The Quoddy Tides

2007 March 9

New Brunswick seeks to halt FERC review of LNG projects

by Edward French

Two weeks after Canadian Ambassador Michael Wilson wrote to the U.S. Federal Energy Regulatory Commission (FERC) that the Canadian government would use legal means to try to prevent the passage of liquefied natural gas (LNG) ships through its waters to proposed terminals on Passamaquoddy Bay, the Province of New Brunswick submitted a motion to FERC to suspend its review of the applications by Quoddy Bay LNG and Downeast LNG. Those actions led Maine Governor John Baldacci to write to the state's congressional delegation, objecting to Canada's stance and asking the delegation to work with the Department of State in preparing a legal opinion on the right of vessels to travel through Head Harbour Passage.

"Canada has asserted the right and authority to restrict or limit access to the waters of Head Harbour Passage, which forms part of the international waters of Passamaquoddy Bay. This issue is much more about economic development in Maine in general than about LNG," Baldacci wrote in a March 6 letter to Senator Susan Collins. Noting that the port of Eastport is accessed through the passage, he added, "If the Canadian government can dictate the size and types of vessels that can use Head Harbour Passage, they will be able to dictate the economic future of Eastport. This is an unacceptable situation for the State of Maine."

The governor also wrote, "I believe a strong statement on the part of the U.S. government is needed to counter the Canadian assertion of authority to prohibit any form of commercial activity they do not want over international waterways that pass through these waters. Allowing the Canadian action to stand unchallenged could undercut the foundation of international maritime law and create a precedent that could politicize international trade."

Baldacci had recently entered into agreements with New Brunswick Premier Shawn Graham for cross-border cooperation concerning energy and education, but the state and the province are now at odds over the proposed LNG facilities for Passamaquoddy Bay. In making the February 27 announcement that the province was filing a motion to suspend the FERC review, Graham stated, "Following the Government of Canada's decision to deny LNG vessels permission to transit through Head Harbour Passage — a position we fully support — New Brunswick, as an intervenor in the FERC process, has requested a suspension to further consideration of the applications in these proceedings." The province's announcement states that the decision on allowing LNG vessels to transit through Head Harbour Passage is the exclusive jurisdiction of the Canadian federal government and is outside the FERC process. As a result of the ban by the Canadian government, the two LNG terminals under review could not receive LNG vessels, which would make them not viable. The motion submitted by the province refers to a similar case in Long Beach, Calif., in which a terminal developer was requested to show why FERC should continue to review a terminal application when a factor "essential for the project to go forward" was declined.

Tamara Young-Allen, spokesperson for FERC's Office of Energy Projects, says a motion to terminate the proceedings for a project under review is not unusual, but the request usually occurs because the applicant has violated the commission's rulings. She cannot recall any cases where the motion was made because of a jurisdictional issue.

Intervenors have a 15-day period to comment on the province's motion, with the comments posted on FERC's website, under the docket numbers for Quoddy Bay LNG, CP07-35, and Downeast LNG, CP07-52. After that period the commission will respond, but there is no time limit for a response, according to Young-Allen.

FERC Chairman Joseph Kelliher did respond to Ambassador Wilson's letter on March 2, stating that the FERC review would be continuing for the present time. He wrote, "In your February 14, 2007, letter, you identified environmental impacts and navigational safety as concerns and noted that the Government of Canada commissioned a study to review these concerns. However, I understand this study is non-public and has not been shared with the commission. In order for the commission to accurately assess the environmental impacts and navigation concerns, I ask that you send me a copy of the study so we can incorporate it into our record." Kelliher asks that Wilson request the appropriate Canadian environmental, coastal and navigational safety agencies to assist FERC staff and the U.S. Coast Guard as they continue their analysis of the projects. "To date, our requests for information have not been answered beyond an August 1, 2006, commitment from Foreign Affairs and International Trade Canada to provide a response, which we have not yet received," he writes, adding, "The U.S. Department of State is assisting the commission staff and the U.S. Coast Guard to resolve all concerns from the Canadian perspective on these projects."

Under Section 3 of the Natural Gas Act, which concerns the importation of natural gas into the U.S., FERC approval for LNG import facilities involves consultation with the departments of State and Defense. "We're coordinating with all federal agencies," Young-Allen says.

