier collided witha Liberian cargo vessel in Tokyo Bay in November 1974,resulting in a fire setting the naphtha alight in wingtanks which, in turn, eventually reached the LPG inother tanks.

TU.S. Congress, Ports and Waterways Safety Act of2972, P.L. 92-340, 92d Cong., 1972.



LNG TANKER REGULATIONS AND OPERATIONS

Regardless of the design safeguards re-quired for LNG tankers, the possibility andconsequences of a major spill on water dueto a ship accident are the most serious con-cerns. The gas industry, Government officials,and those who joined in OTA’s public par-ticipation program during this assessment allagree on that fact.

As marine traffic in such hazardous cargoesas LNG and LPG increases in the future,much more attention will be needed in thewhole area of vessel traffic monitoring andcontrol, especially since the movements ofother marine traffic in the vicinity of liquefiedgas tankers may not be as predictable as themovement of the LNG ships.

Tanker Traffic

The Coast Guard has authority to grantthe Captain of the Port the power to controlany vessel within the territorial sea and toprescribe conditions and restrictions for theoperation of waterfront facilities.

The only U.S. ports where LNG tankers arecurrently operating are Boston, Mass., andKenai, Alaska. The Captain of the Port inBoston has prepared an operations/emergencyplan specifically for LNG. The Captain of thePort in Kenai has not. He relies instead on avoluntary operations plan drawn up by thefour industrial users of the port.2

The Boston plan requires that all LNGvessels bound for the Everett, Mass., terminalmeet a Coast Guard cutter 4 miles out for aninspection of cargo systems prior to enteringport. The officer-in-charge will then make adetermination of whether the ship should beallowed to enter the harbor. From that pointon, if permission to enter port is given, the

Coast Guard cutter will escort the tanker tothe terminal, remain berthed nearby duringthe unloading operation, and finally escortthe tanker back out to the open sea. Duringthe transit to and from the terminal, the CoastGuard broadcasts warnings to keep the har-bor clear of all other traffic. Simultaneousunloading of LPG tankers in an adjacentberth is prohibited.

Due to the unique traffic problems witheach LNG terminal site, local planning willalways be required. However, the presentmethod of operation—especially closingdown long sections of Boston waterwaysduring an LNG tanker transit-may bevery costly and unworkable as increasednumbers of LNG tankers enter service.Effective long-range planning to handletraffic problems is required now.

With tanker deliveries once every 20 to 30days into the relatively uncrowded BostonHarbor, the inconveniences and costs to othershipping activity are modest. However, whendeliveries are made more regularly or intovery busy harbors, pressures will exist for theCoast Guard to be less rigorous in their con-trols.

For example, LNG tanker deliveries to thenew terminal at Cove Point, Md., are expectedevery 2 to 3 days. At the same time, more than4,000 major ships per year pass Cove Point ontheir way to and from the Port of Baltimore,one of the 10 largest ports in the UnitedStates. (By comparison, Boston Harbor han-dles only 1,500 ships per year; the DelawareRiver, 5,000; New York Harbor, 10,000).3 I naddition, LNG ships bound for Cove Pointwill have to mix with other ship traffic in theChesapeake Bay at Hampton Roads.

IU.S. Congress, Ports and Waterways Safety Act of1972, P. L. 92-340, 92d Congress., 1972.

Conversation with officials of the U.S. Coast Guard,Washington, D. C., Aug. 12, 1977.

:W.S. Department of the Army, Corps of Engineers,Waterborne Commerce of the United States, CalendarYears, 1973, 2974, 2975 (Vicksburg, Va.: U.S. Depart-ment of the Army, Corps of Engineers, 1974, 1975,1976).


Probably the greatest single safety measurethat could be taken to develop and to main-tain safe LNG shipping and safer shipping ingeneral would be the adoption of positivetraffic control over vessels within harbors,rather than simply allowing ships to followrules of the road.

Historically, oil tanker casualty data haveindicated a need for improved marine trafficsafety in U.S. ports and waterways.

The Ports and Waterways Safety Act of1972 authorizes the Coast Guard to establish,operate, and maintain vessel traffic services(VTS) in congested waterways, require in-stallation of electronics for implementation oftraffic safety systems, and control vesseltraffic where conditions require it throughrouting schemes and speed limits. While thisis not a positive control system in the samesense that air traffic controllers exerciseauthroity over flight, it does give the CoastGuard the statutory authority to deal withhazardous cargo traffic in a concrete way.

The Coast Guard completed a detailedanalysis of ports and waterways traffic in1973. 4 VTS systems for San Francisco, PugetSound, and the Houston Ship Channel arenow opera t iona l , and sys tems fo r NewOrleans and Valdez are expected to be opera-t ional late in 1977. A system is beingdeveloped for New York Harbor and its ap-proaches.

Priorities for ports to be outfitted with VTShave been set by the Coast Guard based onhistoric information reflecting the level oftraffic, the opportunity for accident, and thecosts and benefits of installing the system. Itnow appears that the Coast Guard shouldalso study harbors and waterways andpossibly consider new VTS locations basedon at least three additional factors relatedto the cargoes:

4u.s. Ilepartrnent of Transportation, U.S. CoastGuard, Vessel Traffic Systems Issue Study, FinalReport (Washington, D.C. U.S . Department ofTransportation, U.S. Coast Guard, March 1973).

●

●

●

the percentage of ship traffic in haz-ardous cargoes in relationship to alltraffic in the port;

the potential for increased traffic inhazardous cargoes; and

the impacts of various types of ship acci-dents which might occur in each harbor.

Admittedly, VTS are complex and costlysystems. However, the complexity and cost ofcurrent pract ices--such as hal t ing traff ica round LNG tankers and p rov id ing in -dividual Coast Guard cutter escorts for eachLNG tanker—will become more unmanagea-ble and less feasible as traffic increases.

Since all proposed sites for LNG importterminals are not now scheduled for VTSsystems, special handling of the ships willprobably continue to be required in thenear term. However, in the future safety ofall vessels around and including, hazard-ous cargo ships depends on implementationof some level of VTS system by the CoastGuard to reduce the probability of ship col-lisions.

In testimony before a Coast Guard hearingc o n s i d e r i n g t h e n e e d f o r V T S i n t h eChesapeake Bay, a representative of the firmwhich will operate the LNG tankers into CovePoint noted that working VHF radios andradar are not now required on ships enteringthe Bay. He indicated fai th in the LNGtankers, which are so equipped, but added,“We are concerned, however, about the basisfor entry and transit (of other vessels) andwho will pass our berthed vessels at CovePoint .” 5

Citizens who joined in OTA’s public par-ticipation program expressed considerableconcern about the operation of LNG tankersin crowded harbors and the problems of tyingup other ship traffic. One participant sug-gested that in order to minimize the possibility

sHearings before the U.S. Coast Guard on- theChesapeake Bay Vessel Traffic System at Norfolk, Va.,Jan. 27, 1977, John Boylston, marine manger ofMethane Tanker Service Company.

48 CH. 11 – CRITICAL REVIEW OF COMPONENTS OF LNG IMPORT SYSTEM

of collision and to provide a large area ofempty water in which an LNG spill might dis-sipate, LNG tankers be restricted to routesaway from normal shipping lanes and ter-minals be restricted to isolated coastal pointsaway from other shipping ventures.

Tanker Inspections

The Coast Guard assures the compliance offoreign LNG tankers to established standardsby boarding the ships for an inspection whenthey enter U.S. ports.

Inspections are required at least every 2years and may be carried out, as they are inBoston, on each arrival in a U.S. port.

These inspections are limited to cargo-han-dling systems, deck machinery and compart-ments, and fire and gas detectors for the cargosystem. The general condition of the ship andthe capability of the crew are not included inthese inspections. Thus the inspection doesnot reduce the risk of failure of propulsion,navigation, and steering systems, or evenverify the crew’s training and experience.

One very specific criticism of the CoastGuard’s inspection procedures is that it reliestotally on shipboard instrumentation duringthe inspection. While most systems can bechecked by actuation of controls and by built-in self-test features, there is one very obviousoversight. The ability of the ship’s gas detec-tion system will be limited to sensor locationin hazardous areas only.

The major questions to be raised about theinspection procedures are:

“ Is the Coast Guard determining andusing the best means of detecting gas invoid spaces?

“ Is the Coast Guard developing inspectionprocedures which will allow them to ade-quately inspect the growing fleet ofvessels which will soon include ships ofseveral different designs, with differentforeign flags and crews of different na-tionalities?

s Are the Coast Guard inspectors availablein suff icient numbers with adequatetraining in hazardous materials?

To date, Coast Guard inspectors have hadlittle specific training in LNG or other lique-fied gases. However, a 3-week course in haz-ardous materials, including LNG, is beingdeveloped and is scheduled to begin this fall.The course is designed to train more than 100Coast Guard personnel each year in inspec-tion techniques for hazardous material car-riers. However, the course is a voluntary one,and it is not clear that all personnel involvedin regulation and inspection of LNG carrierswill actually receive training. G

A detailed course outline had not been com-pleted when this report was written, but it ap-peared from preliminary materials that ap-propriate subjects would be offered.

Crew Training

The Coast Guard has already proposedregulations setting out minimum standardsfor persons employed on U.S. flag LNGtankers. T But there appears to be disagree-ment over whether the Coast Guard has amandate to propose similar standards for per-sonnel on foreign flag ships entering U.S. har-bors. To date, the Coast Guard has preferredto work internationally to develop thosestandards and is participating in Intergovern-mental Maritime Consultative Organization(IMCO) sessions on the subject. It is open toquestion whether this approach ensures anadequate level of training and competenceamong foreign crews.

This situation could be changed signifi-cantly by S.B. 682, the Tanker Safety Act of1977. If passed, the act would mandate crewstandards on all tankers entering U.S. ports,regardless of flag.

Conversation with officials of the U.S. Coast Guard,Washington, D. C., Aug. 12, 1977.

W.S. Department of Transportation, U.S. CoastGuard, “Qualifications of the Person in Charge of OilTransfer Operations,” Federal Register 42, no. 79, Apr.25, 1977, 21190-21200.


Several training programs, funded by ship-ping companies and unions, are in existence,but training at these schools is not requiredcurrently by any Federal agency.

One particular area of concern is training inthe use of fire protection equipment. Ex-perience has shown that serious accidentswhich involve tankers with flammable cargoalmost always result in a fire. As the Ad-HocMaritime Committee of the AFL-CIO states,“hands-on type fire prevention, detection, ex-tinguishment, and containment training pres-ently available to professional seamen, islacking in magnitude, depth and scope. . . .Repetitive retraining, at various MaritimeAdministration sponsored field schools, . . .is, at best, presently capable of exposing per-sonnel only to historically employed evolu-tions that require no prethinking, equipment

selection or command decision capability.’8

In fact, fire or explosion currently accounts for90 percent of the deaths and injuries in alltanker collisions. The tanker casualty rate didnot show a decrease between the years 1970and 1975. The actual number of collisions in-creased with the increase in traffic. g Analysisof 825 fires aboard U.S. Navy ships shows asimilar trend. 10

Thus, minimum requirements for crewtraining in the use of fire prevention andprotection equipment should be a cor-nerstone of the Coast Guard safety efforts.

sAd Hoc Committee, (AFL-CIO), Fire Protection,Detection, Containment and Extinguishment Proposal(n.p.: Ad Hoc Committee, (AFL-CIO), n.d.)

gu.s, Congress, Office of Technology Assessment, OilTransportation by Tankers: An Analysis of MarinePollution and Safety Measures (Washington, D. C.: U.S.Government Printing Office, July 1975), p. 36 and 57.

IOGeorge G. Sharp, Inc., Patrol Frigate MachinerySpace Fl”re Protection and Safety Hazards Study (n.p.:George G. Sharp, Inc., December 1972).



R E G U L A T I O N O F T E R M I N A L O P E R A T I O N S

Standards for Terminals

The existing industry standard for produc-tion, storage, and handling of LNG in land-based terminals is the National Fire Protec-tion Association (NFPA) 59A. These stand-ards have been adopted by many State agen-cies as well as by OPSO, making them part ofthe Federal regulations for LNG terminals.

To date, many portions of baseload LNGimpor t t e rmina l s appear to have beendesigned to much more stringent requirementsthan the minimum specifications set forth in59A. Still, a strong case can be made for morestringent requirements in many areas, par-ticularly those relating to public safety. Indus-try is opposed to promulgation of tougherstandards unless the need is clearly demon-strated. This opposition is at least partlybecause of the fear that such standards wouldbe retroactively applied to existing peak shav-ing and import facilities which would bedifficult and costly to modify. On the otherhand, some members of the public interestgroups which cooperated in OTA’s public par-ticipation program are calling for retroactiveapplication of new standards with a gradualphasing out of any facilities which do not meetthese standards.

The prospect for retroactive application ofnew requirements does now exist with the pro-posed s t anda rds r ecen t ly pub l i shed byOPSO. 1

There are several areas in which the pro-posed standards are considerably more com-prehensive than the NFPA 59A standard.These include definition of a thermal exclu-sion zone, vapor dispersion zone, and seismicdesign cri ter ia . In may o the r r e spec t s ,

IU. S. Department o f Transportat ion, Office ofPipeline Safety Operations, “Liquefied Natural GasFacilities (LNG); Federal Safety Standards,” FederalRegister 42, no. 77, Apr. 21, 1977, 20776-20800.

however, the proposed standards are lessdefinitive than the existing specification.These areas include specifications for concretematerials , equipment spacing within thefacility, valves, piping, and electrical equip-ment. Industry representatives have criticizedthe regulations as being overly stringent indefining thermal and vapor dispersion exclu-sion zones, specifying inappropriate estimat-ing techniques for determining these exclusionzones.

There is also concern that the proposedregulations do not allow for the develop-ment and use of several alternative meansof controlling vapor cloud generation in theevent of a spill. The proposed regulationsstipulate the use of a buffer zone (which couldbe as large as 3 to 7 miles depending on thesize of the diked area around storage tanks)2

or provisions for automatic ignition of a vaporcloud.

The use of automatic ignition during anLNG release may have an effect opposite ofthat desired in a fire protection system; itcould result in cascading equipment failuresand much greater damage than would be thecase with other methods of control.

Ideally, the regulations should provide fordeveloping technology which both protects theplant and enhances public safety. Some typicalalternatives which have been proposed andlarge-scale tested are the use of high-expan-sion foam systems for direct control of im-pounded LNG spill fires, the use of high-ex-pansion foam systems for reductions in thedownwind travel of vapors from LNG on land,the use of fixed dry chemical systems for im-

~Wesson & Associates, Inc., Compilation of Data onWesson & Associates, Inc., Key Personnel, Major Ex-periences in LNG Technology—Safety—Fire Protection,Industrial LNG Fire Training School and Comparisonof NFPA No. 59A with the Proposed OPSO LNGFacility Federal Safety Regulations, (Norman, Olda.:Wesson & Associates, Inc., 1977.

CH. 11 – CRITICAL REVIEW OF COMPONENTS OF LNG IMPORT SYSTEM 51

pounded spill fire extinguishment, and the useof certain types of fireproofing coatings forcryogenic and thermal protection of structuralsteels.

In general, LNG spill and fire research hasresulted in the improvement of and applica-t ion for commercial f i re protect ion anddamage control systems in LNG facilities.While it is generally conceded that these typefacilities have excellent safety records and ac-cident-free histories, they can still be im-proved. It was also generally agreed duringthe December 1976 ERDA LNG Workshop,that adequate fire protection equipment per-formance and design requirements have beenexperimentally established for definition ofthe hazard-control systems for typical operat-ing and impounded LNG spill conditions.However, one expert estimates that only 30percent of the existing peak shaving facilitieshave adequately designed and installed fireprotection systems capable of controlling amajor LNG spill condition.3 Thus, attention tothese issues and recognition of the hazardreduction capabil i t ies of experimental lyproven fire protection and safety systems bothin the development of regulations and inallocations for research and developmentprograms would be well justified.

Concern about firefighting ability extendsbeyond that of the LNG facility. There hasbeen cons ide rab le pub l i c d i scuss ion o fwhether local fire departments near an LNGfacil i ty have the expert ise and financialresources to prepare themselves for dealingwith a possible LNG emergency.

