Monday, April 28, 2008

Broadwater Will Appeal New York State's Rejection of its LNG Proposal

No huge surprise here, but Broadwater has officially said it intends to appeal New York State’s rejection of its proposal to put a LNG terminal in Long Island Sound.

Broadwater’s lawyers have written to the Federal Energy Regulatory Commission asking if it would assemble the material needed for the appeal to the Secretary of Commerce (which makes sense, since all the material was submitted to FERC) and also asking FERC to let them know if they won’t be able to do so before the May 12 appeal deadline. If they can’t meet the deadline, Broadwater will ask for an extension.

The letter from Broadwater’s lawyers is here.

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11 Comments:

Blogger Sam said...

Tom that Broadwater post was just a wee bit too close to your posting about a 26-toilet mansion, although it seems perfectly fitting in this case. Makes me wonder if they have irritable bowel disease or something?
-sams

9:28 PM  
Blogger Nan Patience said...

Not that there's anything wrong with people with irritable bowels.

But seriously, are these lawyers serious? What are they up to?

9:15 AM  
Anonymous Bryan said...

Well, Islander East appealed CT's decision of CZMA inconsistency to the Secretary of Commerce and prevailed. The Secretary over-ruled CT. So it's possible, but not very probable that it could happen again.

3:19 PM  
Anonymous Bryan said...

I found this summary of appeals being upheld or denied after posting that last comment.

3:24 PM  
Anonymous africa jen said...

I've thought since March the Shell/Broadwater exec's will guide their next steps with some involved cost benefit analyses. They've been very quiet the last couple of weeks, but it's not becuase they've been crying in their beer. They've been furiously busy, I'm sure, with lunch dates in Washington and using programs like "Crystal Ball" and similar predictive software.

I'm guessing they'll create predictive models looking at approval scenarios with different sets of assumptions, budgets, variability's, risk, uncertainty, predictions of behavior by different government officials, etc. (For anyone who has worked with these programs before, can you imagine? For this $700 million - $1 billion project where they have public outrage, PO'ed Governors and heightened scrutiny over environmental degradation/liability, what I wouldn't give to see the set of assumptions they hand their computer geeks to work with. Or actually, it might cause cardiac arrest in anti-Broadwater folks.)

This appeal is pretty cheap for them, it's easy and they have friends in high places at the Dep't. of Commerce. So essentially they have very little to lose. If they get no where, they'll probably start looking at models involving costs of extended litigation VS a series of future outcomes, and if the project will still be competitive if Exxon or others moves full speed ahead with alternatives that may make it to the approval line before them. If it all shows poor success predictions, Shell will probably decide their 'business model has changed' and abandon the project. If it looks good, they'll push on with mind-blowing vengeance.

4:41 PM  
Anonymous Bryan said...

Islander East appealed CT's CZMA decision and I expect there are people on LI who are glad they did, given the outcome so far. In fact, I don't recall hearing that anyone was upset that they appealed, besides the folks in CT.

And I haven't heard that anyone on LI changed their position to now oppose Islander East.

7:13 PM  
Blogger Nan Patience said...

huh?

5:25 PM  
Anonymous Bryan said...

Nan,
Not sure what you're "huh" means. Are you looking for some background info on Islander East or questioning my comment? Either way, I'd be happy to elaborate.

11:18 PM  
Blogger Nan Patience said...

I'm sort of a layperson, and you're all obviously extremely well versed. I barely understand a word anyone said.

9:36 AM  
Anonymous Africa Jen said...

Nan:

A predictive computer program can take all kinds of estimated information (usually from past sales history or other quantifiable data, such as 'days to get an approval based on other similar passed legislation') , and then calculate profits and the odds of something happening or not happening.

To give a very simplified version, and I'm REALLY making some stuff up here, but let's say Shell wants know:
1) how much to invest in the Broadwater fight and how long to keep it up
2) how much profit they may realize with different amounts / time frames they pay and wait
3) the percent chance that any of the above scenarios will successfully happen.

So they use a predictive program (one very sophisticated one is aptly called 'Crystal Ball') and tell their computer nerds to input all kinds of information like the following:

"We predict $2.5 billion profit in the next 10 years based on historical LNG sales data of 99% accuracy and data 75% accurate showing prices for LNG will rise 7% a year',

"we assume 100% of the LNG comes from our own new source in Nigeria so we have 95% control of the supply" (read: Shell's income stream is assured to not be interrupted),

"We assume a 70% chance we can rely on the NYC Mayor's quiet promise he will use Broadwater's LNG for the next 20 years, and we assume NYC demand will increase 5% a year,

we give a 60% chance CT Blumenthal will mess us up at the Dept. of Commerce and courts, but if we pay this lobbyist $20,000,000 past history shows 80% of the time Bloomie's opposition can be reduced to 50%,

We estimate a 30% chance of an $400 million accident in 10 years but a 35% chance we will be held liable for 20% of the damage,

We estimate with 70% accuracy that Litigation will cost us $20 million and 24 months, after which we have a 50% chance Exxon will beat us to 60% of Broadwater's proposed market...

... Blah blah blah. You get the idea. It can go on for hours.

The nerds work hard and come back with stuff like: "under scenario #1, there is a 43% chance we'll make $1 Billion in profit. If you increase the lobbyist fee to $50,000,000, it will increase to 51%, but ROI is down to 7%, and assume the NY DEC will not tighten regulations that affect us. Blah blah blah.

Then the Shell exec's have data to make an informed choice of action. If they say " hey, I can make the same profit with 80% less investment, and in half the time in China', they may decide "our business model has changed" and they'll board up their Riverhead office space.

But, I suspect this won't happen. Metro NY is a tremendous market, and they want the huge enchilada.

I know this sounds really confusing, and the programs can be very involved. It's also pretty sad I know this and think about their next strategy, I suppose. but this is the way may businesses make lots of decisions: believe me, Shell does this same thing when determining where to explore for gas and oil sources. It tells them, 'which place is our money best spent to maximize profits within a 90% chance we will get a 10% ROI?'

Airlines use similar models to figure out fares and how many first/business/coach seats to install in their planes, and Department stores use it to determine how and when price/mark items down, based on past sales and profits realized. They tell the program to spell out how many to sell at what prices to maximize profit.

Phew. Now, the quiz will be tomorrow at 10AM, folks!

1:47 PM  
Anonymous Tom Andersen said...

Bryan and Sam (loyal readers), Nan and Africa Jen (whoever you are), thanks for the analysis and the wisecracks.

To the two of you who live on LI (and not in Texas), feel free to keep my up to date with other issues out there that I might want to write about, now that Broadwater is sort of fading into the past.

3:16 PM  

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