The commission will continue to process the proposals and prepare a draft environmental impact statement (EIS), which will be published on FERC's website and mailed to anyone who requests a copy. The EIS will be open for public comment for approximately 45 days.

Linda Godfrey, coordinator of Save Passamaquoddy Bay-U.S., comments that the letter from Kelliher underestimates the role of the sovereign nation of Canada in the Maine LNG matter. "Canadian citizenry and Canadian assets are at risk from these two projects. Canada knows it, and they have spoken."

She adds, "Canada commissioned their safety study on these proposals for their use, so that they could formulate their national decision. They made their determination and announced it. It is inappropriate for an agency of the U.S. to chide the Canadian government and tell Canada to supply their data for FERC's work."

She also notes that for Kelliher to call these proposals "beneficial" at this point in the review process indicates that FERC has already determined that they are beneficial to the U.S. before the required work of FERC has been completed. "This was a dangerous and ill-timed revelation for Mr. Kelliher to make," she states. "It raises a red flag over the entire FERC process and causes even more attention to be focused on the validity, transparency and credibility of FERC's authority."

LNG developers respond

Concerning the Province of New Brunswick's motion to terminate the proceedings, Brian Smith, project manager for Quoddy Bay LNG, comments, "We were completely caught by surprise, since it's contradictory to the province's previous statements to the press and to U.S. government representatives." Dean Girdis of Downeast LNG says the announcement was "somewhat of a surprise" since Premier Graham had previously indicated that the province would respect the FERC process. Smith questions whether the latest statement from Graham "is his true intention."

Smith says the State Department has assured Quoddy Bay LNG that the FERC process will go forward and that Canada's position is political, not legal, in nature. "The U.S. process will not be held hostage by this position," he says. He says State Department attorneys have confirmed that Head Harbour Passage is subject to the right of innocent passage by vessels. Although the U.S. has not ratified the United Nations' Law of the Sea Treaty that defines the right of innocent passage, Smith points out that Canada has ratified it, and the U.S. has ratified other treaties that have a similar interpretation.

Concerning Head Harbour Passage, Girdis comments, "I can state emphatically that they are territorial waters and as such international passage applies." He believes that if Canada contests the right of passage that an international court would find against Canada.

According to Smith and Girdis, Canada's position does draw into question the right of passage for ships to the port of Eastport and for Canadian ships traveling through U.S. waters on the west coast. "The State Department and the Department of Energy will take this very seriously," says Smith. Girdis is concerned that Canada could restrict other shipping through the passage to the port of Eastport. "It appears that Canada wants a veto right over economic development in Washington County," he states. "That's not fair to the residents of Washington County."

Girdis is concerned that the study commissioned by Canada to review navigational, safety, environmental and other impacts of the LNG projects has not been made available, although he understands that it is not yet finalized.

County commissioners voice displeasure

In response to the comments by Ambassador Wilson and Premier Graham, the Washington County Commissioners sent a letter to Maine Governor John Baldacci stating, "As the single body of government that serves all of Washington County, and only Washington County, we felt it necessary to voice our concern and displeasure with the actions purportedly to be taken by the Canadian government." It adds, "[W]hether one is for or against the LNG proposals for Passamaquoddy Bay, the statement made by Canadian officials goes far beyond the LNG issue. It traverses into the realm of protectionist foreign policy and the pattern of government subsidies that Canada has been allowed suffer upon the people of Maine for much too long."

"It is obvious to this board that the Province of New Brunswick is feverishly trying to protect their investments, while masquerading it as trying to protect its citizens. If the mere passage of LNG tankers through Head Harbour Passage was so dangerous that it warranted this intrusion, obviously in their line of thinking the danger of locating an LNG facility in one of New Brunswick's most populous cities would surely require that they prevent its sighting on its own soil. Evidently this is not the case, as yet again it appears that Canadian interests go a long way to trump Canadian concerns."

"The county commissioners cannot stress our displeasure with the actions of the Canadian officials strongly enough. We agree that the Canadian government has a duty and responsibility to ensure the well being of their citizens. However, it cannot, and will not, be at the expense of the people of Washington County."