Critical Review of Components of LNG Import System

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?

Documents

Critical Review of Components of LNG Import System