During the first nine months of 2006, North America consumed an average of more than 60 billion cubic feet per day (Bcf/d) of natural gas. The United States is the largest energy consumer in the world and is expected to require the largest increase in LNG imports to meet its growing demand for natural gas. LNG only accounted for approximately 3% of total United States gas consumption in 2005.

The California and the Pacific Northwest gas markets are at the end of the North American pipeline system and import over 80% of their natural gas supply from neighboring states or Canada. As a result, these markets are at risk of supply disruptions caused by growth of demand in “upstream” gas markets as gas reserves in North America decline. Currently, there are only five operational LNG terminals in North America, all of which are located on the East or Gulf Coasts of the United States.

North America is one of the largest interconnected natural gas markets in the world consuming more than 75 Bcf/d, of which the United States alone accounts for more than 60 Bcf/d. The U.S. is the world’s largest producer, consumer, and net importer of energy, ranking eleventh worldwide in reserves of oil, sixth in natural gas, and first in coal. In its 2006 Energy Outlook, the EIA forecasts U.S. natural gas demand to grow at an average rate of 1.25% per year, with gas demand increasing from its current level of 61 Bcf/d to 74 Bcf/d by 2025.

In recent years, despite record gas prices and record levels of drilling activity, the production of natural gas in the United States and Canada has failed to increase. Although U.S. unconventional production is expected to increase marginally, Canadian and conventional U.S. gas production, not including Alaska and Hawaii, is projected to decrease. With the continued increase in demand and flat production profile, a potential natural gas shortfall of as much as 13 Bcf/d is forecasted by 2015.

The Company’s Bradwood project is designed as a land-based LNG terminal in a remote location of Oregon on the Columbia River with deepwater channel access, approximately 30 miles inland from the Pacific Ocean. Bradwood is engineered to have an initial sustainable base capacity of 1.0 billion cubic feet per day (Bcf/d), a peak capacity of 1.3 Bcf/d and a pre-engineered capability to expand the base capacity to 2.0 Bcf/d.

Bradwood is the only LNG terminal project in the Pacific Northwest to have completed the Federal Energy Regulatory Commission (FERC) prefiling process, and whose formal applications to the FERC have been accepted into the application process under Sections 3 and 7 of the Natural Gas Act for authorization to construct and operate an LNG receiving terminal and pipeline.

The Company’s Clearwater project has contracted for the use of Platform Grace, an existing oil and gas production platform located in federal waters approximately 13 miles offshore of Oxnard, California, which the Company intends to convert into an LNG terminal.

The Company plans to refurbish and reconfigure the platform for regasification of LNG and to add two floating mooring docks capable of accommodating large LNG carriers. Clearwater is engineered to have a sustainable base capacity of 1.2 Bcf/d and a peak capacity of 1.4 Bcf/d. The platform will be connected by a 13-mile offshore pipeline to the Southern California Gas Co. (SoCalGas) pipeline network and storage infrastructure serving the4.0 Bcf/d Southern California market.

The Company’s Orion project has a target location about 25 miles offshore of Carlsbad, California with direct access to the Los Angeles and San Diego markets. Orion is expected to be designed to include a concrete hull floating storage and regasification unit with a sustainable base capacity of 1.2 Bcf/d, a peak capacity of 1.5 Bcf/d. The Company intends to pursue the development of Orion in conjunction with the approval process of its Clearwater project.

The Company’s three LNG terminal projects are designed to have an aggregate sustainable base capacity of 3.4 Bcf/d and expansion capability that could increase its base capacity to 4.4 Bcf/d.

General and administrative expenses were $27.3 million for the nine months ended September 30, 2006.