US embassy cable - 05NASSAU851

C O N F I D E N T I A L SECTION 01 OF 03 NASSAU 000851 
 
SIPDIS 
 
E.O. 12958: DECL: 05/03/2010 
TAGS: ENRG, EPET, EINV, PREL, PGOV, BF, Energy and Environment 
SUBJECT: DECISION ON LNG PROJECT STILL PENDING 
 
Classified By: Ambassador John Darrell Rood, Reasons 1.4 b and d 
 
1.  (C) SUMMARY:  Representatives from the U.S.-based AES 
Corporation visited the Ambassador on April 27 to discuss the 
status of their proposed $650 million Liquefied Natural Gas 
project.  AES expressed its frustration at the inability to 
get a final decision from Prime Minster Perry G. Christie, 
whom they claim is delaying a decision in an effort to get 
them to withdraw so he will not be blamed for the project's 
failure.  AES is the current front-runner to get the LNG 
project.  Opposition has centered on the impact any possible 
environmental damage would have on the Bahamian tourist 
industry.  END SUMMARY. 
 
2.  (U) The Bahamian government is currently considering a 
pair of competing proposals for a Liquefied Natural Gas (LNG) 
facility and pipeline in The Bahamas.  Both projects would 
include an import terminal, a re-gasification plant, and an 
undersea pipeline to South Florida, in addition to other 
support infrastructure.  Florida Light and Power is expected 
to be the final customer in the U.S. 
 
 
AES Proposal for Ocean Cay 
-------------------------- 
 
3.  (U) U.S.-based Applied Energy Services Corporation (AES) 
has proposed a $650 million project to build an LNG facility 
on Ocean Cay in the northern Bahamas. 
 
4.  (U) Ocean Cay is a 95-acre man-made island situated 20 
miles south of Bimini and 65 miles east of Miami.  It was 
built in 1970 as a site for aragonite dredging and 
processing.  AES proposes to construct a LNG importation and 
regasification facility; a Liquefied Petroleum Gas (LPG) 
removal plant; a seawater desalination plant; and an undersea 
Natural Gas (NG) supply pipeline.  The proposed pipeline 
would be constructed of steel and extend approximately 64 
kilometers from the Ocean Cay site to a connection point at 
the U.S. Exclusive Economic Zone (EEZ) boundary.  Linkage 
would be made from there to the Ocean Express Pipeline, 
which, in turn, would transport the Natural Gas to South 
Florida for distribution. 
 
5.  (U) AES Ocean LNG Ltd. submitted an Environmental Impact 
Assessment (EIA) to the Bahamian government in 2003.  The 
Bahamas Environmental Science and Technology (BEST) 
Commission contracted U.S.-based ICF Consulting to review the 
EIA and opened it for public comment in November 2003.  The 
BEST Commission completed its review and forwarded the EIA to 
the Cabinet for approval.  AES was issued U.S. Federal 
Environmental Regulatory Commission (FERC) approval in 
December 2003. 
 
6.  (U) The Applied Energy Services Corporation (AES) is a 
U.S. company founded by two former U.S. Government officials 
in 1981.  It is listed on the S&P 500 and operates power 
generation facilities in 27 countries around the world, 
including an LNG terminal and natural gas pipeline at AES 
Andres in the Dominican Republic.  Its Ocean Cay project 
would be operated by AES Ocean LNG, Ltd. 
 
 
AES Representatives Visit Ambassador 
------------------------------------ 
 
7.  (C) AES officials Aaron Samson and Scott J. Taylor and 
their locally retained attorney, H. Campbell Cleare, III, 
visited Ambassador Rood on April 27 to provide an update on 
their LNG proposal and to request assistance in dealing with 
an indecisive Christie cabinet.  Samson explained that AES 
has already spent over $55M on this project, an agreement in 
principle has been signed, and the Prime Minister will not 
speak to them because there are no other requirements that 
AES must satisfy.  Attorney Cleare said that the PM has 
difficulty with the project because of his concerns about any 
accident at an LNG facility on tourism and wants to delay the 
LNG project as long as possible. 
 
8.  (C) Cleare suggested that the Prime Minister orchestrated 
the recent public battle between Cat Cay resident and LNG 
opponent Manny Diaz and LNG advocate Minister Leslie Miller 
on Cat Cay (see para 12) as part of his strategy to delay the 
project until AES gives up and pulls out.  If AES withdraws, 
PM Christie believes he will not be held responsible for the 
failure of the project.  Nevertheless, the PM has told both 
Ambassador Rood and Cleare that the project will be approved. 
 