Those who contributed to the public par-ticipation program had few suggestions forspecific changes in terminal regulations. Theydid, however, desire that regulat ions beclearly defined and strictly enforced. Manysuggested that regulations include require-ments for training of personnel employed atthe terminals and the preparation of evacu-ation plans for the areas near an LNG facilityin the event of a major accident.

~Wesson & Associates, Inc.

Inspection of LNG Facilities

Once standards for construction and opera-tion of LNG facilities are clarified, there willstill remain the necessity to inspect facilitiesfor compliance with regulations.

It appears that there are gaps in current in-spec t ion p rocedures which cou ld causeproblems in the future.

The Office of Pipeline Safety Operations(OPSO) has the responsibility for inspection ofall pipelines and other facilities used intransportation or sale of natural gas in inter-state commerce. However, the small size ofthe OPSO staff limits its ability to inspectfacilities. In fact, OPSO has been describedby industry managers as “almost invisible inthe field.” A The small staff also impairsOPSO’s ability to participate in FPC hearingsalthough compliance with OPSO regulationsis one subject of the hearings.

T h e S e c r e t a r y o f T r a n s p o r t a t i o n i stherefore authorized to enter into agreementswith State agencies to take over inspectionduties. 5 These agreements require that:

●

●

the State must adopt at least minimumFederal safety standards; and

the State must submit an annual cer-tification that it has adopted such stand-ards and is complying with a number ofother more technical conditions.

The Office of Pipeline Safety Operationsdoes not have these agreements with all Statesand the inspection mechanisms vary in theStates which do participate.6 This could resultin uneven enforcement of regulations concern-ing LNG facilities. For this reason, it appearsthat guidelines for inspection and enforce-ment should be included in OPSO regula-tions along with standards for constructionand operation of the facilities.

qInterView with officials of Columbia Gas Corp.,Cove Point, Md., June 8, 1977.

~Natural Gas Pipeline Safety Act of 1968, 49 U.S. C.$! 1671 et seq (1970).

Conversation with staff of State Programs Divisionof the Office of Pipeline Safety Operations, Departmentof Transportation, Washington, D. C., Aug. 10, 1977.


Guidelines for t raining of inspectors ,methods of inspection, and how often facilitiesshould be inspected could raise public confi-dence, enhance safety of LNG plants, and en-sure equitable enforcement practices.

There also appears to be a problem of in-specting facilities for compliance with stipula-tions which may be imposed by FPC when itissues a certificate of public convenience andnecessity. In some recent FPC rulings, thesestipulations have been quite complex andtechnical. At the present time, however,there is no mechanism for enforcing theseorders. The FPC staff is insufficient for per-forming followup inspections on a routinebasis. Inspections are performed only when,and if, the applicant applies for modificationsto an existing facility.7 Thus, the conditionsof certification are considered more as good

71nterviews with staff of Federal Power Commission,Washington, D. C., May 31 and June 24, 1977.

faith agreements with the company than aregulatory order.

In addition, the FPC can and does requireoccasionally higher standards than those con-tained in exist ing OPSO regulat ions. gHowever, OPSO does not verify compliancewith these higher requirements during its in-spection of LNG facilities.9

It appears that inspection of facilities forcompliance with all similar requirements—regardless of the source of the requirement—should be fixed with a single agency. Sincemost of the duty already falls to OPSO or itsdelegated State authority, it appears logicalOPSO should be charged with this expandedtask.

~lnterview with staff of Federal Power Commission,Washington, D. C., June 24, 1977.

Conversation with staff of State Programs Divisionof the U.S. Department of Transportation, Office ofPipeline Safety Operations, Washington, D. C,, Aug. 10,1977.

CH. 11 – CRITICAL REVIEW OF COMPONENTS OF LNG IMPORT SYSTEM

Critical Review: Paper

DECISIONMAKING PROCESS IN CERTIFICATION OF LNG PROJECTS

53

4

The Federal Power Commission (FPC) isthe lead agency in determining whether or noteach individual LNG import project is in thepublic interest and, therefore, will be allowed.

However, both the LNG industry and con-cerned members of the public have found theagency unresponsive to their needs. Mostcriticism leveled against the agency can be col-lected into four areas:

● lack of clearly enunciated Federal policyand jurisdiction on import matters;

● length of time required for approval proc-ess:

● financial difficulties inherent in the ap-proval process; and

● lack of adequate information and oppor-tunity for intelligent participation in thedecisionmaking process.

Lack of Clear Policy and Jurisdiction

Historically, the FPC’s role has been toregulate the entry of suppliers into the inter-state natural gas market and to ensure thatinterstate sales take place at prices which are“just and reasonable.” 1 Early on in the im-port of LNG, that caused a problem ofjurisdiction which has not yet been completelyresolved. For an import facility where the gasis to be sold interstate, there is little difficultysince FPC approval is required for both theimportation and the construction/operation offacilities to handle the gas. However, wherethe imported gas is to be sold intrastate, therehas been confusion as to whether the FPCcould require that facilities meet Federalstandards.

In 1974, a U.S. Court of Appeals ruled thatthe FPC could require certain standards ofthe intrastate facilities if the Commission first

115 U.S,C. $ 717 c(a) (1970).

made an affirmative finding that such stand-ards were necessary to protect the public in-terest. 2 As a result of the court decision, theDistrigas terminal outside of Boston cameunder FPC jurisdiction. It now appears likelythat such jurisdiction will include any otherterminals which may sell imported gas only toan intrastate market.

Jurisdiction is also clouded in another areawhere there is a lack of guidelines for thedivision of responsibility among the FPC,OPSO, and the U.S. Coast Guard in promul-gation and enforcement of safety and sitingstandards which an applicant must meet.Since the Coast Guard’s role has been mostlyto review applications and advise the FPC inareas of Coast Guard expertise, the moreserious present conflict is with OPSO. Thereare two major questions involved in the con-flict:

1) To what extent can the FPC requirehigher standards than those containedin OPSO regulations?

The two agencies clashed directly on thispoint in the past. In a controversy involv-ing the Chattanooga Gas Company, theFPC temporarily closed down an LNGpeak shaving facility which OPSO hadinspected and approved.3 This led to aneffort between the two agencies todevelop a memorandum of understand-ing delineating responsibilities; however,so far this effort has not been successful.

2) Which agency—if either—shall establishsiting criteria for the location of importterminals?

2D~t@~ Corporation v. Federal Pouter Cornrrzzk -sion, 495 F,2d 1057 (D.C. Cir. 1974).

!31n the time since original FPC certification, a num-ber of homes had been constructed on land which theFPC felt was dangerously near the storage tanks. TheFPC required the company to purchase the adjoiningland.

9 6 - 5 9 7 0 - 7 7 - 5


OPSO has proposed new safety stand-ards for LNG terminals which bearheavily on the selection of specific sites.The effort has surfaced two problems:

a)

b)

There appears to be a s t a tu to ryprohibition against OPSO standardsprescribing the location of LNGfacilities; A and

The FPC has expressed concern thatit has exclusive jurisdiction over siteselection. The FPC has received a re-quest by the attorneys general ofseveral east coast States to beginrulemaking on uniform siting criteriaand has asked for comments on this re-quest; however, the outcome of thisissue is far from certain.

Until these jurisdictional problems aredecisively resolved, it is difficult, if not im-possible, to plan facilities which can be ap-proved.

The LNG industry has been particularlycritical of the FPC in the realm of decision-making. One representative told OTA that therecurrent theme of industry’s relationshipwith the FPC was “we can’t follow the rulesbecause we don’t know what the rules are orwill be.’5

One of the underlying problems whichfrustrates the FPC’s decisionmaking dutiesand processes is the fact that it is aregulatory agency, not a policymakingbody. The questions of import levels, pric-ing mechanisms, and siting criteria whichthe FPC must regularly consider are allpieces of basic energy and environmentalpolicy issues which should be determined

4Natura] Gas Pipeline Safety Act of 1968, 49 U.S.C. $1671 (4) ( 1970). “Pipeline facilities includes . . . new andexisting pipe right-of-way and any equipment facility, orbuilding used in the transportation of gas or the treat-ment of gas during the course of transportation but‘rights-of-way ‘as used in this chapter does not authorizethe Secretary (of Transportation) to prescribe the loca-tion or routing of any pipeline facility. ” (emphasis ad-ded).

sInterview with officials of Algonquin Gas Transmis-sion Company in Boston, Mass., June 16, 1977.

before individual project decisions aremade. There are currently no nationalpolicies for LNG which could be used as abasis for consistent FPC decisions on thesesubjects. However, the policy void in whichthe FPC now operates may be filled by thenew Department of Energy.

Under the Department of Energy Organiza-tion Act,6 the FPC will be absorbed by a newfive member Federal Energy Regulatory Com-mission, which will be a semiautonomousbody in the Department of Energy.

In general, the change is an effort to strike abalance between maintaining independentregulation of energy and fitting such regula-tion into a policy framework which is respon-sive to the President. In part, the Act sets outthe following:

●

●

●

●

the Commission has jurisdiction overnatural gas prices and the granting ofcertificates of public convenience andnecessity;

the Secretary of Energy has respon-sibility for regulating imports and ex-ports of natural gas and for issuing cer-t i f icates of public convenience andnecessity for imports and exports;

the Sec re ta ry has the au thor i ty toe s t a b l i s h n a t u r a l g a s c u r t a i l m e n tpriorities, which are then implementedand enforced by the Commission; and

the Secretary may act as an intervener inthe Commission’s proceedings and mayset reasonable time limits for the comple-tion by the Commission of its rulemakingproceedings.

Currently, the relationship between theSecretary’s import approval and the Commis-sion’s certification function is unclear andneeds to be clarified. On the positive side,however, the Secretary’s authority over im-ports provides at least the institutional

6U. S. Congress, House, Department of EnergyOrganization Act, Conference Report 95-539 to Accom-pany S.826, 95th Congress, 1st session, 1977.


possibility that LNG decisions will be madein the framework of conscious policy choicesconcerning the role of LNG in the Nation’senergy mix, the acceptable level of imports,the preferred supplier countries, and trade-ofls between LNG and alternative domesticand imported fuels.

This policy framework has been lacking inthe present structure and is sorely needed.

Meanwhile, the FPC practice of makingcase-by-case decisions on such matters makesplanning difficult for the LNG industry or byopponents of any particular project. There isanother troublesome policy question: In re-cent decisions, the FPC has issued its ap-proval contingent upon receipt of all Stateand local approvals.7 These decisions raisedconcern among some industry representativesthat the FPC was abdicating its authority tolocal politicians.8

The issue here is one of Federal preemption.What if the FPC authorized a particular proj-ect and State authorities refuse to allow it?The Natural Gas Act provides for condemna-t ion of land for pipelines, but does notspecifically mention terminal facilities. Caselaw on the subject is limited and the questionhas never been decided directly by the courts(see appendix C). There is, however, a closeanalogy in the FPC’s jurisdiction over hy-droelectric facilities. There, the courts haveexpressly held that Federal jur isdict ionpreempts that of State authorities. g The Com-mission’s jur isdict ion over hydroelectr icfacilities comes from a different statute thanthe Natural Gas Act, but there is probably anequally strong or stronger argument to be

~Federal Power Commission, Trunkline LNG ConZ -pany and Trunkline Gas Company, Opinion No. 796,D o c k e t N o s . CP74- 138 , CP74-139, CP74-140(Washington, D. C.: Federal Power Commission, Apr.29, 1977.)

~Interview with officials of Algonquin Gas Transmis-sion Company in Boston, Mass., June 16, 1977.

gw~hington Departmen/ of Game v. FPC, 207 F.2d391 (9th Cir. 1953); FPC v. Oregon, 349 U.S. 435 (1955);City of Tacoma v. Taxpayers of Tacoma, 357 U.S. 320( 1957).

made in favor of Federal preemption innatural gas. The balance between State andFederal powers in one LNG peak shavingplant has been described by a U.S. Court ofAppeals in the Hackensack Meadowlandscase—“Although the States are not precludedfrom imposing reasonable restraints andrestr ict ions on interstate commerce, andalthough the authority to enact zoning ordi-nances under the State’s police power isclear. . . , it is equally settled that a State maynot exercise that police power where the neces-sary effect would be to place a substantialburden on interstate commerce.’ 10 However,the FPC’s recent action in the Trunkline caseclouds the matter considerably.

Another area of uncertainty is the questionwhether provisions of the Coastal ZoneManagement Act apply to the various permitswhich the Federal Government grants in con-nection with LNG. Under the Act, applicantsfor any Federal license or permit for an ac-tivity in the coastal zone of any State with anapproved coastal zone program are requiredto certify that their proposed project is consist-ent with the State’s program. The FederalGovernment is prohibited from issuing thelicense or permit until the State concurs orfails to act within 60 days or the Secretary ofCommerce makes a finding that the proposedproject is consistent with the overall objectivesof the Coastal Zone Management Act.11

There are two problems in this procedure asit relates to LNG: First, it is not entirely clearwhat kinds of authorizations are covered bythe terms “license or permit’ and, therefore,it is unclear if FPC certificates of publicconvenience and necessity would be in-cluded. Second, another provision of theCoastal Zone Management Act states that theAct is not to modify laws applicable toFederal agencies.

The FPC has announced its intention ofconducting a rulemaking on the Act, but has

1 ~Transcontinental Gas ~“pe Line Corp. V. Hacken -sack Meadowlands Development Commission, 464 F. 2d1358, 1362 (3d Cir. 1972), cert. denied, 409 U.S. 1118(1973).

1116 U.S.C. $$ 1451 et seq. (Supp. 1974).


not yet taken a position on what procedure itwill adopt.12

Time Required for Approval

To date, the first LNG import project ap-proved, the El Paso I project at Cove Point,Md., required 49 months to gain final FPCcertification. The recent Trunkline decisiontook 43 months; the Pacific-Indonesia deci-sion, which is still subject to review, has taken44 months. However, the FPC has adopted anaccelerated schedule for the El Paso II projectand anticipates that the procedures will re-quire only 9 months. Meanwhile, the longprocess coupled with the uncertainties suchas what type of pricing scheme will be im-posed as a condition of the final certificate,make it difficult for U.S. firms to competesuccessfully with foreign countries whichare capable of making faster decisions(figure 33). The problem, however, lies notonly with the FPC, but in the fact that thedecisionmaking process in private industry inwhich long-range commitments are madeearly on is not compatible with the lengthy,sometimes unpredictable, Government proc-ess.

For example, before an LNG companymakes application for Federal permits, com-mitments have been made for an LNG supply

1 ~Interviews with FPC staff counsel, on May 31,1977.

from abroad, for acquisition of the land, andfor construction of the tankers which willcarry LNG to the United States. 13 It is notdifficult to understand that such early com-mitments may not always be approved or becompatible with plans which are approved.

Much of the time used up by FPC is ex-hausted dealing with generic policy issueswhich could, and should, be decided in ad-vance so that individual applications couldmove through a well-defined series of decisionpoints. As noted earlier, there is the potentialfor considerable improvement in the timeschedule for decisionmaking under the newDepartment of Energy.

Some citizens who joined in the OTA publicparticipation program expressed concern thatthe United States could lose needed suppliesof foreign gas if Government processes are notcoordinated and expedited. However, othersexpressed conce rn tha t any a t t empt tostreamline procedures may result in fewer op-portunities for the public to be involved.There was strong support in all segments—thegas industry and related businesses, State andloca l government s , and pub l i c in t e re s tgroups—for increased effort to make LNG ap-proval procedures more open to those who areconcerned.

laln&rVieWS with officials of Distrigas Inc., 130stm,Mass., June 15, 1977.

Figure 33- Procedure for FPC Certificate of Public Convenience and Necessity

FPC determines major NBS DEIS Comments FEIS— — — —Federal action: cryogenics prepared and received prepared

EIS required review distributed .

Application by Application Hearing: Hearing: staff,company to FPC reviewed Applicant’s case . . answering case

I r r 9 v rAdministrative law Exceptions by party Commissioner’s Final FPC Applicant may Applicant may appeal— - —

judge’s initial or staff review, decision petition FPC to a U.S. Courtdecision if any if any 4 for rehearing of Appeals

h

Source OTA.

