Thursday, August 02, 2007

Tallying LNG savings vs. cost

It's a huge chunk of change, no doubt about it. Broadwater's floating natural gas facility in the Long Island Sound would save New York consumers $14.8 billion over the course of a decade, according to a report prepared for the Long Island Power Authority by Levitan & Associates Inc., a Boston-based energy industry consulting firm.

The $14.8 billion figure is not a reduction in current energy costs. It represents our potential 10-year savings compared to what the equivalent natural gas would cost regional consumers without Broadwater's one billion cubic feet per day.

Still, it's nothing to sneeze at.

Heck, $14.8 billion is how much we're going to spend to wage war in Iraq between now and, oh, the beginning of autumn, approximately 56 days from today.

It's twice as much as Royal Dutch Shell, one of Broadwater Energy's owners, earns in one quarter of its fiscal year. (The company posted a second-quarter profit this year of $7.56 billion.)

Still, East End consumers don't know how much of that savings we'll see. According to the Levitan report, LIPA ratepayers will save $2.7 billion in natural gas costs between 2010 and 2020 if Broadwater goes online. LIPA CEO Richie Kessel — the one-time consumer advocate who, as an energy executive, has presided over what some irate ratepayers argue is a huge pricing scam on consumers, namely the imposition, without regulatory review, of "fuel surcharges" that equal or exceed energy use charges — says that 20 percent of Broadwater's savings for Long Island consumers is just not enough. As the host community for this behemoth, Long Island should get more, Richie says. Long Island should get more PILOT payments, and more "community benefits" — something of a code word for hush money. "Community benefits" help a company buy the silence, if not the support, of community segments that would otherwise oppose a proposed project. Community benefits often consist of cold, hard cash for schools, towns, community organizations. It's a euphemism for "community bribes," if you ask me.

But you can bet Richie will fight for benefits for LIPA — if not LIPA's ratepayers, whom he seems quite willing to skewer.

I've just read Levitan's 157-page "technical assessment" of Broadwater. It was interesting reading, even holding my attention into the wee hours of Wednesday morning.

As LIPA communications director Bert Cunningham noted, the report is "a compilation" and summary of documents from a variety of sources: FERC's DEIS, Broadwater's "resource reports" and responses to FERC's information requests, the Coast Guard reports, and LNG safety studies. As such, it's a handy little document.

LIPA engaged Levitan to prepare this report in April 2005. Originally, according to LIPA's April 20, 2005, board meeting minutes, LIPA was going to use the Levitan report, which Kessel said he expected to have by September 2005, to form a recommendation on Broadwater for the governor's office. LIPA has since backed off that idea. On Tuesday, Kessel said he didn't know if LIPA was going to make a recommendation one way or the other.

Levitan knows LNG very well; senior members of the firm specialize in consulting to the LNG industry and the firm has a long track record with the industry. Given the firm's background, resources and expertise as an LNG industry consultant, it's hard to understand why it took Levitan almost two years longer than first expected to complete its assessment. But it's not hard to understand why the energy industry consultant would focus on assessing the benefits rather than the costs — costs to the economy, the environment, and the government, which will have to provide expensive security for the operation.

What will the total of all those costs be? We still don't know, but it's no mystery who will foot the bill, is it? Open your checkbook.

I'm wondering what we've already spent just reviewing the Broadwater proposal to date. The preparation of the EIS, government staff time to review applications, documents and submittals, publication of notices, public hearings held, legal fees to firms retained by the county and towns to fight it, all of that. I wonder if anyone anywhere is keeping a tab.

One cost we know for sure: the $850,000 LIPA blew on the Levitan assessment report it was supposed to have two years ago, which LIPA now may or may not use for anything. This makes it a ratepayer-funded PR boondoggle for Broadwater Energy, resulting in headlines about multibillion dollar "savings" that don't factor in costs which may equal or exceed those "savings."

That's an awful lot of fuel surcharge money, isn't it?

1 comment:

Nicole said...

Don't get me started on "Community Benefits." This is what has been worrying me from the start. SWR is a school district constantly bemoaning a growing populaton, without enough financial resource. (I think Riverhead has many of the same problems). I spoke with the SWR Board of Ed last fall to remind them that nothing, not even monetary compensation, would make the communities of Wading River and Shoreham approve of this LNG facility floating off our beaches. Our feelings about Broadwater are not for sale.

Also, I'm curious, this large amount of savings - does it take into account the fact that Natural Gas will increase in price similarly to the way oil has. I read that it will most certainly do this, it's just a little behind schedule.

I can't say I'm surprised that Richie would try to use this thing to his benefit. I was wondering why it had taken so long for LIPA to have a comment about Broadwater. I'm so glad they (LIPA, I mean "we") had the resources to spend on this report. It's so helpful for all of us.