BP LNG Project Seeks Alternatives After U.S. Court Decision

HOUSTON, April 4, 2008 (Dow Jones Newswires)

BP PLC will explore alternative plans to build a liquefied natural gas plant in New Jersey, including re-routing a 2,000-foot-long dock to avoid Delaware waters after the U.S. Supreme Court ruled in favor of the state's right to block the project.

The Supreme Court Monday gave Delaware the right to decide what is built in the waters surrounding a 12-mile circle around New Castle, Del., which extends into New Jersey's side of the Delaware River.

The decision thwarted the Anglo oil-and-gas major's plans to build a gas import terminal which would need a long dock to allow large tankers carrying the super-cooled fuel to discharge their cargo.

In 2005, New Jersey requested the high court hear its case against Delaware after it denied BP permits to build the dock citing infringement of the state's Coastal Zone Act.

"With that decision in hand we will be redoubling our efforts in evaluating alternatives to a pier in Delaware state waters," said Tom Mueller, a BP spokesman. "We have a variety of options we are exploring."

The case surrounded a more than 100-year-old covenant in which England gave Delaware the water rights within the 12-mile circle of New Castle. The state of New Jersey argued that it had the right to build since the project initiated from its side of the river.

The proposed Crown Landing terminal, to be located near Logan Township, N.J., would be able to receive imports of up to 1.2 billion cubic feet of gas a day, enough to fuel around 5 million homes.

The chosen site was the least environmentally disruptive, Mueller said, and had good access to a gas transmission pipeline grid.

BP said it won't abandon plans to build the project, though alternatives could mean moving the entire site to another location, possibly disturbing wetlands. The company might also have to consider building a new pipeline to link the gas terminal to the pipeline grid.

The court decision comes at a time when U.S. LNG imports are in decline as demand for the fuel rises for household heating and electricity generation, especially in the densely-populated U.S. Northeast.

"We see a need for a project like this in this market area," Mueller said. "Our intent is to continue pushing forward with the project."

BP has no timeframe for the project construction and said only it is "focused on evaluating alternatives to the current pier location/configuration and that analysis will drive our forward timeline."

The original timeframe was to have Crown Landing operational in 2009.

Other projects have faced similar challenges. Weaver's Cove LNG, a joint venture between Hess Corp. and Poten & Partners, has been mired in legal battles with the state of Massachusetts to obtain permits for the project.

HOUSTON, April 4, 2008 (Dow Jones Newswires)