CH. 11 – CRITICAL REVIEW OF COMPONENTS OF LNC IMPORT SYSTEM 57

Financial Diffiulties

The financial problems caused by the cum-bersome approval procedure are on twolevels: first, the lengthy process allows con-siderable cost escalation to occur resulting ina higher cost to the ultimate consumer; sec-ond, both the applicant and interveners whomay oppose the applicant must invest con-siderable sums of money in the project prior toapproval or rejection by the FPC.

The cost escalation which most routinelyoccurs is in the contract price paid to the sup-plier of the LNG. For example, in the case ofthe recently abandoned Eascogas project, con-tract price of the LNG rose form 44.75 centsper thousand cubic feet to $1.32 per thousandcubic feet as it was necessary to renegotiatethe contracts during the 5 years in which theapplication was pending.14

In addition, industry claims a $5 million to$8 million investment in paperwork is neces-sary to get an import project moving throughthe approvals process.15 These early costs are,of course, ultimately borne by the consumer.

The process is equally as expensive formembers of the public who may wish to par-ticipate in the FPC process. In theory, theright to participate as an intervener at FPCproceedings is one of the most direct and effec-tive public participation mechanisms in theexecutive branch. It is a formal opportunityfor all interested parties to participate in thedecisionmaking process. In actual practice,however, participation is limited to groupswith sufficient finances and expertise toclosely and continuously monitor FPC pro-ceedings. This generally means that gas com-panies and State utility commissions are ableto participate effectively, but other groupswhich are affected by FPC decisions, such asenvironmental and consumer groups, havenot been able to participate extensively.

One of the major expenses facing groupswhich wish to participate as interveners is

141 nterview with officials o f Algonquin GasTransmission Company in Boston, Mass., June 16, 1977.

151 nterv ie w with of fi ci a 1s o f A 1 go n qu i n GasTransmission Company in Boston, Mass., June 16, 1977.

legal fees. Although representation by an at-torney is not strictly required by Commissionrules, the complexities of the quasi-judicialp roceed ings make a l awyer a p rac t i ca lnecessity. Even at the reduced rates offered bypublic interest law firms, legal services for anaverage 20-day hearing would be approx-imately $25,000.16

Information and Opportunities forParticipation

Adequate information about applicationsand FPC proceedings are necessary for effec-tive participation in the decisionmaking proc-ess, However, the specialized nature of thesubject and the quasi-judicial practices ofFPC are a major deterrent to public involve-ment. Moreover, FPC, like most other Govern-ment agencies, relies on the Federal Registeras its means of providing notice of applica-tions and proceedings to the public. There islittle, if any, effort to encourage participationfrom a broad range of groups which maybe in-terested in the proceedings or affected by theproject.

In practice, the public input into OPSO andCoast Guard regulations appears to be lesslimited, and both agencies mail announce-ments to a list of interested parties in additionto publishing such announcements in theFederal Register. These actions are takenunder the Administrative Procedure Act, andregulations which provide an opportunity forpublic hearings if the agencies deem them tobe necessary.l7 Both OPSO and the CoastGuard also have technical advisory commit-tees, although membership in these groups isgenerally limited to people with backgroundsin appropriate gas-related fields. Except for asubtask force of the Natural Gas Survey, theFPC has no advisory committee directly re-lated to LNG.

IGBased on interview with an attorney in a public in-terest law firm. The figure includes 20 days of prepara-tion and 20 days of hearings at a rate of $40 an hourplus other costs.

1T33 C.F.R. $ 1.05 (1976) and 49 C.F.R. $$ 102.13,102.15 (1975).



SAFETY RESEARCH ON LNG FACILITIES

Research to de te rmine whe ther LNGfacilities are safe for the public involves:

● postulating a “worst case” scenario;

“ estimating the extent of a vapor cloud,which is a central key event of any LNGdisaster scenario; and

c estimating the probability of other eventso c c u r r i n g a n d t h e i r c o n s e q u e n c e s(through fault tree and risk analysis).

Making sense of the LNG facility safetyquestion requires examination of each of thesesubissues.

Scenarios

Postulating an LNG disaster scenario isclearly an almost limitless task. There arecountless combinations of events which couldlead to an accident. Of necessity, then, LNGsafety researchers have simplified the task. Itmust be questioned, however, whether in theprocess of simplifying, important possibilitiesfor faults have been overlooked, thereby lead-ing to overly optimistic or pessimistic results.Since there has been little worldwide ex-perience with shipping LNG, compared to theshipping of other cargoes, the historical recordis scant and statistical evidence is limited.The creation of LNG disaster scenarios is,therefore, a somewhat subjective undertakingwhich is vulnerable to the biases of individualanalysts.

The use of disaster scenarios to search forpossible faults in a system is a useful analyti-cal approach. But to infer, as most LNGsafety reports do, however inadvertently,that all the important possibilities havebeen “covered” may be shortsighted. Areview of the investigation of past disasters ofother types shows how “failure paths’ can beoverlooked or summarily dismissed. This wastrue of NASA catastrophes, such as the deathof three astronauts in the Apollo program,

and of public works projects, such as thefailure of the Teton Dam in Idaho.

Vapor Cloud Research

Researchers differ in their findings aboutthe behavior of a LNG vapor cloud as it dis-perses into the atmosphere after a spill onwater. From a safety perspective, the key issueis how far and how broadly a vapor cloudtravels. Estimated distances vary from lessthan 1 mile to more than 50 miles.1 Some haveargued that these differences indicate the needfor more investigation and more research.

However, combined past research is in-conclusive because researchers usedifferent initial assumptions about a spill,have different concepts about how the vaporcloud would behave, and different in-terpretations of data which is available.Further research could resolve only some ofthese differences.

DIFFERENT ASSUMPTIONS.-One ofthe reasons research results differ is thatdifferent weather conditions are assumed forthe time of the spill. To some extent themeteorological research community has triedto standardize assumptions about weathercondit ions by using commonly acceptedclassifications of weather states. There are,however, several classification schemes in use.

Furthermore, some researchers use “worstcase’ (stable) weather conditions while othersargue that such assumptions are pointlessbecause an LNG tanker would not enter aharbor under these conditions because theyonly occur at night.

IU. S. Depart,rnent of Transportation, U.S. CoastGuard, Predictability of LNG Vapor Dispersion fromCatastrophic Spills on Water: An Assessment(Washington, D. C.: U.S. Department of Transportation,April 1977).

CH. II – CRITICAL REVIEW OF COMPONENTS OF LNC IMPORT SYSTEM 59

Further research will not resolve thesetypes of differences in initial assumptions.

CONCEPTS.—Fur ther research couldhowever, minimize the differences in concep-tual approaches used in LNG models.

For example, some researchers assumeLNG is vaporizing from a single spot; othersassume that the source is a line or an area.Some researchers visualize a vapor cloud as acontinuous plume; others see it as a series ofpuffs. All of these different visualizations leadto different mathematical representations inthe models and to different equations andresults.

INTERPRETATION OF DATA.—Furtherexperiments could also develop data whichwould help resolve differences in interpreta-tion of raw data that is now available. For ex-ample, it has been shown that an LNG cloudis flammable only when the concentration ofnatural gas is between 5 and 15 percent.

Therefore, because there is a lack of dataon large spills, researchers must make an edu-cated guess about the maximum distancedownwind a vapor cloud could still containpockets of gas sufficiently concentrated to beflammable. This question bears directly onthe issue of how far a plume must travelbefore it is unignitible. More data fromfurther experiments could possibly answerthis question with greater certainty than pres-ently exists.

Most LNG researchers would like to seefurther experiments undertaken. But untilthere can be some agreement in theassumptions to be used in such experi-ments, and until there is some faith that theassumption are realistic, such investiga-tions cannot be useful for public policy-making.

Estimating the Risk to the Public

Fault-tree analysis and risk analysis havebeen applied successfully to equipmentsystems which have been in use over an ex-tended period of time and for which there ex-ists a firm data base of failure and repair

records. In these situations, the techniquesenable the risk analyst to determine withsome confidence the probability that specificcomponents will fail. In innovative situations,however, risk is less amendable to this kind ofanalysis.

One reliability/safety analyst with 11 yearsexperience in the aerospace industry describedin testimony before the FPC how, in the late1950’s, the aerospace industry was quite op-timistic about risk-assessment methodology.But he points out:

This optimism was soon dispelled byhundreds of cases of unexpected test andoperational failures and thousands of systemmalfunctions. Many of the failures and mal-functions modes had either been previouslyanalyzed and seemed to be noncredible eventsor had come as a complete surprise which pre-vious analyses had not identified at all. Bythe early 1960’s, it had become apparent thatthe traditional method of identifying poten-tial failure events and assigning historicalprobabilities of occurrence to these events, aswas done in the Little and Homer reports(Little was consultant to an LNG applicantbefore the FPC, Homer was a consultant toFPC) had consistently led to overly optimisticconclusions. Consequently, the failure rateswere consistently underestimated. 2

The risk assessment issue is also one of con-tention between the Department of Transpor-tation agencies (U.S. Coast Guard and OPSO)and the FPC.

In his initial decision on the application byPac Indonesia LNG Company and WesternLNG Terminal Associates to import LNG toOxnard, Calif . , FPC Administrat ive LawJudge Samuel Gordon supported his opinionon LNG safety by citing the risk-assessmentstatistics of the applicants’ consultant.

The analysis shows that under the worst case,the highest fatality probability is one chancein 6.7 million per person per year within five-eighths of a mile of the site, decreasing to

~Federal Power Commission, Testimony of WilliamBryon before the Federal Power Commission in the ap-plication of Eascogas LNG, Inc., and Distrigas Corp.,Docket Nos. CP73-47, and CP73-132, 1976.


probabilities of one chance in 10 million perperson per year or less within 1 mile of the siteand to one chance in 1 billion to 10 billionper person per year or less beyond 3 miles ofthe site. The probability of one occurrence is113,000 with a probability of one chance in710 septendecillion (710 followed by 54 zeros)per years

In contrast, a DOT study on LNG took an op-posite position regarding the applicability riskanalysis:

Several approaches may be taken in theanalysis of potential system failures and theconsequent risk. A statistical estimate of riskcan be made if enough years of experiencewith the system are available. Unfortunately,the total operating experience of the LNG in-dustry is not sufficient to demonstrate thatrisk levels are acceptably low on a purelystatistical basis. For example, to assure thatthe risk of any fatality from an LNG facility isat a level of less than 10–5/year (equivalent tothe risks associated with machinery) wouldrequire a statistical data base of about500,000 plant-years of operation without ma-jor accident causing a fatality beyond theplant boundaries. Even with major growth inthe LNG industry, experience accumulatedthrough the next decade will be about two or-ders of magnitude below that required toassure a risk level of 1 -5 fatality/year bystatistical data. Therefore, a statistical ap-proach is not sufficient to quantify LNGfacility risks.4

Accordingly, OPSO and the Coast Guard donot use risk analysis in consideration of LNGoperations.

It appears that fault-tree analysis and riskanalysis are useful management techniques toidentify “trouble spots’ in a complex systemso that preventive measures can be taken(figure 34). It is also useful for comparing onekind of a risk against another where a choice

:~Federa] power commission, Initial Decision Of Ad-ministrative Law Judge Samuel Gordon on Applicationof Pacific Indonesia LNG Company and Western LNGTerminal Associatesj Docket Nos. CP74-207 andCP75-83, Washington, D. C., July 22, 1977, p. 118-119.

AArthur D. Little, Inc., Technology and Current prac-tices for Processing, Transferring and Storing LiquefiedNatural Gas, (Cambridge, Mass.: Arthur D. Little, Inc.,December 1974).

is to be made between types of equipment orprocedures. Even in these app l i ca t ionshowever, a reliable data base and historicalrecord of performance are important. As pres-ently applied by the FPC, the use of fault-tree analysis and risk analysis to determinewhether LNG facilities are safe is mostquestionable; worst of all such inappropri-ate use of the research techniques leads to afalse sense of knowledge about the possiblerisks.

Value of Further Research

Research on the behavior of LNG spills andthe possible consequences of spill accidentshas been conducted over the past 10 years byvarious Federal agencies and private industrygroups. Recent Federal efforts have been pri-marily sponsored by the Coast Guard whohave an annual budget of about $1 milliondesignated for LNG safety researches Thesee f fo r t s have inc luded exper imen t s andanalyses on many of the same subjects thatare now being suggested by ERDA for muchexpanded research programs, ie: LNG vaporgeneration and dispersion; fire prediction andcontrol; and, explosive characteristics. G

The most recent spill tests have been con-ducted at the Naval Weapons Center at ChinaLake, Calif., and have been jointly sponsoredby the American Gas Association (AGA). TThese have included vapor-cloud ignitiontests, pool-ignition tests, and explosion tests.The vapor and pool igni t ion tests haveresulted in data on evaporation rates, down-wind vapor concentration, flame propagation,and radiation characteristics. The explosiontests have been exploring the applicability ofsuch theories as dynamic self-mixing, whichhas been applied to recent weapons develop-ment and has been used to explain largevariations in the energy yield from volcanic

~Conversation with staff of U.S. Coast Guard,Washington, D. C., Mar. 18, 1977.

Csummary of Workshop Recommendations on LNGSafety and Control (n.p.: Energy Research and Develop-ment Administration, Dec. 15-16, 1976).

~R.V. DeVore and L.A. Sarkes, LNG ResearchPrograms (n.p.: American Gas Association, Jan. 3,1977).


Figure 34. Typical Fault Tree for Leak Which Is Not Isolated

Source Western LNG Terminal Co

explosions. If such theories do apply, it is con- about $50 million, making it the largest LNGsidered possible that an unconfined LNGvapor cloud could be detonated. However, inall tests to date, no detonation of LNG cloudshas been accomplished and efforts to detonateusing explosive triggers have resulted in igni-tion and burning of the cloud but not explo-sion.

Some researchers believe that further testsare necessary to demonstrate that an uncon-

resea rch p rogram ever under taken . Theresearch design is still in the formative stagesand it has not yet been determined how manyexperiments will be conducted, how large theywill be, and whether they will be on land orwater.

There are three critical questions about thisproposed research and any large-scale, long-range research which may be considered:

fined LNG cloud will not detonate.●

At the present time, the Energy Researchand Development Administrat ion is ten-tatively planning to conduct and study over aperiod of more than 5 years several majorspills of LNG. The project is expected to cost

F E A S I B I L I T Y : I s i t p o s s i b l e t oeconomically and safely transport largequantities of LNG to a test site, to set uprel iable monitoring equipment, andgenerally to set off a large LNG firewhich is both measurable and safe?


● VALIDITY: How valid will the resultsbe from just one experiment or a smallseries of experiments? Unless a largeenough number of spills are conducted,the arguments resulting from interpreta-tion of a data base which is inadequatewill continue.

● TIMELINESS: How t imely wi l l theresults of this research be 5 or more yearsfrom now? How many significant LNGpolicy decisions will still remain to beresolved?

Past research has produced conflictingresults and predictions, and it is unlikely thatthe United States can afford the time andmoney to conduct enough research to resolvethe differences and come to firm decisionsabout the safety and behavior of LNG. F o rthis reason, decisions about LNG systemsshould be made on the basis of nonquan -titative approaches which result in prudentsiting criteria and strict design, construc-tion and operation standards. Existingresearch techniques should be used to identifypotentially dangerous elements in the overallsystem so that specific research can be under-taken to find ways of improving the safety ofthose elements.

Many of these specific types of researchwere called for by those who joined the OTApublic participation program during the LNGassessment. These suggestions included:

●

●

●

●

●

site planning research to develop a na-t ionwide s i t i ng p l an and e s t ab l i shspecific siting criteria;

an independent detailed analysis of theLNG system to specifically identify thesafety issues involved;

further investigation to determine themost efficient methods of handling LNGfires, to assess the possible impacts ofsuch fires, and to establish procedures forcoordinating and mobilizing local fire-fighting efforts and evacuating neighbor-ing areas;

a study of the capabilities and equipmentof agencies responsible for inspection ofLNG tankers and facilities; and

an analysis of the decisionmaking proc-ess for LNG project applications so thatbetter procedures can be established toguarantee that the public will be able toexpress its concerns about the safety offacilities.



