National Post's Financial Post & FP Investing - Carrie Tait, Financial Post, with files from Bloomberg News - New York state rejected TransCanada Corp.'s plans to build the first floating liquefied natural gas terminal in the United States yesterday, a decision that investors shrugged off, but illustrates the difficulty involved in building a LNG project in North America, despite escalating demand for fuel.
New York Governor David Paterson effectively squashed plans to build the Broadwater Energy project, a joint venture between TransCanada and Royal Dutch Shell PLC, citing the environmental damage it would cause, and the availability of energy alternatives.
"I would say this is the kiss of death [for the Broadwater project]," said Daniel Shteyn, a utilities and power analyst at Desjardins Securities. "If New York is dead set against it, then ... there is a very high probability that it is dead and done."
That, however, comes as little surprise to analysts and investors.
"Do you know how many LNG facilities have been turned down or blocked? That's more standard than one getting approved," said Bob Hastings, an analyst at Canaccord Adams.
The proposed terminal was slated to be built in Long Island Sound, a long bay just northeast of New York City. LNG is natural gas that has been cooled to liquid form in order to transport it on specially designed ships to markets in need of fuel that are not serviced by pipelines.
New York's dense population is what made it a candidate for a LNG facility. But the massive terminals attract naysayers, arguing the industrial projects are unsafe terrorist magnets and environmental disasters in the making.
Connecticut Attorney General Richard Blumenthal has railed against the Broadwater proposal, and sent a letter to Gov. Paterson threatening to sue, and urging him to nix TransCanada and Shell's plan.
"The environmental costs would be unacceptable to Long Island Sound and the coast of New York," Mr. Blumenthal said yesterday. "There are better, safer, saner alternatives than this environmental monstrosity and public-safety menace."
Fadel Gheit, managing director of oil and gas research at Oppenheimer & Co. Inc., argues that politicians who deep-six LNG facilities are making "myopic" decisions by blocking operations which could help smooth out price spikes when demand for gas surges during cold snaps.
"Both [politicians] should be thrown in the ocean," he said. "There are no safety concerns, no environmental concerns. It is political gimmicks."
The Broadwater design, he said, is sophisticated, safe and clean. "It has all the bells and whistles. It is the Rolls Royce of the industry."
The U.S. Federal Energy Regulatory Commission on March 20 approved the Broadwater proposal on the condition it adopt more than 80 mitigation measures to enhance safety and security issues, as well as to limit its environmental impact.
John Hritcko, senior vice-president and regional project director at Broadwater Energy, said: "We are disappointed and concerned with the [New York State Department of State's] decision. We specifically designed this project to be consistent with the state's coastal management policies and offered a number of additional commitments that would further enhance the state's coastal resources."
The decision did not rattle TransCanada's stock price. Because it was a joint venture, the pipeline giant was only on the hook for about $350-million.