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CONSERVATION LAW FOUNDATION
"Defending the law of the land"

Date: May 5, 2004

Governor John E. Baldacci
State of Maine
Office of the Governor
#1 State House Station
Augusta, ME 04333

Governor Craig Benson
State of New Hampshire
Office of the Governor
107 North Main St.
Concord, NH 03301

Governor Donald L. Carcieri
State of Rhode Island Office of the Governor
State House, Room 115
Providence, RI 02903

Governor Mitt Romney
Commonwealth of Massachusetts
Office of the Governor
State House, Room 360
Boston, MA 02133

Governor John G. Rowland
State of Connecticut
Office of the Governor
210 Capitol Ave.
Hartford, CT 06106

Re: Regional Liquefied Natural Gas (LNG) Terminal Siting

Dear Governors Baldacci, Benson, Carcieri, Romney, and Rowland;

As you are all aware, proposals for new Liquefied Natural Gas (LNG) terminals in New England and across the country have become extremely controversial. From my perspective as President of the Conservation Law Foundation (GLF), New England's largest regional environmental oraanization with offices throughout New England, it is apparent that LNG terminal siting is a regional issue of great importance and with significant environmental implications. CLF proposes that as Governors of New England's coastal states, all of you work with the Federal Energy Regulatory Commission (FERC) and other federal officials to address the very complicated and controversial issues associated with LNG terminal siting through a New England region-wide approach.

In our view, it is our key regional policvmakers who ultimately need to engage in finding a solution to this issue that works for all New Englanders. After careful consideration, we believe the solution lies in a regional evaluation of the merits of adding one or more new LNG terminals to New England's energy base and the development of a regional strategic plan for new terminal siting prior to approval of any individual terminal. This evaluation should include examination of opportunities at the state level to reduce overall energy demand through increased efficiency and to reduce demand for fossil fuels through increased use of renewable energies. CLF does not have the answers to these critical questions about terminal siting, but we ask you, as regional policymakers, to develop and evaluate the information needed to make fair and informed decisions about the need for additional terminal capacity in New England and the siting of such terminals. In the end, CLF's objective is to ensure that any new LNG terminal in New England is sited fairly, strategically, in an environmentally protective manner and on the basis of need.

To date, proposals for several potential LNG terminal sites have been advanced in New England, specifically in Maine, Massachusetts and Rhode Island. These proposals, however, are advancing on a community-by-community basis. As such, they are not part of a coherent strategy for evaluating the merits of one or more new terminal(s) for New England generally, or for any particular community specifically. From CLF's perspective, this ad hoc approach has not been effective and will continue to founder. It has pitted New England communities against one another in wrestling with the merits and the risks of specific proposals. This has led to very unproductive results.

One issue that must be addressed is how much natural gas New England needs. There is tremendous variability in forecasts for New England's demand for natural gas. This is in part because many forecasts are made in support of specific agendas. Demand for natural gas in New England is partially driven by an environmental agenda: natural gas is an important transitional fuel until we move to a comprehensive renewable energy base. Simply put, more natural gas supply means lower prices; lower prices mean that cleaner-operating natural ~as plants supply more of New England's energy demand. Indeed, significant air quality benefits would accrue if the natural gas power plants that now make up a substantial portion of the generating base of New England are fully utilized. New England's Independent System Operator forecasts that in 2005 roughly 45 percent of our regional electrical generating capacity will utilize natural gas. The Massachusetts Division of Energy Resources and the US DOE Energy Information Administration similarly forecast a steady rise in the percentage of New England's electricity coming from these plants.

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Analysis by FERC staff estimates that peak monthly natural gas use can be met with the existing import capacity through 2005, and that proposed additions to import capacity would provide adequate capacity through 2010. But that analysis assumes that in addition to planned additions to pipeline capacity, some of which are in construction, by 2010 there will be (a) at least one new major LNG terminal built in Eastern Canada, (b) significant expansion of the existing LNG terminal in Boston Harbor and (c) at least one other new major LNG terminal, or two to three smaller LNG terminals with roughly the same capacity as a single large facility, in New England.