LNG FACILITY SITING

One of the most controversial aspects re-lated to LNG is the location of major importterminals, storage facilities, and regasificationplants.

Siting is closely related to safety or to thepublic’s perception of the safety of facilities.Environmental, land-use, and aesthetic con-siderations are also important.

There is currently no operating experiencewith major baseload import terminals in theUnited States and only limited experience inL N G s h i p p i n g t h r o u g h o u t t h e w o r l d .Researchers, therefore, do not have sufficientdata on which to predict with any degree ofaccuracy the likelihood that a major LNGspill will occur, how the spilled liquid andresulting vapors will behave, and what wouldbe the impacts of a spill. Since little is known,some citizens are fighting LNG facilities andhave urged that the facilities, if needed at all,be located at the sites which are remote fromdense population centers.

The principal questions of the siting con-troversy are:

“ Who should establish siting criteria?

● What criteria should be considered in ap-proving an LNG site?

● What is a “remote site?”

Who should establish siting criteria?

Site selection is currently undertaken solelyby the company or consortium proposing anLNG import project for approval. The con-siderations which lead to a final selection aretechnical and economic ones. The FederalGovernment’s role is strictly reactive, in thatit can approve or disapprove sites proposed byindustry but does not tell industry in advancewhere it may or may not locate.

In addition, the Federal process is notdesigned to encourage local participation

in consideration of industry’s proposed site.The lack of such participation has been iden-tified as a serious concern of most of the publicinterest groups contacted during this study.

The lack of any standards, which proposedsites must meet, has led many groups to sug-gest that specific siting criteria be established.It seems possible either that a standard sitescreening process could be established by theFederal Government or that a set of uniformsiting criteria could be developed.

There are differing views on the ad-visability of establishing such criteria on aFederal level: The American Gas Associationhas stated that each site is unique and mustbe treated on its own merits, while some repre-sentatives of public interest groups havestated that a national LNG siting policy isneeded to address safety and siting concerns.

D u r i n g O T A ’ s p u b l i c p a r t i c i p a t i o nprogram, the one concern most often voicedabout siting criteria was that the publicshould be involved to the maximum extentpossible in establishing such criteria. Groupsalso said they felt more public participationwould be necessary in permit processes ordecisionmaking procedures set in place byadoption of siting criteria.

Currently, three Federal agencies havesome bearing on site selection: FPC, OPSO,and

●

●

the Coast Guard.

The FPC, which ultimately approves ordisapproves a site, was asked by agroup of Eastern States in May 1976, toestablish siting criteria, but so far hastaken no such action.

The Office of Pipeline Safety Operations,which is responsible for the safety o ffacilities and pipelines involved in inter-state transportation of natural gas, hasproposed regulations which will impacton site selection primarily by mandatingthe size of a buffer zone to protect sur-

—


rounding areas from the heat of a fire atthe storage tanks and from the vaporcloud which might form as a, result of atank rupture.1

Since the LNG terminal operator wouldhave little control over property utilizationoutside his own property line, the result ofthe OPSO proposals is to require that theterminal and storage tanks be located on alarge piece of property owned by the LNGcompany. Under the proposed regulations, athermal exclusion zone would require thatstorage tank dikes be about one-half mileaway from humans in any public area. In ad-dition, there is a requirement for a vapor dis-persion zone, which is the area necessary forvapor from an instantaneous spill of an LNGtank to dissipate to the point where gas con-centration in the cloud is less than 2 percent.Depending on the size of the LNG tanks andthe design of the dikes surrounding them, thatarea could range from 1,000 to 12,000 acresunder the proposed regulations. z The alterna-tive offered in the proposed regulations is a re-dundant automatic ignition system, whichwould set a spill afire and contain the heat inthe one-half mile thermal exclusion zone.

. The Coast Guard has an indirect in-fluence on site selection by exercising itsa) responsibility to determine if ships willbe permitted access to a proposed site,and b) its responsibility to advise all con-cerned parties of operational constraintsand safety criteria which would be ap-plied to the marine portions of the projectif it is approved.

The Coast Guard assessment of marinetransportation and safety aspects of a pro-posed project is made informally, either at the

IU. S. Department of Transportation, office ofPipeline Safety Operations, “Liquefied Natural GasFacilities (LNG); Federal Safety Standards,” FederalRegister 42, no. 77, Apr. 21, 1977, 20776-20800.

Zwesson & Associates, Inc., Compilation of Data onWesson & Associates, Inc. Key Personnel, Major Ex-periences in LNG Technology—Safety—Fire Protection,Industrial LNG R“re Training School and Comparisonof NFPA No. 59A with the Proposed OPSO LNGFacility Federal Safety Regulations, (Norman, Okla,:Wesson & Associates, Inc., 1977.

request of an applicant before FPC proceed-ings begin or in response to the environmentalimpact statement prepared by the FPC. Theanalysis considers such things as the depthand width of the channels to be used by LNGships, the necessity of dredging, the adequacyof surveys and charts, and the density andloca t ion o f o the r wa te rborne ac t iv i ty .However, the Coast Guard has no specificcriteria to use in evaluating each of theseareas or specific standards which proposedsites must meet. 3

Obviously, if there are to be Federal sitingcriteria, the expertise of these three Federalagencies should be combined and a single setof regulations formulated. However, it is notclear that these criteria should, in fact, be setat the Federal level. The selection of accepta-ble sites for LNG facilities will involve manytradeoffs between environmental preserva-tion, economics, and safety which can possiblybest be made at the State and local level.

One possible mechanism for combininglocal preferences with the national interest isalready in place. That is the Coastal ZoneManagement Act. The Act charges coastalStates with formulating land-use and sitingplans for coastal areas in exchange forFederal funds for planning, implementation,and impact compensation. It requires thatfacilities which require Federal licenses andpermits comply with the State plan unlessspecifically exempted by the Secretary of Com-merce. 4

While the Act itself is still the center ofsome controversy and has yet to prove itself asa management tool, the Act could provide aframework in which to consider sites for LNGterminals and other energy facilities.

What criteria should be considered?

Distance and population density should notbe the only criteria for siting LNG facilities.Many other factors also affect the safety and

3Conversation with staff of U,SO Coast G u a r d ,Washington, D. C., Aug. 15, 1977.

coastal Zone Management Act of 1972, 16 U.S.C. ##1461 et seq (Supp, 1972).

CH. 11 – CRITICAL REVIEW OF COMPONENTS OF LNG IMPORT SYSTEM 65

acceptability of a site, and it is possible that insome aspects, such as availability of firefight-ing equipment, nearness to distribution lines,and ease of access, remote siting may be adrawback,

One list of such factors is included in analternative site study conducted for the FPCduring preparation of the environmental im-pact s tatement for the Tenneco AtlanticPipeline Company (TAPCO) application tobuild a 495-mile pipeline to New York from anLNG terminal in New Brunswick. s In thisstudy, a large section of the northeast coastwas screened for oceanographic, bathymetric,navigational, and land-use conditions whichwould identify potential LNG terminal sites.The potential sites were then evaluated inrelation to other land uses, other shipping ac-tivities, safety, the consequences of accidents,the possibility of system outages, environmen-tal impact, and economic cost.

I f t h e F e d e r a l G o v e r n m e n t w e r e t oestablish siting criteria, an approach in threeparts would probably be desirable. The firstwould cover very minimum standards that ev-ery site of a certain capacity would have tomeet, the second would involve nationalstrategic planning, and the third would bespecific site evaluation based on establishedguidelines.

Minimum standards could cover:

1)

2 )

3 )

4 )

Property dimension and distance fromstorage tanks or ship terminals to prop-erty lines;

Conditions of harbor entrances, ship-p i n g c h a n n e l s , t u r n i n g b a s i n s ,anchorages, and tanker berths;

Relations to other marine and land-useactivities in the region, including im-pacts on natural resource values; and

Presence of unusual hazards or relatedhazardous operations in the region.

~Resource Planning Associates, Inc., Alternative SiteStudy, Northeast Coast Liquefied Natural Gas Conver-sion Facility (Cambridge, Mass.: Resource PlanningAssociates, July 1977).

The Federal Government could prepare na-tional plans for future LNG import projectsbased on:

1)

2)

3)

In

the existing gas pipeline networks andprojected demand;

the projected domestic supply of gas tothese pipelines; and

the possible foreign countries with ex-cess gas to export.

this way an accurate number of futureprojects could be forecasted. The AmericanGas Association has stated that less than 1 0additional LNG import terminals will be re-quired, but logical locations and relativeneeds for these terminals have not beenes tab l i shed . Fo l lowing a na t iona l p l an ,evaluation of various possible sites or projectscould be established ut i l izing guidelinescovering such items as:

1)

2)

3)

4)

5)

6)

7)

8)

Location of s i tes relat ive to densepopulation centers and other land-useconflicts with terminal activities andconsideration of specific safety hazards.

Location of terminal relative to othership traffic and existence of specialtraffic control.

Local benefits of the specific industrybase and possible satellite development.

Possible degradation of natural areasor residential areas due to establishingadded industrial activities,

Location of populated areas exposed tospecific accident scenario at a terminal.

Presence of specific external factorswhich may lead to accidents such assevere weather, active seismic zones,nearby airports, etc.

Availability of equipment and methodsto control effects of accidents, such asfirefighting equipment and emergenc y

contingency planning.

Use of accident-prevention measuressuch as monitoring and inspection offacilities or operation, training of per-sonnel, and control of shipping traffic.


A number o f c i t i zen g roups say tha toffshore LNG terminals may be preferablefrom the standpoint of safety and land-useissues.

Technology for offshore LNG terminals,pa r t i cu la r ly moor ing sys tems , t r ans fe rsystems, cryogenic pipelines, and large storagetanks requires more detailed evaluation anddevelopment. Standards for this technologyare not developed and the environmental,economic, and technical tradeoffs have notbeen evaluated. Offshore systems needdetailed technical analysis and testingbefore they can be considered viable alter-natives to onshore sites.

What is remote?

Remote is not a definitive term; and eventhose who argue for remote siting of LNGfacilities disagree on what they mean by theterm. It generally implies a combination ofdistance and low-population density.

The unresolved question of what distancefrom population centers would be acceptableis related to the unresolved questions of howfar and how fast an LNG vapor cloud from amajor spill would disperse and what wouldhappen if the cloud were ignited.

Research models have made a variety ofpredictions for the distance the cloud wouldtravel following the largest possible spill onwater and assuming the vapors would not ig-nite initially. The predictions ranging from 1mile to more than 50 miles (figure 35).

An equally wide variety of distances havebeen suggested by parties interested in theLNG siting issue, suggesting that facilities belocated between 1 to 25 miles away frompopulated areas.

There are currently no Federal require-ments for remote siting, but proposed OPSOregulations could, if adopted in present form,

make it necessary that some facilities be asmuch as 7 miles from populated areas.6

One piece of legislation which appears todefine “remote” is the proposed CaliforniaSiting Act. It specifies that an LNG site meetthe following criteria:

s Within a radius of 1 mile of the site andthe area within which maintenance andoperation of the facility will occur, noperson resides or works, other than per-sons who would be employed at thefacility or at associated facilities thatmake substantial use of byproducts ofLNG processing, such as facilities thatutilize waste cold.

Figure 35. Distances a Vapor Cloud May Travel

Maximum Downwind Distance to 5 Percont Concentration Level Following25,000 Cubic Meter Instantaneous Spill Of LNG onfo Water

—Model Distance (Miles)

——

U S B u r e a u o f M i n e s 252-50.3*American Petroleum Institute 5 2Cabot Corporation 11.5U S Coast Guard CHRIS 16.3**Professor James Fay 17 4**Federal Power Commission 0 7 5Science Applications, Inc 1.2***

/

———-

Note Assumes 5 mph wind except as noted and meteorological condi-tions considered applicable by investigating groups

● A range was presented to indicate uncertainty in vapor evolution rate

● *Wind velocity not considered explicitly m model

● ● ● For 37,500 cubic meter instantaneous release,wind velocity = 6.7mph

Source U S Coast Guard

6Wesson & Associates, Inc., Compilation of Data onWesson & Associates, Inc., Key Personnel, Major Ex-periences in LNG Technology—Safety—lTre Protection,Industrial LNG Fire Training School and Comparisonof NFPA No. 59A with the Proposed OPSO LNGFacility Federal Safety Regulations, (Norman, Olda.:Wesson & Associates, Inc., 1977.


Within a radius of 6 miles of the site andthe area within which maintenance andoperation of the facility will occur, thereexists no residential or working, or bothpopulation that exceeds 60 persons oc-cupying an area of 1 square mile, exclud-ing persons who would be employed atthe facility or such associated facilities.

radial distances specified in the sectionat any time.7

Although “remoteness’ (distance andpopulation) is the siting criteria most oftenpublicly mentioned it is not the only factorwhich should be considered, as has been dis-cussed in the preceding pages.

The si te is so located that no shiptransporting LNG will pass within the

TCa]ifornia Assembly, Siting of Liquefied NaturatGas Facilities, No. AB220, 1977-78 Regular Session,Jan. 17, 1977.



LIABILITY FOR LNG ACCIDENTS

The liability issue is extremely complicatedand the law concerning it is far from clear. Itseems possible, however, that the mostserious form of LNG accident, a ship acci -dent, could leave injured parties with littleor no effective compensation. Preliminary in-vestigations indicate that the liability ques-tion is clouded by three areas of uncertainty:

“ the extent to which maritime law wouldgovern various possible accidents;

● the uncertainty within the maritime areaas to how far the States can go in exercis-ing jurisdiction concurrently with theFederal Government; and

● the variety of State laws that would ap-ply in instances where nonmaritime lawapplies.

This is not to say that compensation fordamage done in an LNG accident woulddefinitely not be forthcoming; however, thatpossibility does exist. Therefore, this is an ex-cellent area for more indepth analysis.

Maritime law

The most commonly discussed LNG acci-dent scenario starts with a ship collision, andmaritime law is, therefore, called into play.The most important consequences of maritimelaw is that, under the Shipowner’s Limitationof Liability Act, a vessel owner’s liability for“any act, matter, or thing, loss, damage, orforfeiture, done, occasioned or incurred, with-out the privity or knowledge of such owner’ islimited to the value of the vessel after the acci-dental An exception is made for loss of life orbodily injury, in which case liability is limitedto $60 per ton of the vessel.2 The judicial con-struction of the terms “privity or knowledge’has been expanded so as to limit the numberof petitions for limitation which are suc-

146 L1. s.c. $ 183 (a) ( 1970).~Ibid. $183 (b).

cessful; nevertheless, the law remains on thebooks.

A difficult question would be posed if a fireoriginated onboard an LNG ship and spreadto a surrounding harbor (or a vapor cloudfrom the ship spread over the nearby landarea and subsequently ignites). That is: wouldthe Limitation of Liability Act apply, since theaccident originated with the ship? Anotherprovision of the shipping laws, the AdmiraltyExtension Act of 1948, seems to indicate thatit would, in that admiralty jurisdiction is toextend to all injuries “caused by a vessel . . .notwithstanding that such damage or injurybe done or consummated on land.”3

Since this Act was passed in 1948,4 it isdoubtful that Congress had in mind the poten-tial disasters which could conceivably becaused by LNG vessels. Furthermore, thecharterer of a vessel may be deemed to be theowner in certain specific cases and thus reapthe same benefits of liability limitation.5

The situation is further complicated by thecomplex patterns of vessel ownership whichhave evolved in the past 30 years. It is custom-ary for a vessel to be owned by a special cor-poration which has no other assets besidesthat vessel (i.e., if a fleet owner has six ships,each one will be “owned’ by a separate cor-poration). Although in maritime law a claim-ant can attach a vessel until all claims relat-ing to it are settled (presumably bringing forththe true owners), in the case of an accidentwhere the ship is lost there is obviouslynothing to attach. Furthermore, the corpo-rate-shell device frustrates any action againstthe owner, since without the ship the owner-

346 LJ, S,C. $ 740 ( 1970).@rant Gilmore and Charles L. Black, Jr., The Law

of the Admiralty, 2d ed. (Minneola, N. Y.: FoundationPress, Inc., 1975), p. 523.

