PROVIDENCE, R.I. – A plan to build a liquefied natural gas terminal in Fall River, Mass., suffered a setback Friday when environmental regulators rejected a proposal to dredge Mount Hope Bay.

The decision by the Rhode Island Department of Environmental Management marks the second time a state government has hampered a plan by Weaver’s Cove Energy and Hess LNG to build a terminal on the Taunton River.

The companies want permission to dredge a 40-foot-deep navigational channel along Mount Hope Bay so its tanker ships can reach the terminal site. Right now, that channel varies in depth, making navigation difficult for large vessels, said Jim Grasso, a spokesman for Weaver’s Cove.

Company officials want to begin construction in 2008, and start operations two to three years later.

“Our next step will most likely be an appeal,” Grasso said. “This is not the end of this project.”

In a written statement, DEM officials called the company’s application insufficient. It failed to provide a water quality monitoring plan or information about how much sediment could be released into a habitat that supports fish, quahogs and oysters.

DEM officials also complained that Weaver’s Cove never responded to a U.S. Coast Guard report that questioned whether the company could safely steer 85-foot-wide tankers through a bridge with a 98-foot navigational opening.

Officials in Massachusetts and Rhode Island have called the terminal plan dangerous. An estimated 64,000 people live along the shipping route proposed by Weaver’s Cove.

The Northeast is heavily dependent on natural gas for heating and electricity. Some analysts warn the region could face shortages by 2010.