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PGW drops talks with Hess over LNG terminal

By Jennifer Lin, Inquirer Staff Writer
Sat, Mar. 18, 2006

The city-owned utility said it still remains "committed" to such a plan. The mayor was in favor; City Council was not.

The Philadelphia Gas Works said yesterday that it has broken off nine months of talks with Hess LNG to develop a terminal on the Delaware River for importing liquefied natural gas.

But a PGW spokesman said the city-owned utility has not given up on the idea.

"We still remain committed to the development of an import terminal," Doug Oliver, a PGW spokesman, said. "It's not that the project is not occurring, it's just that these specific negotiations have ended."

A late call to the headquarters of Hess LNG in New York was not returned.

Oliver said that since July, PGW had been negotiating exclusively with Hess to develop a terminal for liquefied natural gas (LNG). The project would use the company's existing storage tanks in Port Richmond.

Mayor Street endorsed the idea as a way of bringing much-needed revenue to the struggling utility. But in recent months, political opposition has mounted.

Last month, City Council, which would have to approve any deal, overwhelmingly passed a resolution denouncing the project.

"That was a clear message we sent to PGW," City Councilman Frank DiCicco said.

He said the breakdown in talks "gives us more time to think about where PGW is going with this notion of LNG and will let us involve the community more in the process."

A PGW project would be the second LNG terminal proposed for the Delaware River. The oil giant BP has received federal approval to construct a terminal in Logan Township, Gloucester County. But that project remains stalled by litigation between Delaware and New Jersey.

LNG is natural gas cooled to minus 260 degrees. Although the LNG shipping industry has a strong safety record, homeland-security experts are concerned that tankers could become terrorist targets. A tanker leak could cause a vast flammable vapor cloud.

Last month, State Sen. Michael Stack and Rep. Michael McGeehan, both Democrats from Northeast Philadelphia, toured Boston Harbor with the U.S. Coast Guard to see first-hand how LNG is imported into a major metropolitan area.

Stack said elaborate security measures are taken to protect LNG tankers. "I was relieved they are doing this in Boston and not Philadelphia," Stack said. "It's not a project we should be considering at all. There are way too many issues that would come into play."

Oliver of PGW said the talks did not break down over security issues.

He said an LNG project would allow PGW to partner with an importer of natural gas in a long-term arrangement, thereby locking in a supply for PGW customers at predictable prices.

"It was those requirements for our customers that we were unable to agree on," Oliver said.

In a news release, the company said the project could generate "tens of millions of dollars" in annual revenue for PGW - money that could help to cut debt, reduce lending needs and offset costs.

Thomas Knudsen, president of PGW, said controlling costs for the gas utility would help to stabilize gas bills, which have risen steadily.

"The status quo is no longer acceptable," Knudsen said. "We must find ways to maximize our assets to stabilize gas bills for our customers."

Contact staff writer Jennifer Lin at 215-854-5659.


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Last modified: 20 March 2006

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