~If the charterer “Mans, victuals, and navigates suchvessel at his own expense’ he is deemed to be the ownerfor liability purposes. 46 U.S.C. $ 186 (1970).


corporation has no assets beyond its insurancecoverage and any judgment against it wouldbe correspondingly limited.

State versus Federal jurisdiction

To complicate matters still further, therehas been considerable confusion recently as tothe extent to which the States may exercisejurisdiction concurrently with the FederalGovernment regarding maritime activities. A1973 Supreme Court decision refused to strikedown as unconstitutional a Florida statutewhich set stricter State liability limits thanFederal law for oil spills from tankers,6 and aWashington law banning supertankers fromPuget Sound will be reviewed by the SupremeCourt during the fall term of 1977.7 State-Federal jurisdiction in the maritime area istherefore in a state of flux.

Since New York already has an LNG billwhich could be interpreted as providing forstrict liability for LNG tanker owners forany accident occurring in port, 8 andCalifornia is currently working on an LNGbill, the ambiguity of State-Federaljurisdiction in the maritime area may cometo plague LNG as well as oil.

Land-based liability

It seems relatively clear that if an acci-dent which did not involve a ship occurredat an LNG terminal the law of the State inwhich the terminal was located wouldgovern the terminal owner’s liability. Thekey legal problem is whether there would bestrict liability or whether a showing ofnegligence would be required. At least oneState, New York, has adopted a statute forLNG which provided for strict liability, andthis is an area where Congress could legislate,

~Askew v. The American Waterujays Operators, Inc.,411 U.S. 325 (1973).

may v. Atlantic Richfield Company, No. 76-930, asreported in the New York Times, Mar, 1, 1977, p. 16.

Welephone interview with staff of New York StateAssembly Services, Aug. 15, 1977.

based on i ts powers over interstate andforeign commerce.

In the absence of statute, case law wouldgovern. At a cursory look, there would not ap-pear to be any uniformly applied analogy toLNG; there are cases where the storage offlammable liquids in proximity to populationor property has been held to be an abnormallydangerous activity requiring strict liability,while the same activity in a wilderness or lessobviously dangerous setting has not requiredsuch liability.9 A more definite statement onland-based liability would require a closerlook at the law in each of the States con-cerned. However, even where gas companieshave liability insurance such insurance comesinto play only after the company’s liabilityhas been proven.

Staff Working Paper No. 1

In November 1976, Senate Commerce Com-mittee staff prepared a draft bill on LNG,Staff Working Paper No.1. 10 In addition toproviding for an LNG damages fund to helppay compensation in the event of an LNG acci-dent, the draft bill also provided for strictliability for both terminal and vessel ownersand ope ra to r s up to a spec i f i ed do l l a ramount.11 The fund would be used to pay forclaims which exceeded the set liability limits.

The American Gas Association (AGA) sup-ported the LNG damages fund in principle,although it considered the version in the draftbill “impractical.” Strict liability was opposedby AGA, viewing it as “not consistent with therisks of LNG operations. ’12

Representatives from both the gas indus-try and public interest groups which joined

gWilliam L. Presser, Handbook of the La U* ofl%rts,4th cd., (St. Paul, Minn.,: West Publishing Co.,1971).

1 [)Staff Working Paper No. 1, Nov. 12, 1976.1 IIn the case of vessels, $75 million or $1,000 per ton,

whichever is less; in the case of terminals, an upper limitof $100 million.

1 ILetter from AGA president George H. Lawrence ‘0

Sen. Warren G. Magnuson, Feb. 2, 1977.

9 6 . 5 9 7 0 - 7 7 - 6


in OTA public participation programcited liability as a serious problem. Manysaid that terminal owners cannot buy liabilityinsurance beyond $100 million and saw aneed for either a liability fund financed by atax on LNG sales or for legislation which pro-vides for coverage of possible disasters such asthat now in effect for nuclear powerplants.

Some members of the LNG industry havestressed that LNG systems should not betreated any differently in matters of liabilityand insurance than traditional commercialactivities, especially shipping activities. And,

in fact, the problems of liability and insurancedealing with LNG accidents are not greatlydifferent than the problems of liability fornuclear accidents, large oil spills, or othercatastrophic accidents. However, since manyof these areas have already been the subject ofpublic and congressional concern and debatewhich have not yet resulted in legislation (seeappendix E), it may be desirable to considerall possible catastrophic accidents as a classand consider liability and insurance problemsfor the entire class, rather than for individualmembers of the class.



RELIABILITY OF LNG SUPPLY

In a decade in which the United States hassuffered from an embargo on petroleum and afour-fold increase in crude oil prices, importa-tion of any fuel raises legitimate questionsabout the reliability of the energy supply.Algeria, a member of OPEC, is currently thesole supplier of LNG imports to the UnitedStates. Indonesia, the next likely supplier, isalso an OPEC member. Thus, reliability ofthese supplies and the results of a possiblecurtailment should be considered.

However, it is not likely that these two na-tions will remain the only sources of LNG.Several other countries also control majorportions of the world natural gas reserves andmay market LNG in the United States. Thesepossible future suppliers include Chile ,Nigeria, Colombia, the U. S. S. R., Iran, China,and Aus t ra l i a .1 Any contracts with theseother nat ions would, of course, providegreater diversity of supply and would mini-mize the potential for, and the impacts of, adisruption in LNG trade.

Reliability of suppliers

1n 1976, the Energy Resources Council(ERC) sponsored an interagency task force onLNG. One subject examined was the securityof supply question. On the basis of a reviewconducted by the Department of State theERC recommended that total imports of LNGbe limited to 2 trillion cubic feet per year, andimports from any one country be limited to 1trillion cubic feet per year.2 The Carter Ad-ministration, however, changed the recom-mendations, adopting instead a more flexibleposture that set no upper limit on LNG im-ports. Under the new procedure, the Federal

IDean Hale, “LNG Report, ’ Pipeline and Gas Jour-nal 204 (June 1977): p. 20.

ZExecutive o f f i ce of t he P r e s i d e n t , T he Natlona/Energy Plan (Washington, D. C.: U.S. GovernmentPrinting Office, 1977), p. 57.

Government would review each application toimport LNG with regard to the reliability ofthe selling country, the degree of U.S. de-pendence such sales would create, the safetyconditions associated with any specific in-stallation, and all costs involved.3 The newprocedure also seeks to ensure that importsare distributed throughout the country, in aneffort to limit regional dependence.

A n y d i s c u s s i o n o f U . S . e c o n o m i cvulnerability to an LNG embargo should takethe following factors into account:

1)

2)

IMPORTANCE.—Imported LNG cur-rently accounts for only one-twentiethof 1 percent of the natural gas consumedin this country. In the future, however,that percentage may rise to as much as15 percent.

SUPPLIERS.—The two major foreignsuppliers of LNG, in the near term, willbe Algeria and 1ndonesia.

Relations with Algeria over the past decadecan best be characterized as strained but im-proving. As a result of the 1967 Middle EastWar and U.S. support of Israel, diplomaticrelat ions between the United States andAlgeria were severed. Algeria participated inthe 1973 oil embargo organized by the Arabmembers of OPEC, but did not stop deliveriesof LNG at that time. Since 1973, however,diplomatic relations have been restored andtrade between the two countries has been in-creasing. The quest ion remains whetherAlgeria would curtail exports of LNG to theUnited States as a result of future conflict inthe Middle East or other political crisis.

United States gas company spokesmen arequick to point out two factors mitigatingagainst a cutoff. First j Algeria itself has in-

IExecutive C)ffice of the President, The NationalEnergy Plan (Washington, D. C.: U.S. GovernmentPrinting Office, 1977), p. 57.

72 CH. II – CRITICAL REVIEW OF COMPONENTS OF LNC IMPORT SYSTEM

vested large sums of money in gas productionand liquefaction facilities and has borrowedheavily to finance these investments. Anyovera l l supp ly cu to f f wou ld j eopard izeAlgeria’s ability to repay these loans and itsefforts to channel LNG revenues to internaleconomic development. Second, the gas indus-try claims to have had good experience indealing with the country.

It seems fairly certain that an embargowould be imposed only in a time of crisis.Therefore, since the entire point of an em-bargo is to exert the maximum possibleeconomic pressure in order to achieve politicalgoals, Algeria’s economic self-interest couldbe a minor factor in the debate on whether toembargo LNG supplies to the United States.This is not to say that Algeria will impose anLNG embargo in the event of any future Mid-dle East crisis, It does mean, however, that apolitically motivated disruption of LNGsupplies is at least plausible and should notbe dismissed quite as lightly as some LNGproponents have argued.

Relations between the United States andIndonesia have, on balance, been good. In-donesia is a member of OPEC and has been astrong supporter of higher oil prices, but it didnot participate in the 1973 embargo and doesnot advocate using oil as a political weapon.4

The State Department views U.S. relationswith Indonesia as extremely good at the pres-ent time.5

There has been cons ide rab le concernamong the international financial communityin the last 2 years over Indonesia’s foreigndebt and financial problems within its Stateoil and gas company. This might limit Export-Import Bank credit to Indonesia for LNGfacilities.

3) SUBSTITUTES,—In normal circum-stances, petroleum, coal, and nuclearenergy are alternatives to natural gas.

~Robert F. Ichord, “Indonesi a,’ in Gerard J.Mangone, cd., Energy Policies of the World, v. 2: In-donesia, The North Sea Countries, The So~~iet Union(New York: Elseview, 1977), p. 68.

~Department of State, Background Notes.” Indonesia(Washington: Department of State, July 1974), p. 7.

4 )

However, as the natural gas shortageduring the winter of 1976–77 demon-s t r a t ed , conver s ion to these sub-st i tutes-even if they are availabl--canno t be under t aken rap id ly andsevere dislocations can result.

F E A S I B I L I T Y O F C A R T E L A C -TION.—This is not the question ofwhether a given country or group ofcountries might attempt cartel action,but rather the question of whether suchan attempt is likely to be successful.There are four major conditions which acartel must meet if it is to exercise sus-tained influence over internationaltrade for a given material:6

●

●

●

●

the concentration of exports among afew countries;

inelastic demand for the material;

inelastic supply of the material (or ofclose substitutes) from sources out-side the cartel; and

policy cohesion and export disciplineamong members to keep supp lyl imited enough to maintain highprices or possibly to achieve othergoals as well. Members of the cartelmust be strong enough financially toaccumulate stocks and forego currentexport earnings.

Liquefied natural gas is somewhat difficultto analyze along these lines. Trade in LNG issuch that it meets all four of these conditions.In addition, since the present and likely futuresuppliers of LNG are OPEC members, theframework for concerted action is already inplace.

However, there is one aspect of LNG whichargues strongly against the probability of anembargo. That is, unlike oil or other productswhich can be delivered to a customer almostanywhere, LNG requires highly specializedand very expensive processing and handlingequipment. The long leadtime required—3 to

6Edward R. Fried, “International Trade in RawMaterials: Myths and Realities,” Science 191 (F’eb. 20,1976): 641-646.


4 years to construct LNG facilities—fairly welllimits the number of customers to whom asupplier can sell. The limited number ofcustomers who can receive LNG shipmentsmakes the supplier almost as dependent uponuninterrupted service as the receiver.

Impacts of an interruption in supply

Based on OTA’s work, it does not appearthat there is, at present, any serious threat tothe national economy from dependence on im-ported LNG, nor is there likely to be a dangerin the near future. However, regional or localdependence on LNG supplies could causesome problems.

It appears that about eight States could bedependent on LNG for a large part of theirnatural gas supplies by 1985 if currentlyplanned import projects go into operation.These States are:

Alabama New YorkCalifornia OhioGeorgia PennsylvaniaMichigan South Carolina

These States stand to benefit directly from im-ported LNG; therefore, they also are the mostvulnerable to any interruption in the supply.

For purposes of this study, a State’s de-pendence on LNG was measured in terms ofits natural gas supplies from all sources, in-cluding LNG. According to an earlier OTAstudy, domestic supplies of gas (excluding sup-plementary sources such as SYNgas o rAlaskan gas) will decline 12 percent na-tionally by 1980 and 20 percent by 1985. 7

These are at best crude figures, which over-look regional differences. g Therefore, in

VJ. S. Congress, Office of Technology Assessment,Analysis of the Proposed National Energy Plan(Washington, D. C.: U.S. Government Printing Office,August 1977), extrapolated from p. 30.

Wurrent synthetic gas production from petroleumfeedstock was included in the analysis but no additionalproduction was estimated on account of recent govern-mental actions restricting it. If the contribution ofSYNgas from coal in the early to mid-1980’s is small, asseems possible in light of delays in starting proposedprojects, then U.S. supplies of natural gas will be fromdomestic reserves and LNG almost entirely.

estimating the total State supply in 1980 and1985, the 1975 supply was reduced by 12 per-cent or 20 percent respectively, and then in-creased by the anticipated LNG supply.

The results are tentative because not all ofthe El Paso II LNG has been precisely allo-cated to the States. However, in most casesthis imprecision is not significant.

This study indicates that in the nextdecade these eight States expect to get from33 to 91 percent of their natural gas (figure36) from a group of companies which planto meet as much as half of their gas needswith imported LNG. As a result some in-dividual States will be dependent upon im-ported LNG for nearly one-fourth of theirnatural gas supplies (figure 37).

Alaskan natural gas which might be movedas LNG was not counted in these calculations.Nevertheless, it is clear that reliance on LNGcould be considerable.

Figure 36 States Dependent on Companies Using LNGas Part of Gas Supplies

State Suppliers 1975 volume Percent of Stateto use LNG delivered consumption

(consumption (in Bcf) provided byin Bcf) suppliers listed

Ohio(957)

Pennsylvania(654)Georgia(326)California(1848)S. Carolina(122.9)

New York(576.8)Michigan(887)Alabama(264)

Columbia 490.4Consolidated 269.2Panhandle 66.9

Columbia 211 2Consolidated 9 8 7Southern 269

El Paso 943

Southern 96.3

Consolidated 190.3

Trunkline 151 3Panhandle 6 8 0

Southern 1677

——.

86

4791

51

78

33

.

Source OTA

2564

.— ——.

74 CH.II

Figure 37.

CRITICAL REVIEW OF COMPONENTS OF LNG IMPORT SYSTEM

Percent of LNG in State Consumption andCompany Supplies (Imports from ForeignCountries Only)

—.—.——. ————LNG supply if allprojects approved LNG use as aand operating on

Statepercent of total

schedule (in Bcf) supply— . — . - — —

1980 1985 1980 1985

California 226 463 12 24Ohio 122 143 13 15Pennsylvania 41 48 7 8New York 59 74 10 14Georgia 61 94 18 30(20#)Alabama 23 35 8 13South Carolina 20 31 16 28 (22#)Michigan 87 87 10 11(#) Percent of LNG use possible if domestic production IS reduced by 20

percent and consumption remains relatively unchangedCompanyColumbia 116 116 13 14

Consolidated’ 136 190 26 44

Southern” 136 210 28 56

El Paso o 237 0 26’ ●

Trunkline 902 902 52 66

Panhandle 7 3 8 7 3 8 17 23* ● ●

Pacific Gas & El 113 113 ( )( )

So Calif. &Pacific Lighting 113 113 ( )( )

● Assumes certain deliveries of LNG from El Paso II (United Gas Pipeline)

● 24% with planned production from coal gasification Included insupply

● *•18.2% with planned production from coal gasification included insupply

If Alaskan LNG is factored into the sup-plies, on the theory that technological as wellas political problems could cause interrup-tions in supply, dependency in Californiawould rise drastically (figure 38).