9. (U) AES officials are especially frustrated with Bahamians 
and complained that although they have visited an operating 
AES LNG plant and seemed to be convinced of its safety, they 
now fail to speak out in favor of an LNG plant on Ocean Cay. 
 
10. (U) At an April 20 meeting attended by visiting Caribbean 
Affairs Director Brian Nichols and DCM, David Davis and 
Ronald Thompson of the Office of the Prime Minister said on 
the topic, without elaboration or explanation, that, in their 
opinion, "LNG is dead."  After being asked about this 
comment, Foreign Minister Mitchell assured the Ambassador 
that no decision has been made. 
 
 
Tractabel/El Paso Proposal for Grand Bahama 
------------------------------------------- 
 
11.  (U) Tractabel North America (a subsidiary of a French 
giant Suez) and El Paso in December 2004 united what had been 
independent bids for the LNG project.  The partnership is 
expected to utilize El Paso's "Seafarer Pipeline" location at 
South Riding Point in Eastern Grand Bahama, a site with fewer 
environmental concerns than the facility in Freeport Harbour 
that Tractabel (and the Grand Bahama Port Authority) had been 
advocating.  Neither Tractabel nor El Paso have yet received 
Bahamian environmental approval for their project. 
 
 
Impact on Economy 
----------------- 
 
12. (U) Minister of Trade and Industry Leslie Miller, the 
government's chief proponent of LNG, estimates the project 
will generate approximately $40 million in average annual 
revenues over the course of the next 25 years, for a total 
contribution to the public treasury of nearly $1 billion. 
The project is also expected to create about 450 jobs during 
the construction phase and 25-35 permanent positions 
thereafter. 
 
 
Debate Gets Nasty 
----------------- 
 
13.  (U) Residents of Cat Cay, an island eight miles from 
Ocean Cay, held a public forum to discuss LNG on April 3. 
Minister Miller, present to represent the government, walked 
out of the session during the showing of an anti-LNG video 
commissioned by some of the residents.  After returning to 
the event, Minister Miller had a heated exchange with Manuel 
Diaz, president of the Cat Cay Yacht Club and a staunch 
opponent of LNG.  The two shouted back and forth, with Mr. 
Diaz referring to Minister Miller as "an idiot" who was 
"behaving like a child." 
 
14.  (U) Local environmental group "Re-Earth" has loudly 
advocated against LNG, focusing on the dangers posed by the 
gas while in transit and while being processed, and the 
potential damage to the air, oceans and marine life in the 
vicinity of the terminal.  Re-Earth launched a "Say No to 
LNG" petition which has garnered approximately 1500 
signatures as of May 2.  Bahamian Ambassador for the 
Environment Keod Smith has expressed his doubts that The 
Bahamas has the regulatory oversight necessary to safely host 
the LNG project.  He also does not believe that The Bahamas 
has the capability to protect the pipeline from potential 
terrorist attack. 
 
15.  (U) Minister Miller alleged in a radio interview on May 
1 that Re-Earth's opposition is getting more media attention 
than it normally might because the group's leader, Ms. Sam 
Duncombe, is white.  Said Minister Miller, "Had this been a 
regular Bahamian of a hue like you and I, it would not have 
been tolerated or she would not have gotten the coverage that 
she has certainly gotten."  The opposition Free National 
Movement (FNM) immediately issued a statement denouncing 
Minister Miller's statement as "wicked and evil."  Minister 
Miller on May 2 said he was sorry if Ms. Duncombe was 
offended by his remarks, which he said were not meant to be 
derogatory. 
 
16. (U)  Both advocates and opponents of LNG have stepped up 
their public relations campaigns in recent days, with ads now 
appearing on a daily basis in the print media and throughout 
the day on radio and television.  The Ministry of Trade and 
Industry and the BEST Commission are scheduled to hold a 
public forum on LNG on Thursday, May 5. 
 
 
Comment 
------- 
 
17.  (C) The consideration of the various LNG proposals 
typifies the slow and opaque decision-making process of the 
Christie government.  Government ministers have been 
promising a decision "in a few weeks" for nearly two years. 
 
18. (C)  Even for the consensus-driven society of The 
Bahamas, the LNG debate has been long, protracted, and 
increasingly bitter.  Some insiders have insisted that 
several members of the Cabinet have personal financial stakes 
in the competing bids and are taking positions within Cabinet 
based on how they will personally profit from the outcome. 
In the end a cash-strapped Bahamian Government may be forced 
to make a decision about an LNG facility so it can start 
collecting the revenue the project will generate. 
 
ROOD