There. are currently four announced LNG terminal proposals in New England and two in Eastern Canada. One proposed terminal for Harpswell, Maine was voted down by the community under very acrimonious circumstances on March 9 and now may be off the table.

That result immediately focused attention on an undefined proposal to build an LNG terminal on Sears Island, in Penobscot Bay, Maine. Three other proposed terminals are clustered at the upper end of Narragansett Bay, Rhode Island. All three would require LNG tankers to travel up the main shipping channel of Narragansett Bay through the heart of Rhode Island waters. There is also an existing LNG terminal in Everett, Massachusetts and many people are concerned about possible future plans for expanding that facility.

New or expanded LNG terminals present significant potential environmental impacts. The risk of a catastrophic event would seem to argue against siting in urban areas such as those in Rhode Island and Massachusetts. While the extent of this risk is the subject of considerable debate, CLF believes that such as risk is, at a minimum, sufficiently credible to require a complete review as part of a regional approach to siting. On the other hand, there are numerous potential environmental impacts to the less populated coastal areas of Maine. One reason the Harpswell site was voted down was due to potential impacts on lobster fishing. Although Sears Island offers access to a deepwater port with suitable infrastructure, it is Maine's largest undeveloped island and the project may require considerable dredging. Sears Island is also located in the upper reaches of Penobscot Bay, a tremendous scenic and natural resource and some of the richest lobstering grounds in the world. More generally, there is also concern that LNG terminal siting, including potential off-shore sites, may provide additional infrastructure that will encourage exploration and development of potential off-shore oil and gas resources such as Georges Bank, long defended by CLF and others from such drilling.

Complicated issues such as these lead us to conclude that the best approach would be regional and strategic and address these issues proactively. There may be several tools that can serve as vehicles for such an approach. One tool could be the development of a programmatic environmental impact statement (EIS) by FERC. The National Environmental Policy Act (NEPA) provides for the preparation of programmatic EISs in order to evaluate "broad actions" geographically (e.g., by region) or generically (e.g., common timing, impacts, alternatives), and anticipates that connected, cumulative or similar actions should be evaluated in a single EIS. =10 C.F.R. 1502.4(b)(c); 1508.25(a)(1)-(3). The programmatic EIS can then be used to facilitate and expedite the preparation of subsequent project-specific EISs ("tiering"), allowing those documents to concentrate only on site-specific issues. 40 C.F.R. 1500.4-5; 1502.4(d); 11-102.10. Alternatively, a separate but equally rigorous regional alternatives study involving federal, state, and private participants could accomplish similar results, leaving the environmental impact analysis to FERC and the individual project proponent(s).

CLF believes that undertaking a regional approach to LNG terminal siting represents an important opportunity to address this controversial issue in a strategic manner and propel consideration beyond the current, site-specific, polarized siting debates. Most importantly to all of us, a more rational approach to LNG siting could help reduce New England's dependence on dirtier fuels like coal and oil while ensuring that the terminal site selection process provides an economically sensible and environmentally acceptable result.

In the coming weeks, my staff will contact your office to discuss your interest in participating in initial meetings designed to advance a regional approach to LNG terminal siting.

I appreciate your time and consideration of this proposal and look forward to working with your office to resolve this issue of utmost importance to New England. You or your staff may also contact me directly at 617-350-0990.

Sincerely yours,

Phillip Warburg, President
Conservation Law Foundation

CC
Mr. Patrick H. Wood, III, Chairman, Federal Energy Regulatory Commission
Robert W. Varney, Regional Administrator, US EPA
Senator Edward M. Kennedy, Commonwealth of Massachusetts
Senator John F. Kerry, Commonwealth of Massachusetts
Senator Olympia J. Snowe, State of Maine
Senator Susan M. Collins, State of Maine
Senator Jack Reed, State of Rhode Island
Senator Lincoln D. Chafee, State of Rhode Island
Senator Judd Gregg, State of New Hampshire
Senator John E. Sununu, State of New Hampshire
Senator Christopher J. Dodd, State of Connecticut
Senator Joseph I. Lieberman, State of Connecticut

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