Technological interruptions are not out ofthe question. There has already been ampleevidence that they are possible,

For example, the average delay in the con-struction of three LNG tankers at the QuincyShipyard has been about 2 years. Part of thedelay was planned because no terminals wereready for the ships, but many shipbuildingproblems caused other actual delays.9

In addition, at all the U.S. shipyards in-volved with LNG tankers, there have been in-

Figure 38. Percent of LNG in State Consumption andCompany Supplies (Including Alaskan Gas)

—. .LNG supply if allprojects approved LNG use as aand operating on

Statepercent of total

schedule (in Bcf) supply——

.—1980 1985 1980 1985

— —California 299 913 13# 43( 24 # )Ohio 122 265 13 30 (20#)Pennsylvania 41 95 7 15New York 59 74 10 14Georgia 61 94 18 30( 20#)Alabama 23 35 8 13South Carolina 20 32 16 28(22#)Michigan 87 101 10 12

(#) Percent of LNG use possible if domestic production iS reduced by 20percent and consumption remains relatively unchanged

CompanyColumbia 116 362 14 44Consolidated’ ● * 136 190 26 44Southern** 136 210 28 56El Paso o 383 0 39*Trunkline 902 902 52 66Panhandle 7 3 8 1 3 1 . 8 17 32*Pacific Gas & El 113 259 ( ) 24So Calif &

Pacific Lighting 113 429 ( ) 40

——-——.—

‘Includes SYNgas from coal m total estimate

● ● Assumes 74 Bcf/yr from El Paso II (deliveries fromUnited Gas Pipeline)

● * ● Assumes 54 Bcf/yr from El Paso II (deliveries fromUnited Gas Pipeline)

Source OTA

9Tom Connors, “Domestic LNG Vessel Construc-tion, ” paper presented at the Chesapeake Section Meet-ing of Society of Naval Architects and MarineEngineers, Bethesda, Md., May 1977.


stances of subcontractor failures, startup possibility that LNG could provide a signifi-difficulties after construction of new facilities, cant portion of the supply. However, many ofor other delays. State supplies could be just as the citizens and public interest groups alsoseriously affected by this type of interruption indicated concern about the reliability andor delay as by embargoes or cartel action. the cost of LNG supplies which would be

Most members of OTA’s public participa-coming from foreign nations. Several

tion program were well aware of the need forspecifically questioned the political stabilityof supplier nations.

m o r e n a t u r a l g a s a n d u n d e r s t o o d t h e



LNG PRICING POLICY

In the complex LNG system, the price for following prices have been set for importedwhich the product can be sold is a key con- LNG: 1

straint on the development of new projects.There is no internationally accepted price of

Distrigas $1.90 per million(Boston ) Btu (1972)

natural gas at the wellhead, but in most El Paso Iforeign markets gas supplies—including

$1.80 per million(Md. & Ga. ) Btu (1972)

LNG—are price linked to alternative energy Panhandle $3.37 per millionsources on a Btu-equivalency basis. (La.) Btu (1977)

Foreign pricing mechanisms make it fairlyPac/Indonesia

likely that LNG will be price competitive with(Calif.)

$3.59 per millionBtu (1977)

other fuels in the near future, thus making itlikely these countries will be strong markets The lower prices appear competitive with

for LNG. other fuels imported to the east coast, butthere is consensus that future Algerian LNG

In the United States, however, the cost/price will be increased to account for the costs ofsituation is extraordinarily complicated by other alternative fuels.the regulation of natural gas prices, making it In contrast, the wellhead price of domesticmore difficult to determine if LNG will beprice competitive with other fuels.

natural gas in interstate sales is now regu-lated by the FPC at a top price of $1.44 per

In Western Europe, the threshold price for mi l l i on- Btu’s for gas produced from wellsimported gas, whether it is transported by commenced on or after January 1, 1975, andconventional pipeline or as LNG, will be set by at an average of about 76 cents per millionNorth Sea gas and low-sulfur content im- Btu’s for all U.S.-produced interstate gas. Theported fuel oil. On the basis of 1977 prices, im - President’s proposed National Energy Planportation of Algerian LNG should be price places a ceiling on all new natural gas, pro-competitive for the foreseeable future. De- duced from wells beginning in 1978, of $1.75pending on prices set by producing nations, per million Btu’s at the wellhead.LNG from Nigeria and the Persian Gulf could Thus, it appears probable that for thealso be price competitive in the major WesternEuropean markets. foreseeable future the price of imported

LNG will be significantly higher than theJapan is now importing low-sulfur fuels regulated price-of ‘domestic gas and proba-

from several world suppliers and LNG from bly of many other energy alternatives. InIndonesia and Alaska. Liquefied natural gas addition, the confused cost/price situation, incan command a higher price in Japan than combination with the substantial technicalcan alternative fuels because its clean-burn- and commercial risks associated with LNG,

ing properties offer a way of providing pollu- may limit growth beyond those projects whichtion-free, electric-power generation. are now proposed.

In the United States, where prices and At present there is no policy for the FPCmechanisms for passing prices on to the ulti- to follow in making decisions about pricingmate customer are established by the FPC, the LNG. The major debate centers on the use of

IThe world market price for crude landed in U.S.during 1976 averaged $13.48 per barrel which isequivalent to $2.32 per million Btu’s.


rolled-in pricing versus the use of incrementalpricing.

Inc rementa l p r i c ing means tha t eachcustomer using LNG is charged the full cost ofthe amount of LNG he actually uses. Under arolled-in pricing formula, he would pay aprice determined by the weighted average ofall the flowing gas and LNG used in thesystem. 2

In most cases industry has claimed thatrolled-in pricing is necessary to the financialviability of LNG import projects.

Industry fears that the market will becomeso uncertain if the gas is incrementally priced,that the necessary financing will not be ob-tainable at acceptable interest rates. Theargument is also made that rolled-in pricing isthe best method to ensure maximum use of theexisting pipeline system.

Since the gas pipeline system is a majorcapital investment and therefore a large fixedcost, when volumes decline the utilities areforced to charge customers a higher unit pricefor the gas. It is therefore argued that even ifsupplemental gas itself is very costly, rolled-inpricing will lower the unit charges to con-sumers because more of the pipeline will befilled.

The principal objection to rolled-in pricingis that the consumer does not pay the replace-ment cost for the gas he is using. He is givenan incorrect signal as to the actual value ofthese incremental LNG supplies and has lessincentive to look for more efficient ways to usegas or for alternatives that would be less cost-ly. Therefore, adoption of rolled-in pricingwould appear to be counter to the goals ofenergy conservation and replacement costpricing set forth in the President’s proposedNational Energy Plan.

However, if LNG is incrementally priced it

ZFor “Rolled-in’ versus “incremental’ pricing argU-ment see—” Incremental Pricing of Supplemental Gas”by FPC Office of Economics—Aug. 1976; Response tothis report by Robert Nathan Associates, Dec. 1976; and“The Future of Natural Gas; Economic Myths,Regulatory Realities” by FPC Bureau of Natural Gas—Nov. 1976.

would probably sell for at least $3,00 perthousand cubic feet. Therefore, a customercould bid for new gas up to the $1.75 ceilingbut would then be forced to jump to the $3.00level if he wanted more than the $1.75 pricewould bring forth. Any natural gas that couldbe produced at intermediate prices would beforeclosed, which would defeat some of thepurpose for going to incremental pricing in thefirst place.

Another difficulty with rolled-in pricing isthat it forces all customers to subsidize LNGwhether they use it or not. However, industryspokesmen argue that supplemental gas proj-ects such as LNG are of direct benefit to allcustomers because they increase the quantityof gas supplies.

The main argument against incrementalpricing is that it would raise gas prices to apoint where the market for LNG may becomeunstable. Another argument against incre-mental pricing is that there is no feasiblemechanism for separating and selling a cer-tain portion of high-priced gas to specificcustomers. Finally, it is claimed that incre-mental pricing cannot be administered whilealso following a policy of curtailing gas forlow-priority customers.

There were few comments addressed to thepricing issue during OTA’s public participa-tion program. There was, however, discussionof the fact that it is a complex issue which thepublic is still attempting to understand. Therewas also considerable discussion of the subjectat OTA’s LNG panel meeting.

In general, it appears that gas-relatedbusinesses and industries support rolled-inpricing while public interest groups sup-port incremental pricing. The stand behindincremental pricing appears to be motivatedby the desire to have energy priced at a truecost which will encourage conservation andthe search for alternatives.

To date, the FPC has approved rolled-inpricing for all major new LNG import proj-ects. And, traditionally, all new natural gassupplies have been priced on a rolled-in, oraverage, basis to the consumer. However, in


the recent Trunkline case, the FPC made aninitial decision for incremental pricing, whichwas later reversed.

Although it is not certain, it appears thatrol led-in pricing may be the mechanismchosen in the future. When considering onlythe two pricing mechanisms, it appears thatrolled-in pricing would provide less incen-tive for industry to seek new domestic sup-plies. It may, instead provide an incentivefor importing LNG and using other expen-sive alternatives, the costs of which will bepassed on to the consumer.

Thus, pricing decisions for future LNG proj-ects will have effects beyond the immediatecost of gas to consumers. They will also affectthe supply, demand, and prices of otherenergy, and major energy decisions related tothe national interest.

Ultimately, pricing is not strictly an LNGissue. It is an issue which now surrounds allforms of energy. No decision on LNG pricingshould be made in isolation. Pricing of allforms of energy should be considered in thecontext of a national’ policy. This issueshould be one which gets early attention from

the new Department of Energy. Some of thequestions which should be addressed include:

●

●

●

●

●

Should pricing mechanisms be used toencourage or discourage the develop-ment of LNG projects?

Will the use of rolled-in pricing dis-courage the use of alternative energysources which might be available atprices lower than the incremental priceor have greater long-term security of sup-ply possibilities, such as solar energy?

Will rolled-in pricing give certain LNGprojects unfair competitive advantagebecause customers will not notice theadded cost?

Will rolled-in pricing unfairly affect cer-tain regions by encouraging use of LNGat the expense of developing moredomestic supplies at a possibly lowercost ?

Can incremental pricing be established ina way that will allow companies to pro-duce and sell LNG separately from othergas and be compatible with curtailmentpolicies?

.

Public Awarenessand Concerns

About LNG

Chapter III

Public Awareness and ConcernsAbout LNG

Like many other types of energy and energysystems, the use of LNG as a method oftransporting natural gas from distant sourceshas become a subject of public attention andcontroversy in recent years.

Thus, the range and diversity of views heldby the people who will be affected by the use ofLNG are important to Congress in its con-sideration of possible new legislation, over-sight activities, and budget appropriations toFederal agencies involved in the regulation ofLNG projects and facilities.

In order to provide Congress with informa-tion on these views, OTA conducted a publicparticipation program in connection with thisassessment of the transportation of liquefiednatural gas. The program consisted of a day-long workshop in Washington, D. C., a ques-tionnaire/interview survey in relevant coastalareas, and a review of this draft report bymembers of the public.

These activities were designed to obtain in-formation about the opinions and beliefs ofthe

●

●

●

●

public in four areas:

the benefits and risks which variousgroups associated with the developmentof an LNG system or alternatives to thatdevelopment;

concerns about marine transportation ofliquefied natural gas and the siting ofLNG facilities;

the adequacy of the decisionmaking andregulatory processes relating to LNG;and

the need for Government action in theform of legislation, policymaking, orresearch.

More than 100 persons from gas utilitiesand related industries and financial institu-tions, organized labor, State and local agen-cies, and public interest groups were directlyinvolved in the public participation program.Through them, OTA was able to identify thekey issues which have been or will be raised inthe public debate and which should beanalyzed for possible Federal action. Throughthem, OTA was also able to appreciate thewide range of views on these issues and incor-porate those views into its report to Congress.

Much of the discussion of LNG during thepublic participation program centered onspecific LNG projects and the concerns whichvarious interest groups have had about thoseprojects. Public involvement with LNG proj-ects has been limited to date, but has includedparticipation in formal hearings before theFPC, legal action, and dissemination of infor-mation about the issues involved.1

Although individual opinions on issuesvaried, it was obvious from the public par-ticipation program that there are three majorissues in the consideration of LNG systems:

s safety of LNG ships and terminals;

● criteria for siting of LNG facilities; and

● public participation in decisionmakingprocesses.

ILeonard E, Bassil, “Cove Point Liquefied NaturalGas Terminal , Calvert County, Md., ” NationalAcademy of Sciences National Research Board,Maritime Transportation Research (unpublished), andAndrew J. Van Horn and Richard Wilson, LiquefiedNatural Gas Safety Issues, Public Concerns, and Deci-sion Making. Cambridge: Harvard University, 1976.

81

82 CH. III – PUBLIC AWARENESS AND CONCERNS ABOUT LNG IMPORT PROJECTS

The varied views of the public who workedwith OTA in this effort are part icularlyreflected in the section, “Critical Review ofComponents of the LNG System.” Theirspecific suggestions for action to help resolvemajor problems are itemized in the next sec-tion of this chapter. However, the public alsoexpressed strong interest in several broaderissues which are beyond the scope of thisreport. These broader questions which havenot been answered to the satisfaction of manyinclude:

● Is there a need for LNG in the first place?

“ Will the development of LNG systemsdivert major amounts of capital and

human resources away from the develop-ment of alternative types of energy?

● Will the development of LNG systemsproduce unwarranted confidence in tra-ditional energy supplies and prevent amajor commitment to energy conserva-tion?

On the other end of that concern, many askedabout the impact of not developing LNGsystems. They argued that not proceedingcould result in “an unprecedented economicdisaster” by creating shortages of energy incritical industries, decreasing possible con-tributions to the gross national product, andincreasing unemployment.

Actions Desired By

GAS UTILITY COMPANIES

Gas company respondents included repre-sentatives of the American Gas Association,Algonquin Gas of Massachusetts, ColumbiaLNG Corp., Southern California Gas, CentralPower and Light Company in Texas, andUnited Gas Pipeline Company of Texas.

The respondents suggested the following:

“ T h e F e d e r a l G o v e r n m e n t s h o u l dstreamline the regulatory process bydeclaring policies on LNG pricing, LNGfacility siting, and o the r impor tan taspects of LNG development.

● One Federal agency should coordinateall LNG procedures in order to acceleratethe regulatory process and eliminatej u r i s d i c t i o n a l o v e r l a p s a m o n g t h eFederal Power Commission, the Office ofPipeline Safety Operations, and the U.S.Coast Guard.

● There should be Federal preemption onenvironmental and siting issues.

● Ceil ings on LNG imports should beavoided, but the security of supply and

●

●

●

●

●

●

the possibility of overdependence on asingle source should be addressed on aproject-by-project basis.

The State and local approval processesshould be consolidated where feasible.

T h e F e d e r a l G o v e r n m e n t s h o u l destablish clear safety cri ter ia on ageneric, rather than case-by-case, basis.

The Federal Power Commission shouldapprove a formula to allow companies topass on escalations in the cost of foreigngas or transportation without new hear-ings.

The Federal Power Commission shouldallow rolled-in pricing.

The Federal Government should main-tain existing financial incentives nowavailable through the Mari t ime Ad-ministrat ion and the Export-ImportBank.

Congress should adopt legislation pro-viding for adequate insurance coverageby means of a fund supported by LNGsales.

CH. III – PUBLIC AWARENESS AND CONCERNS ABOUT LNG IMPORT PROJECTS 83

● The Federal Government should under- to be carried out by the Coast Guard andtake additional studies of LNG safety, the Energy Research and Developmentespecially vapor cloud studies and risk Agency.analysis, with large-scale LNG spill tests

Actions Desired B y

ORGANIZED LABOR GROUPS

Respondents from organized labor groupsincluded representatives of the AFL-CIO andother groups.


●

●

●

●

Congress should adopt legislation to cor-rect deficiencies in the LNG regulatoryprocess and eliminate counterproductivetime lapses and delays.

Rateset t ing pol icies should not dis-courage the utilization of imported LNG.

Congress should adopt legislation tomandate the use of U.S. flag ships withU.S. personnel for LNG transportation inorder to increase national security andensure full compliance with constructionand safety standards.

There should be a prompt decision on thegas transportation system to be used forNorth Slope Alaskan gas, including pro-vision for a western delivery system.

Federal preemption should be used ifnecessary to arrive at early decisions onLNG issues, but there should also bemaximum State, regional, and local in-volvement in decisions.

All Coast Guard procedures should bereviewed to determine the adequacy ofship traffic control and inspection ofLNG tankers.

The Federal Government should requireagencies involved in LNG approval proc-esses to act on permit applications withina given time frame.

Additional studies should be undertakento determine the capability of CoastGuard units assigned to aid LNG tankersand to assess the adequacy of equipmentin use.

Studies should also be undertaken todetermine what industries are compati-ble and could be located near LNG ter-minals.

