The Quoddy Tides

Eastport, Maine

2010 July 23

Goldman Sachs to sell interest in Calais LNG

by Edward French

Calais LNG stunned opponents of the project for the second time in a week, with its announcement on July 21 that its financial backer, GS Power Holdings LLC, which is a subsidiary of Goldman Sachs, is selling its interest in the project. GS Power Holdings has invested about $24 million in the project so far, and project opponents, pointing to some of the hurdles faced by Calais LNG, have been questioning why the investment banking and securities firm has been continuing to support the project.

A week before, Calais LNG had requested postponement of the hearings on its applications for state permits, which was granted by the Maine Board of Environmental Protection (BEP). That request also stunned opponents, since the company has vigorously sought an expedited review by the state.

The announcement about GS Power Holdings selling its interest in the project to a new financial partner for Calais LNG was contained in a July 21 letter from Calais LNG attorney David Van Slyke to the chair of the BEP, Susan Lessard, requesting a postponement of a conference that was set for July 23 on rescheduling the postponed hearings. In the letter, Van Slyke says Calais LNG anticipates the financial transaction will occur by August 11, but if it doesn't, then the company would expect to withdraw all of its applications filed with the BEP.

Only days before the July 21 letter, Calais LNG partners had reiterated that Goldman Sachs was committed to the $1 billion project and would continue funding it.

Postponement of hearings

The request for the postponement of the hearings had been made on July 13, one day after Calais LNG had mailed postcards to area residents urging them to attend the hearings and support the project and less than a week before the hearings were scheduled to begin.

In response, Sean Mahoney, vice president of the Conservation Law Foundation, commented, "We find it breathtaking that the applicants, who have pushed and pressured and used every bit of political and legal muscle to put the proceeding on a fast track, would seek at the last minute, for what we believe are flimsy reasons, to postpone the hearings." He says Calais LNG had at least three months to resolve the issues for which the company said more time was needed to address.

Lessard, the BEP chair, approved the postponement on July 14, noting, "Postponement at this point in the proceeding comes at a considerable cost in time and resources to the board and the other parties. However, since information needed for the board to make a fully informed decision on the application is apparently lacking, I have reluctantly concluded that the hearing should be postponed." Lessard added that the BEP understands that Calais LNG will sign an agreement to extend the time period for the BEP's review past January 1, 2011, for a period at least equal to the number of days of the hearing postponement. A new hearing date has not yet been established, but it is expected to be in the fall.

In the letter to the BEP making the request, attorney Van Slyke stated that information that has not been provided includes some soils and wetlands data and information sought by the Department of Marine Resources (DMR) regarding fish, lobsters, marine mammals and Marine Patrol resources.

Several intervenors objected to granting the postponement, including Save Passamaquoddy Bay-US and Nulankeyutomonen Nkihtahkomikumon (We Take Care of Our Land), which stated in a letter to the BEP from its attorneys, Ronald Shems and Rebecca Boucher, that "Calais LNG's claim that it only now C three business days before the hearing C realizes that it cannot meet long-standing information requests is not to be believed." The attorneys state that Calais LNG's pre-filed testimony addresses the issues that the company now says it has not addressed. Another intervenor, the U.S. Department of Interior's National Park Service, also stated that Calais LNG had previously provided the information it now maintains is insufficient or the information is "superfluous."

Intervenors supporting the postponement included Maine Workers for a Healthier Environment, the Industrial Energy Consumer Group, the Maine State Chamber of Commerce, Concerned Citizens for Clean and Secure Energy Inc. and the Professional Mariners and Waterway Users of the Passamaquoddy Bay Region. Attorney Timothy Pease, representing the latter two groups, noted that the U.S. Coast Guard's letter of recommendation concerning its waterway suitability assessment for the project should be available in late summer or early fall and that the information concerning navigational safety and port security risk factors would be "vital to the board's assessment of the impact of the project on existing recreational and navigational uses of the waterway."

Following the BEP's decision to postpone the hearings, the coordinator of Save Passamaquoddy Bay, Linda Godfrey, said, "Calais LNG either intentionally kept everyone in the dark up to the last minute, or surprised even themselves in their inability to proceed. The thousands of hours of work and thousands of dollars spent by all parties, and the financial losses to the local economy from the cancellations for lodgings, transportation, meals, security and meeting spaces, to be postponed at the very last moment, is very hard to understand and to justify."

Reasons for postponement

In response to the request for the postponement, Mahoney said, "Either they're concerned that the issues raised with the project are sufficient grounds to deny the applications and/or they have internal problems they're not sharing." Before the announcement about GS Power Holdings selling its interest in the project, he speculated that those problems could involve financing for the project by Goldman Sachs, "which has been footing the bill for a small army of lawyers." He says GS Power Holdings is not only paying Calais LNG's expenses but also the costs for the attorneys for intervenors supporting the project, such as Maine Workers for a Healthier Environment.

