Freeport-McMoRan Energy

Freeport-McMoRan Energy LLC David C. Landry 1615 Poydras Street Vice President – General Manager New Orleans, LA 70112 P. O. Box 61520 Telephone: 504-582-4880 Fax: 504-582-4339 New Orleans, LA 70161 Dave_Landry@fmi.com May 5, 2008 Delivered electronically via http://www.regulations.gov Docket Management Facility (M-30) Department of Transportation West Building 1200 New Jersey Avenue, S.E. Room W12-140 Washington, DC 20590 To Whom It May Concern: Re: USCG Notice of Proposed Rulemaking regarding Financial Responsibility for Water Pollution (Vessels) and OPA 90 Limits of Liability (Vessels and Deepwater Ports) [USCG 2005-21780] RIN 1625-AA98 Freeport-McMoRan Energy (FME) appreciates this opportunity to comment on the proposed regulations (USCG 2005-21780) regarding OPA 90 limits of liability for water pollution from vessels and deepwater ports. FME has a vital interest in these proposed regulations because it is developing the Main Pass Energy Hub™ (MPEH™) Deepwater Liquefied Natural Gas (LNG) Port offshore Southeast Louisiana. FME believes that the proposed 33 CFR 138.220(b)(1) addressing “Limits of Liability” fails to acknowledge the provisions of the enabling law, 33 USC 2704(d)(2), allowing adjustments in the limits of oil spill liability for deepwater ports based on the results of a risk assessment study. In support of this concern, FME submits the following comment in response to USCG 2005- 21780: Comment regarding proposed 33 CFR 138.220(b)(1) that reads as follows: (b) The limits of liability for deepwater ports under OPA 90, as amended, are— (1) For a deepwater port other than the Louisiana Offshore Oil Port (LOOP), $350,000,000; …. Proposed 33 CFR 138.220(b)(1) fails to implement the provisions in OPA 90, 33 USC 2704(d)(2)(A) though (C), providing, in part, that the “Secretary shall conduct a study of the relative operational and environmental risks posed by the transportation of oil by vessel to deepwater ports (as defined in section 1502 of this title) versus the transportation of oil by vessel to other ports.” The Coast Guard and Maritime Administration (MARAD) have interpreted this provision to require conduct of the study as a precedent to lowering, from $350,000,000, the oil spill financial responsibility levels for deepwater ports, as evidenced by the deepwater port Records of Decision that MARAD has issued to date. An example of this practice is the provision on page 20 of the Record of Decision issued to Freeport-McMoRan Energy LLC for its Main Pass Energy Hub™ deepwater natural LNG port: “While it is unlikely that the facility could create an oil spill that would require application of the full liability requirements specified in OPA 90, Sec. 2704 sets the limit on liability at $350,000,000. OPA 90 allows the Secretary of the Department in which the Coast Guard is operating (in this case the Department of Homeland Security) to lower that limit to no less than $50,000,000. Since a study of the relative operational and environmental risks of deepwater LNG ports that could result in lowering the limit of liability has not been undertaken, I must now consider whether the applicant has the financial capability to demonstrate responsibility to cover the maximum oil spill liability of $350,000,000 (emphasis added). Once the applicant has demonstrated that they will be able to meet the requirements of OPA 90, in addition to all other requirements and conditions outlined in this Record of Decision, the Secretary will issue the deepwater port license.” [Emphasis added.] The above-quoted Record of Decision provision illustrates that the Coast Guard and MARAD acknowledge the OPA 90 mandate to conduct a study that would facilitate the creation of guidelines to enable them to set appropriate liability levels for deepwater ports. The subject proposed regulation is the proper place for implementation of the requirement of the study and the development of guidelines pursuant to the study’s results. Further, proposed 33 CFR 138.220(b)(1) fails to acknowledge the provisions in 33 USC 2704(d)(2)(C) that allow the limits of oil spill liability of a deepwater port to be reduced to not less than $50,000,000 based on the results of the study discussed above. This should be corrected. FME recommends that the proposed regulation be rewritten to specifically acknowledge this authority to reduce the limit of oil spill liability for deepwater ports in parallel to the provisions in the deepwater port regulations themselves allowing reduction of oil spill liability levels at 33 CFR 148.605(a) and (b). In addition, proposed 33 CFR 138.220(b) should be expanded to describe the nature of any studies that might be required of deepwater port license applicants or license holders and the specific administrative process to be followed to reduce the otherwise required limits of liability of $350,000,000. As such, FME recommends: • Inserting a new 33 CFR 138.220(b)(3) that either references or restates the provisions of 33 CFR 148.605 acknowledging the statutory provisions of 33 USC Section 2704(d)(2) that allow the oil spill liability levels of a deepwater port to be reduced to not less than $50,000,000. • Inserting a new 33 CFR 138.220(b)(4) and additional paragraphs as needed that clarify the administrative process required to reduce the oil spill liability levels for a deepwater port including: o The scope of the required study, to be conducted by the Coast Guard in accordance with 33 USC 2704(d)(2)(A) and (B) to document the reduced risk of oil spills from deepwater ports and the timing for the conduct of such study; and o Provision of clear guidelines for submitting and processing any request to reduce the limits of oil spill liability for a specific deepwater port based on a reduced risk of oil spills. If there are any questions, or if I can be of assistance in any way, please contact me at (504) 582-4880. Sincerely, David C. Landry