Actions Desired By

STATE AND LOCAL OFFICIALS

Respondents from State and local offices tal Conservation, and the Georgia Coastalincluded representatives of the Public Utilities Zone Management Office,Commission staffs in New Jersey, California,Rhode Island, and Massachusetts; represent- The respondents suggested the following:

atives of the cities of Providence, R. I., Oxnard ● The Federal Government, with the in-and Los Angeles, Calif.; and representatives volvement of local interest groups andof the New York Department of Environment- governments, should establ ish pro-

84 CH. 111 – PUBLIC AWARENESS AND CONCERNS ABOUT LNG IMPORT PROJECTS

cedures for the selection of suitable loca- “ Congress should adopt legislation whichtions for future LNG facilities. will ensure that the costs of shipping

● The Federal Government should, wherepractical, eliminate overlapping jurisdic-tion with respect to siting, constructionand monitoring of LNG facilities.

“ The Federal Government should ex-pedite and consolidate the various permitprocesses required for approval of anLNG facility.

LNG by oceangoing vessels are just andreasonable.

c Additional studies should be made ofLNG sp i l l s on wa te r , undergroundstorage of LNG, and greater use of im-ported LNG as pipeline gas.

s The Federal Government should alsopromote research into alternative fuels

● The Federal Government should pro-which might be more abundant andpossibly less costly; research into conser-

mulgate and enforce safety regulations vat ion methods; and studies of theand establish standards for transporta-tion and storage of LNG.

possibility of curtailing the sales ac-tivities of gas distributors.

Actions Desired By

RELATED INDUSTRIES

Respondents from businesses and indus-tries related to the LNG industry includedrepresentatives of shipbuilding companies andassociations, gas pipeline companies, safetyconsulting firms, marine engineering firms,the industrial construction industry and fi-nancial institutions.


c The Federal Government should resolvethe issue of who is in charge of siting andsafety matters and should establish a“one stop’ permit process.

“ Clearly defined policies and fair regula-tions should be adopted to accelerate theregulatory process.

“ The Federal, State and municipal permitprocesses should be coordinated.

● The Federal Government should assistindustry in meeting energy demands andin determining the safest, most viablemeans to transport, store, and distributeLNG in interstate commerce.

“ The Federal Government should ensurea smooth transition to the new Depart-ment of Energy.

●

●

●

●

●

The Federal Government should developa pricing structure which will ensure ade-quacy of supply.

The Federal Government should adopt aclear policy on incremental and rolled-inpricing.

Additional study should be made ofpipeline vs. LNG systems of transporta-tion, including study of the political,security of supply, safety, and environ-mental issues.

Studies should also be made whichwould improve LNG vapor dispersionanalysis and allow refinement of vapordispersion models to take into considera-t ion local topography and manmadeobstructions.

Studies should be undertaken to identifythe problems and solutions associatedwith transportation and distribution ofLNG to and from inland baseload andpeak shaving plants.*

*Note: one respondent said further studies were

not desirable because they would only cause addi-tional delays in development of LNG.

CH. 111 – PUBLIC AWARENESS AND CONCERNS ABOUT LNG IMPORT PROJECTS 85

Actions Desired ByPUBLIC INTEREST

Respondents from public interest groups in-cluded representatives of California-based na-tional groups such as the Natural ResourcesDefense Council and the Sierra Club;Washington-based national groups such asthe Environmental Policy Center; and localcitizens groups in Maryland, California,Rhode Island, New Jersey, New York,Massachusetts, and Texas.


c Congress should adopt legislation torestrict LNG storage tanks and terminalsto isolated areas.*

● The Federal Government should take amore active planning role in LNG ter-minal siting and should establish broadFederal policy on siting in advance of in-dividual project decisions.

● Federal siting policy should be developedthrough public hearings on generic safetyand siting considerations.

“ The Federal Government, in conjunctionwith State and local groups, should iden-tify and review available sites whichcould be potential LNG terminal loca-tions without waiting for specific applica-tions.

● The Federal Government should act toensure rational land-use planning by theS t a t e s t h r o u g h t h e C o a s t a l Z o n eManagement Act or other means.

“ The Federal Government should deter-mine whether and how much LNG is

& Note. Respondents varied in siting criteria.Some said LNG terminals and tankerroutes should be at least 1 mile from popu-lated areas. Other suggested distancesranging up to 25 miles from populatedareas. Several said terminals should berestricted to offshore sites. One said ter-minals should be located in already in-dustrialized areas with small populations.

96.597 0 -77-7

●

●

●

●

●

●

●

●

●

●

●

GROUPS

needed and limit LNG imports so thatthey do not become a major part of theU.S. gas supply.

The Federal regulatory procedure shouldbe improved to allow for timely selectionof sites, if they are needed, with max-imum public participation in the process.

The Federal Power Commission shouldmandate incremental pricing for LNG,and keep a close watch on price and sup-ply.

Federal supervision of daily operationsof LNG facilities should be increased.

Existing LNG tanks that do not meet newsiting criteria should be phased out.

The Federal Government should setmandatory conservation standards anddetermine uses of natural gas in order todiminish reliance on natural gas.

The Federal Power Commission shoulddevelop procedures for ensuring effectivepublic participation, including adequatenotice of pending proceedings and pay-ment of attorney and witness fees for in-tervenors.

The environmental impact statementprocess should be simplified and shouldinclude consideration of safety issues.

The Coast Guard should strictly controlthe movement of LNG tankers and othership traffic on the LNG tanker route.

There should be intensive training of allpersonnel involved in the inspection andregulation of LNG tankers and facilities.

Transportation of LNG by truck shouldbe controlled with procedures similar tothose which regulate the movement ofLNG tankers.

The Federal Government should man-date development of evacuation plans by

86 CH. III – PUBLIC AWARENESS AND CONCERNS ABOUT LNG IMPORT PROJECTS

local jurisdictions near LNG facilitiesand ensure that there will be adequatelocal firefighting capability.

“ Congress should adopt legislation to en- ●

sure that there will be adequate liabilityinsurance which defines coverage andresponsibility for accidents.

s There should be additional studies oflarge marine spills of LNG, vapor disper-sion, and other safety questions, includ-ing the consequences of large terminal ●

accidents, the effect of such accidents onhomes and industries supplied by the ter-minal, the time required to rebuild a ter-

●

minal, alternate energy sources availableafter an accident, size of the area en-

dangered, methods of combating LNGfires, and methods of protecting citizensin endangered areas.

Studies should also be made of LNG im-port projections under all regulatory cir-cumstances (i.e., with and without importrestrictions, with rolled-in pricing, withincremental pricing, etc. ) and theeconomic consequences of LNG em-bargoes by producing nations.

Studies should be made to find appropri-ate alternatives to the development ofLNG systems.

Siting of LNG facilities in areas whichhave prime ecological or aesthetic valuesshould be avoided.

— . . . —

.

. . . . —

Appendix A

Cove Point, Md., Permits

Terminal

Application PermitRegulatory Agency Description of Action Date Date

Board of County Commissioners ofCalvert County, Md.

Federal Power Commission.



Calvert County Department of In-spection and Permits.

Calvert County Health Department

Calvert County Department of In-spection and Permits.

Department of the Army, BaltimoreDistrict, Corps of Engineers.

State of Maryland, Department ofNatural Resources.

State of Maryland, Department ofNatural Resources.

Department of the Army, BaltimoreDistrict, Corps of Engineers.

State of Maryland, Department ofNatural Resources

State of Maryland, State HighwayAdministration.

Calvert Soil Conservation District.

Calvert County Department of In-spections and Permits

Rezoning 317.722 acres fromAl to Il.

Opinion No. 622 CP71-68.

Opinion No. 622A CP71-289.

Amended—Tunnel plan

Site grading for office building

Deep-drilled well and sewage-disposal system.

Completion certificate.

Construction of office andmaintenance building.

Construction of pier.

Water quality certification.

Wetlands license.

Construct unloading terminaland tunnel and dredge inChesapeake Bay.

Appropriate and use groundwater for sanitary facilities.

Construction of two entrances.Extension.

Erosion and sediment controlmeasures

Site grade and preparation forconstruction; LNG terminalprocess area,

—

9/21/70

6/ 4/71

12/ 8/72

6/ 9/72

6/19/72

6/22/72

4/ 7/71

—

12/ 4/72

12/ 4/72

10/21/72

11/20/72

4/ 5/73

4/ 5173

8/11/70

6/28/72

10/ 5/72

3/30/73

6/14/72

7/13/72

11/15/72

7(21172

9/ 1/728/31/72

12/18/72

12/26/72

12/29/72

11/28/72

3/12/737/ 5/73

5/14/73

5/18/73

9 6 - 5 9 7 0 - ~ ~ - 8 89

90 APPENDIX A



State of Maryland Fire Marshal

State of Maryland, Department ofForests and Parks

State of Maryland, Department ofNatural Resources



State of Maryland Comptroller of theTreasury



State of Maryland,Administration

Water Resources

Federal Communications Commis-sion


Department of Transportation, U.S.Coast Guard


Calvert County Department of in-spections and Permits


State of Maryland EnvironmentalHealth Administration

Construction of cofferdam

Approva l o f o f f i ce andwarehouse

Burning debris

Small pond permit

Site grading in lowland area.

Construction of LNG storagetanks.

Sales and use tax direct pay-ment permit.

Construction of deep drilledwell and sewage disposalsystem.

Completion certificate.

Construction of deep drilledwell and sewage disposalsystem.

Completion certificate

Appropriate and use water forsanitary facilities, coolingwater, testing and fire pro-tection

Radio license.

Approval of fire protectionplan.

Private aids to navigation (fivelighted survey towers)

Approval of use of tunnel bypersonnel

Construction of two firewaterstorage tanks

Construction of 12 buildingsfor use with receiving ter-minal

Construction of emergencyvent heater

8/14/73

10/12/73

10/15/73

10/25/73

10/25/73

7/ 5/74

9/18/74

10/21/74

7/11/75

8/15/73

8/31/73

9/17/73

10/ 1/73

10/12/73

10/24/73

1/ 2/74

1/29/74

2/24/75

1/29/74

1/ 7/75

1/31/74

4/15/74

5/30/74

7/18174

8/26/74

9/20/74

10/23/74

9/16/75

APPENDIX A 91








Calvert County Department ofElectrical Inspections



Calvert County Fire and RescueCommission




United States Department of the In-terior

United States Coast Guard

State of Maryland, Department ofLicensing and Regulation

United States Coast Guard.

United States Coast Guard.

State of Maryland, Water ResourcesAdministration

Construction of LNG vaporizer

Construction of emergencypurge nitrogen vaporizer

Construction of firewater tankheater

Construction of gas turbinefuel gas heater

Construction of boil-off gasreheater

Construction of gas turbinegenerator

Electrical permit for onshoreventilation building

Construction of seven offshorebuildings

Review of electrical areaclassifications

Inspection of fire apparatus

Site grade for warehouse

Construction of warehouse

Construction of sign at ter-minal entrance

Seagull depredation permit.

Approval of survival capsules.

License and regulation certifi-cate for offshore elevator.

Certificate of Inspection forMiss Methane.

License of vessel under 20 tonsfor Miss Methane.

Oil operations permit

7/1 1/75

7/1 1/75

7/1 1/75

7/1 1/75

7/1 1/75

7/1 1/75

1/23/76

8/27/76

3/ 3177

9/16/75

9/17/75

9/17/75

9/17/75

9/17/75

9/17/75

9/ 5/75

2/ 3/76

6/ 4/76

8/ 3/76

8/1 1/76

8/1 1/76

8/31/76

11/ 9/76

6/17/76

1/ 7/77

9/30/76

1/31/77

5/ 5 /77

92 APPENDIX A

Pipeline


Maryland Board of Public Works—Department of Natural Resources.

Maryland Department of NaturalResources.

Corps of Engineers.

Maryland Department of NaturalResources.

Virginia Marine Resources Commis-sion

Viginia State Water Control Board

Virginia Department of Taxation

Federal Power Commission

Commonwealth of Virginia Depart-ment of Highways and Transporta-tion (Fairfax County)


Commonwealth of Virginia, Depart-ment of Highways and Transporta-tion (Fairfax County).

Commonwealth of Virginia Depart-ment of Highways and Transporta-tion (Fairfax County).

Commonwealth of Virginia Depart-ment of Highways and Transporta-tion (Fairfax County).


Wetland license.

Construction in a waterway.

Construction of five 36-inchpipeline submarine cross-ings.

Amended.

Water Quality Certificationfive pipeline crossings.

Revised.

Dredge and backfill a trenchfor pipeline crossing ofPotomac River

Revised.

Dredge and backfill a trenchfo r p ipe l ine c ross ingPotomac River.

Amended,

Sales and use tax direct pay-ment permit.

Amended route.Change construction dates.

Permit for temporary entranceto right-of-way #754738.

Permit for temporary entranceto right-of-way #754826,




Permit for temporary entranceto right-of-way #755739

4/ 1/74

4/ 1/74

4/10/74

3/ 7/75

3/ 7/75

7/15/74

3/ 7/75

11/ 7175

11/ 7/75

9/19/744/25/75

4/23/75

4/15/75

12/31/75

8/22/74

9/10/74

8/27/74

3/25/75

9/26/74

4/ 3/75

3/ 1/75

4/10/758/ 1/75

August1975

August1975

July 1976

October1975

11/19/75

1 1/19/75

APPENDIX A 93




October1975

September1975

December1975

12/17/75

12/17/75

10/24/74

7/16/749/16/74

7/22175

6/18/756/23/75

10/11/746/13/75

7/24/75

2/18/75

8/ 4/75





10/31/75

12/ 9/75

12/ 9/75

10/21/74

7/14/75

6/17/75

6/ 7/74

7/24/74

2/17/75

6/10/75

Commonwealth of Virginia Depart-ment of Highways and Transporta-tion (Loudoun County)


Commonwealth of Virginia Depart-ment of Highways and Transporta-tion (Loudoun County)


Board of County Commissioners ofCharles County, Md.

Grading permit, pipeline right-of-way.

Sediment Control Permit,pipeline right-of-way.

Washington Suburban SanitaryCommission-Prince Georges Coun-ty

State of Maryland-Maryland ForestService, Department of NaturalResources

Roadside tree permit (Calvert,Charles & Prince GeorgesCounties)

Department of Inspections and Per-mits, Calvert County, Md.

Zoning approval, pipelineright-of-way

Grading permit, pipeline right-of-way



Grading permit, access road toright-of-way Cove Point


Use and occupancy permit

Department of Public Works, PrinceGeorges County, Md.

Construction within publicright-of-way (three roadcrossings)

Pipeline road crossing #5-C10943-75

Department of Transportation, Stateof Maryland (Calvert County)

May 1975


Pipeline road crossing #5-C-1088O-75

April 1975


Road c ross ing (cab le )#50C-11046-75

August1975

July 1975Department of Transportation, Stateof Maryland (Charles County)

Pipeline road crossing #5-CH-10881-75

94 APPENDIX A


Department of Transportation, State Pipeline road crossing #5-of Maryland (Charles County) CH-10942-75

Washington Suburban Sanitary Pipeline road crossing #17090,Commission (Prince Georges 3-pg. 208-75County, Md.)

Washington Suburban Sanitary Pipeline road crossing #17094,Commission (Prince Georges 3-pg. 282-75County, Md.)

Washington Suburban Sanitary Pipeline road crossing #17089Commission (Prince Georges

May 1975

May 1975

June 1975

May 1975

7/21/75

3/12/75

10/24/74

2/13/758/22/759/ 5/75

September1975

3/ 31759/10/75

2/17/76

4/ 8/76

6/ 1/76

7/ 8/76

5/24/76

9/19/74

2/13/75

3/ 3175

County, Md.)

United States of America,Railroad (Maryland)

Calvert Soil Conservation

Charles Soil Conservation

County of Fairfax, Va.



U. S. Navy Pipeline railroad crossing

District

District

#NF(R)26225

controlMd.

controlMd.

control

Sediment and erosionfor Calvert County,

6/ 7/74.

9/25/74Sediment and erosionfor Charles County,

11/ 7/74Sediment and erosionfor Fairfax County

Occupancy permit September1975

Site plan waiver for pipelineconstruction

Pipeline road crossing # 1043ODepartment of EnvironmentalManagement, Fairfax County, Va.