Mahoney notes that Goldman Sachs received $10 billion in federal bailout funds, "while the U.S. economy was in the tank." Given the $24 million that Goldman Sachs has invested in the project, Mahoney asks, "Why would any rational investor still be doing this?" He requested that the BEP have a representative from GS Power Holdings present at a July 23 conference on rescheduling the hearings, since none have been present at any of the proceedings so far.

However, Art Gelber, one of the partners in the Calais LNG project, said in a July 15 interview that Goldman Sachs is "still committed to the project," noting, "I have no reason to believe they're still not supporting it." He added, "I'm very serious about proceeding with this project." Ian Emery, the Calais LNG development manager, had echoed, also in a July 15 interview, that Goldman Sachs has been "a strong partner, and they will continue to support us."

Gelber said the reasons for asking for the postponement are the ones outlined in the letter to the BEP from attorney Van Slyke. Emery agrees, saying the team felt it was not ready. "The postponement was related to the lawyers and the scientific studies and not Goldman Sachs," he says, adding that the investment firm "wants to make sure their investment is preserved and protected."

Mahoney, though, believes that "someone at Goldman Sachs took a hard look" at the issues being faced by Calais LNG. Those issues include the Canadian government's opposition not only to LNG tankers proceeding through Head Harbour Passage but also through Canadian waters up to Red Beach. In a June 29, 2010, letter to Maine DMR Commissioner David Littell, Neil Le Blanc, consul general of Canada to New England, wrote, "I have been informed that Board of Environmental Protection (BEP) applicants Calais LNG proposed that LNG tankers follow a course from Western Passage north using the Canadian waters of Passamaquoddy Bay in order to avoid interfering with fishing and lobstering along the Maine coast. You may not be aware that the Canadian waters of the Western Passage and Passamaquoddy Bay are internal waters of Canada and subject to the exclusive jurisdiction and regulation of the Government of Canada." He added that Canada "opposes the passage of LNG tankers through the waters of Passamaquoddy Bay due to the navigational, environmental and public safety risks associated with the transit of these waters."

Emery says that the proposed route in Passamaquoddy Bay is based on input from local Maine fishermen and tries to avoid lobster gear. The LNG ships would follow the same route as the ships that go to the New Brunswick port of Bayside, which go on both sides of the boundary. He adds that some people have suggested that the Canadian government, in opposing the LNG project in Maine, is simply acting to protect the energy hub that the provincial government is developing in New Brunswick.

Another issue faced by Calais LNG, Mahoney believes, is the lack of need for the facility. "The marketplace is saturated with supplies of imported and domestic natural gas already," he says. Mahoney points out that LNG projects across the country are being dropped and existing LNG import terminals are being converted into export terminals. "The reality of this project happening is nil."

Gelber, though, stated back in January that the demand for LNG in the northeastern U.S. is greater than it's ever been, adding that there's an ample marketplace for natural gas for both residential use and for producing electricity.

Mahoney also says the National Park Service has serious concerns about the impact of LNG tankers on the St. Croix Island International Historic Site. Among the park service's concerns, according to information provided to the BEP by park planner John Kelly, are: interference with existing uses of the island; erosion impacts to the shoreline; noise from the terminal and ships; disturbance of archeological resources; impacts on the scenic character; and impacts on air quality from any emissions. Rebuttal testimony pre-filed by the park service disputes a number of statements made by studies conducted for or by supporters of Calais LNG concerning these issues.

Emery says that the National Park Service has "told us they want to be good neighbors and they want to make sure that St. Croix Island is taken into consideration. We're working with them to address their concerns."

In other developments for the LNG project, the Calais Planning Board gave unanimous approval for local permits for the terminal, following a nearly three-hour public hearing on July 12. In addition, the Town of Cutler recently announced its formal support for the project, joining the City of Calais and the Town of Baileyville. In a letter that was sent to the BEP, Selectmen Kristan Porter and Melanie Fergerson noted, "We recognize that Calais LNG has taken into account the concerns of lobstermen who fish Grand Manan Channel. Our area needs a project of this kind, and we believe Calais LNG has fully addressed potential marine and environmental impacts."

Emery says that nearly 1,000 jobs would be created during the construction phase of the project, which is estimated to cost between $800 million and $1 billion. The Calais LNG website says there would be an average of 290 construction jobs over four years and 70 to 80 permanent operations and maintenance jobs. Emery pegs the number of permanent jobs at over 100, noting that additional employment would be provided by the tugboats. Calais LNG has sent a letter inquiring about berthing the tugs at Eastport, and Emery notes that the company has not asked the city to share in the cost for a pier.

"This area has double-digit unemployment and many people are moving away," says Emery about the need for jobs in this region. He adds, "The people of Calais have really stood behind this effort."


© 2010 The Quoddy Tides
Eastport, Maine
Article republished on Save Passamaquoddy Bay website with permission.