Zoning Administrator, LoudounCounty, Va.

Zoning permit for measuringstation at Loudoun

4/ 8/76

4/14/76Department of Engineering and In-spections, Loudoun County, Va.

Building permit for instrumentand transducer buildings atLoudoun

7/ 8/76Department of Engineering and In-spections, Loudoun County, Va.

Electrical permit for instru-ment and transducer build-ings at Loudoun

Health Department, Loudoun Coun-ty, Va.

Permit to install sewage dis-posal system and water well

4/14/76

Maryland Board of Public Works Wetlands license

Fairfax Planning Commission Construction approval formodified route per settle-ment agreement

Fairfax County Board of Supervisors Final approval given modifiedroute

APPENDIx A 95


Fairfax Board of Zoning

Charles County

Calvert County

Fairfax County\

State of Maryland

Prince Georges County

Loudoun County

Loudoun County Planning Commis-sion

Maryland Department of NaturalResources

Maryland Department of NaturalResources

Z o n i n g a p p r o v a l g i v e nmodified route

Pipeline construction reportfiled

Pipeline construction reportf i l e d

Sediment and erosion controlplan approved

License to cross Calvert CliffsState Park

Special ordinance authorizingpipeline construction

Sediment and erosion controlplan filed-permit not re-quired

Pipeline route approved

Surface water appropriation 3/29/76for hydrostatic test

Permit for discharge of test 3/29/76water

3/10/75

5115175

6/30/75

8/22/75

9/29/75

11/24/75

1/23/76

1/26/76

Appendix B

Council on Environmental Quality. The FPCsubmits preliminary and final environmentalimpact statements to CEQ for review.

Department of Defense. DOD is consulted by theFPC for views on national security implicationsof each LNG import application.

Department of the Interior. Permits are requiredif construction or operation of a terminal affectswildlife in the area.

Department of State. State is consulted by theFPC for views on national security implicationsof each LNG import application.

Environmental Protection Agency. Permit is re-quired from EPA if there are any discharges intothe ocean adjacent to an LNG terminal.

Export-Import Bank. Provides loans to foreigngovernments to support purchases of U.S. goodsand services in the construction of liquefactionand related LNG facilities.

Federal Agencies Involvedin LNG Import Projects

Federal Power Commission. The FPC regulatesimportation and the interstate transportationand sale of natural gas.

Office of Pipeline Safety Operations. OPSOestablishes and enforces minimum Federalsafety standards for all pipelines in or affectinginterstate or foreign commerce.

U.S. Army Corps of Engineers. Permit is re-quired for any dredging activity and construc-tion of any object in the navigable waters of theUnited States.

U.S. Coast Guard. The Coast Guard is responsiblefor the safety of the marine link of LNG importoperations, by certification of LNG ships to en-sure that minimum design and constructionstandards, and the establishment of operatingprocedures for bringing LNG into U.S. ports.

U.S. Maritime Administration. MARAD pro-vides a variety of financial aids for the construc-tion and operation of U.S. flag LNG tankers.

F e d e r a l C o m m u n i c a t i o n s C o m m i s s i o n .Licenses are required for radio operations.

96

Appendix C

Laws and CasesRelevant to LNG

STATUTES AND EXECUTIVE ORDERS

Administrative Procedures Act, 5 U.S.C. §§551et seq (1970)

Establishes the minimum procedures whichagencies of the executive branch must follow inestablishing rules and regulations.

Admiralty Extension Act of 1948, 46 U.S.C. §740 (1970)

Provides that admiralty jurisdiction is to extendto all injuries caused by a vessel even if suchdamage or injury is “done or consummated” onland.

Coastal Zone Management Act of 1972, 16U.S.C. $$1451 et seq (Supp. 1972)

Authorizes the Secretary of Commerce to makeannual grants to any coastal State to assist indeveloping a management program for land andwater resources of its coastal zone. Such grants arecontingent on approval by the secretary of theState’s program, i.e. that it meets certain criteriaspecified in the Act. After approval of a State’sprogram, no Federal permit or license for an ac-tivity affecting that State’s coastal zone unless thatactivity has been certified as consistent with theState’s program.

Dangerous Cargo Act, 46 U.S.C. §170 (1970)

Directs the Coast Guard to identify al ldangerous cargoes, prescribe regulations establish-ing standards for containers and handling of ex-plosives and other dangerous cargoes and for in-spection to ensure compliance with these regula-tions.

Department of Energy Organization Act o f1977, P.L. 95-91

Creates a new Department of Energy consolidat-ing many of the energy organizations of Govern-ment. Of particular interest to LNG is the creationof semiautonomous Federal Energy Regulatory

Commission, which will absorb many of the func-tions of the Federal Power Commission as theyrelate to LNG. The major exception is that theSecretary of Energy will have authority to approveor disapprove import applications.

Executive Order 10173-Regulations relating tothe safeguarding of vessels, harbors, ports, andwaterfront facilities of the United States.

Authorizes the Coast Guard to “supervise andcontrol” the transportation, loading and unload-ing of dangerous cargoes. Also allows the CoastGuard to require owners and operators to obtain aCoast Guard permit for the waterfront facilitiesused in the handling of such cargo. (The CoastGuard does not currently require such a permit. )

Federal Water Pollution Control Act, Amend-ments of 1972, 33 U.S.C. §§ 1251 et seq (Supp.1972)

A comprehensive act aimed at cleaning up theNation’s waters. Discharges of pollutants requirepermits administered by EPA and the Army Corpsof Engineers. In certain cases, this permit authoritymay be delegated to the States.

National Environmental Policy Act of 1969(NEPA) 42 U.S.C. §4321 et seq (1970)

Provides that each “major Federal action sig-nificantly affecting the quality of the human en-vironment’ must be preceded by an analysis ofthat action’s environmental impact.

Natural Gas Act of 1938, 15 U.S.C. §§ 717a et seq(1970)

Gives the Federal Power Commission b r o a dpowers to regulate imports, exports, and the inter-state transportation and sale of natural gas. UnderSection 3, no imports or exports may proceed with-out an order from the Commission. Under SectionF, no facilities for interstate transportation or sale

97

98 APPENDIX C

may be constructed without a certificate of publicconvenience and necessity from the Commission,The Commission’s authority over interstate salesof natural gas includes setting the prices at whichthe gas is sold.

Natural Gas Pipeline Safety Act of 1968, 49U.S.C. $$1671 et seq (1970)

Authorizes the Secretary of Transportation toset minimum Federal safety standards forpipelines, establishes a cooperative State-Federalenforcement program, and provides for Federal aidto States to bring State standards up to the level ofFederal standards.

Outer Continental Shelf Act, 43 U.S.C. $$1331et seq (1970)

Declares U.S. jurisdiction over the subsoil andseabed of the Outer Continental Shelf andestablishes the system for Federal leasing of theselands for resource development.

Ports and Waterways Safety Act of 1972, 33U.S.C. $$1221 et seq (Supp. 1972)

Title I provides that the Secretary of the Depart-ment in which the Coast Guard is operating mayprescribe standards and regulations to promote thesafety of vessels and structures in or adjacent to thenavigable waters of the United States and $0 pro-tect such waters and their resources from environ-mental harm due to vessel damage or loss.

Title II provides that the Secretary shallprescribe minimum design, construction, andoperation standards for vessels carrying certaincargoes in bulk (e.g. oil).

Shipowners Limitation of Liability ACt 46U.S.C. §§181 et seq (1970)

Provides that shipowners may limit theirliability after an accident involving their vessels tothe value of the vessel and its cargo after the acci-dent. An exception is made for loss of life or bodilyinjury, in which case liability is limited to $60 perton of the vessel.

Submerged Lands Act 43 U.S.C. §§ 1311 et seq(1970)

Provides for State resource management of theseabed out to a distance of 3 miles from shore (3marine leagues in the case of the States borderingthe Gulf of Mexico). The Federal Government re-tains control over the waters over such lands forpurposes of commerce, navigation, nationalsecurity, and international affairs.

C A S E S A N D F P C O P I N I O N S

Distrigas Corporation v. Federal Power Com-mission, 495 F.2d 1057 (D.C. Cir. 1974).

Decided that the FPC may, under the NaturalGas Act, impose the equivalent of Section F cer-tification requirements for LNG imports even if thegas is to be sold intrastate. This authority is discre-tionary, and must be preceded by the Commission’s ●

finding such requirements to be necessary to pro-tect the public interest.

Federal Power Commission, Opinion No.795, Trunkline LNG Company and TrunklineGas Company, Docket Nos. CP74-138, 139, 140,issued April 29, 1977.

Opinion No. 796-A, Issued June 30, 1977.

The first Trunkline opinion ordered incrementalpricing and conditioned the certification uponTrunkline compliance with all other Federal,State, and local laws and regulations. In the sec-ond opinion, the FPC reversed itself as to pricing(allowing rolled-in pricing) but kept its condition ofcompliance with other laws and regulations.

Washington Department of Game v. FederalPower Commission 207 F.2d 391 (9th Cir.1953); Federal Power Commission v.Oregon, 349 U.S. 435 (1955); City of Tacomav. Taxpayers of Tacoma, 357 U.S. 320 (1957).

The above cases conclusively determined that, inthe permitting of hydroelectric facilities, thejurisdiction of the Federal Power Commissionpreempts that of any State commission or body.

Transcontinental Gas Pipe Line Corp. v.Hackensack Meadowlands DevelopmentCommission, 464 F.2d 1358 (3d Cir. 1972),cert. denied, 409 U.S. 1118 (1973).

Action by natural gas company to enjoinregional development commission from interferingwith an LNG peak shaving facility. Subsequent tothe construction of the facility, New Jersey passed alaw establishing the Hackensack MeadowlandsDevelopment Commission. The gas company, wish-ing to construct an additional storage tank at thefacility, secured a certificate of public convenienceand necessity from the FPC. The HackensackMeadowlands Development Commission, however,refused to issue a permit for the addition. TheFederal courts enjoined the State commission frominterfering, finding its refusal to grant a permit anunreasonable restraint on interstate commerce.

Appendix D

Congressional Hearings Conducted onLiquefied Natural Gas

U.S. Congress Senate Committee on Com-merce. Hearing on S. 2064, 93d Congress, 2d ses-sion. 1974.

The Committee hearings were held on June 12,13, and 14. The Bill was introduced by SenatorsMagnuson and Cotton June 25, 1973, to amend thelaws governing the transportation of hazardousmaterials. The Bill:

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2.

. S

“Would provide additional methods of en-forcement, extend regulatory coverage andremove existing restraints upon the Secretaryof Transportation to delegate regulatoryauthority.’

Review hazardous material statutes andevaluate Federal agency responsibilities andjurisdictional overlaps concerning transpor-tation of hazardous materials.

U.S. Congress House Committee on Interstateand Foreign Commerce. Special subcommit-tee on investigations. Legislative issues relatingto the safety of storing liquefied natural gas.Hearings, 93d Congress, 1st session. July 10-12,1973. Washington, D. C., U.S. Government Print-ing Office, 1976.

The hearings focused on the Staten Island ex-plosion February 10, 1973. To obtain legislative in-formation, the subcommittee investigated:

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U.S.

the enforcement and adequacy of storage-tank safety regulations;

FPC and OPSO LNG safety responsibilitiesauthorized by the Natural Gas Act of 1938and the Natural Gas Pipeline Safety Act of1968;

the question; “Is the state-of-the-art ofcryogenic storage sufficiently advanced to besafe?’

Congress House Committee on Interiorand Insular Affairs, Subcommittee on PublicLands. Alaska Natural Gas Transportation

System. Hearings, 94th Congress, 1st session,October 9, 1975. Washington, D. C., U.S. Govern-ment Printing Office, 1975. 340 p. serial no.94-36.

This report delves into the land-use implicationsof the three proposed natural gas systems. The en-vironmental as well as social impacts of each of theapplications are discussed.

U.S. Congress Senate Committee on Interiorand Insular Affairs/Committee on Com-merce. The transportation of Alaskan naturalgas. Hearing, 94th Congress, 2d session, part 1and 2, February 17, 1976. Washington, D. C.,U.S. Government Printing Office, 1976.1515 p.serial no. 94-29.

The purpose of the hearings was to exploreenergy, economic, and environmental policy issuesin connection with the production and transporta-tion of the Prudhoe Bay gas reserves. The discus-sion revolved around the necessity for additionalgas, gas distribution, and financial arrangementsfor the proposed project.

U.S. Congress Senate Committee on Interiorand Insular Affairs/Committee on Com-merce. The transportation of Alaskan naturalgas, Hearings, 94th Congress, 2d session, part 3.March 24 and 25, 1976. Washington, D. C., U.S.Government Printing Office, 1975.2030 p. serialno. 94-29, (Commerce), 94-29 (Interior).

The hearings concentrated on four bills, S. 2510,S. 2778, S. 2950, and S. 3167. S. 2510 was in-troduced by Senator Gravel on October 9, 1975.The bill requires that the FPC make a decision byJune 30, 1976, on the applications posed by El Pasoand Alaska Arctic Gas. S. 3167 also introduced bySenator Gravel is another attempt to expedite anFPC decision on the gas pipeline proposals. S. 3167directs the FPC to make a decision and transmitthat decision to the President by January 1, 1977.By February 1, 1977 the President would have re-quested agency reports. The reports would be due

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100 APPENDIX D

by August 1, 1977, and the President’s decisionforthcoming. S. 2778, introduced by SenatorStevens, requires the FPC and other Federal agen-cies to approve only those gas transportationsystems located in the United States or subject tointernational jurisdiction. S. 2950 introduced bySenator Mondale requires that all appropriateagencies provide the necessary permits and ap-provals to authorize the construction of the ArcticGas pipeline. The Bill waives NEPA procedural re-quirement.

U.S. Congress House Committee on Interstateand Foreign Commerce. Subcommittee onEnergy and Power. Transportation of Alaskannatural gas. Hearings, 94th Congress, 2d session.May 17-19, 1976. Washington, D.C. U.S.Government Printing Office, 1976.

The hearings revolve around 14 separate billswhich would either expedite administrative pro-cedures for selecting a delivery system and limitagency judicial review actions or allow Congress toselect the route.

U.S. Congress House Committee on Interiorand Insular Affairs. Subcommittee on IndianAffairs and Public Lands. Transportation ofAlaskan natural gas. Oversight Hearings 95thCongress, 1st session. February 17, 1977 Part 1.March 17, 18 and 29, 1977 and April 5, 1977Part 2. Washington, D. C., U.S. GovernmentPrinting Office, 1977.

The purpose of the hearings was to gatherdetailed and comprehensive information on thethree methods of transporting Alaskan natural gas.The three proposals are the El Paso Alaskan LNGproject, the Alaskan Arctic gas project, and theAlcan or Alaskan Highway project. Representa-tives from the gas industry, American and Cana-dian labor unions, environmental organizations,public officials, academicians, and Canadian In-dians presented their proposals and various argu-ments.

Appendix E

Proposed Legislation ConcerningLiquefied Natural Gas

H.R. 6844, Dingel (D-Mich.), introduced on May3, 1977, and referred to the Committee on Inter-state and Foreign Commerce. The bill would:

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2.

3.

4.

direct the Secretary of Transportation to issuerules and regulations for siting, construction,and operation of LNG facilities;

require a permit from the Secretary ofTransportation prior to construction andoperation of an LNG facility;

provide for a limited State veto over projectapproval where a facility would be located inan area with a prescribed population density;and

direct the President to make a 10-year pro-jection of the need for liquefied natural gasimports.

Staff Working Paper No. 1, November 12, 1976,prepared by Senate Commerce Committee staff.The draft would:

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3.

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5.

6.

require a license from the Secretar y o fTransportation for the siting, construction,and operation of LNG facilities;

prescribe procedures for granting such alicense;

direct the Secretary of Transportation toprescribe siting criteria for LNG facilities;

provide for State veto over LNG facilities;

provides for strict liability, with upper limits,for LNG accidents; and

establish a fund to compensate claims overand above the limits on company liability.

U. S. GOVERNMENT PRINTING OFFICE: 19’7’7 O -96-597101

Documents

Transportation of Liquefied Natural Gas