In the past decade, an increasing number of energy companies have hoped to expand their resource production to include shale gas. More than a dozen different companies have requested federal approval from the U.S. Department of Energy (DOE) to produce and export the fossil fuel to foreign countries. It was not until six months ago that the DOE began to approve applications for the exportation of liquefied natural gas (LNG), a natural gas that has been cooled, or liquefied, to minus 260 degrees Fahrenheit in order to be loaded into insulated containers and then shipped in tankers.
One of the three companies that have been approved to export domestically produced LNG to countries that do not have a Free Trade Agreement (FTA) with the U.S. is Dominion Cove Point LNG, LP. In 2009, Dominion’s approval to export from its Cove Point terminal in Calvert County, Maryland, was put on hold pending the conclusion of NERA Economic Consulting’s study on the economic consequences of exporting natural gas. The two-year study, which was commissioned by the DOE, concluded that LNG exports would have no drastic effects on U.S. natural gas prices. To read NERA Economic Consulting’s full, detailed report and analysis, visit http://energy.gov/fe/services/natural-gas-regulation/lng-export-study.
With the DOE’s recent approval, Dominion will now begin constructing its estimated $3.8-billion export terminal facilities. The company hopes that its first shipments will be produced and ready by 2017, following this year’s scheduled start of facility construction. Dominion is authorized to export up to 770 million cubic feet of natural gas—enough energy for about 2.6 million homes—from the Cove Point terminal. Coinciding with the DOE’s approval to export LNG, Dominion signed 20-year terminal service agreements with both Pacific Summit Energy, LLC, a U.S. affiliate of Japanese trading company Sumitomo Corp., and GAIL Global (USA) LNG, LLC, a U.S. affiliate of GAIL (India) Ltd. Each company has contracted for half of Cove Point’s marketed facility capacity.
While the DOE has approved Dominion’s export to these non-FTA countries, there is still some apprehension from both environmentalists and industry about the outcome of exporting on domestic gas prices, as well as the overall effects that the hydraulic fracturing (aka “fracking”) process will have on the environment. (Note: Additional information and links about fracking are provided below.) Commenting on a recent article in The Washington Post, “Dominion Resources plan approved for exporting natural gas from Calvert County,” environmentalist Deb Nardone, director of the Sierra Club’s Beyond Natural Gas campaign, reiterated that “air pollution from the controversial practice of fracking is causing significant havoc on the environment.” Spokeswoman Jennifer Diggins of steel producer Nucor stated that the DOE’s approval to export LNG “raises a risk of increased consumer prices and utility bills, and could limit the prospects for a sustained manufacturing renewal in America.”
Acknowledging these environmental and economic concerns, Michael Levi, an energy expert at the Council on Foreign Relations, stated that requiring environmentally protective practices by regulation is the optimal resolution. In the cited The Washington Post article he said that “blocking exports would address only a tiny piece of the environmental challenge. The problem is not the exports. The problem is the bad practices by some operators and you need to go after that.” On a similar note, when considering the economic concerns, the key findings from NERA Economic Consulting’s study, “Macroeconomic Impacts of LNG Exports From the United States,” iterate that “across all scenarios [i.e., assumption levels of exports, global market conditions, and the cost of producing natural gas in the U.S.], the U.S. was projected to gain net economic benefits from allowing LNG exports. Moreover, for every one of the market scenarios they examined, net economic benefits increased as the level of LNG exports increased.”
Aside from economic and environmental concerns, when it comes to exporting LNG, many safety and security precautions must be considered. The LNG industry goes to great lengths to ensure that all appropriate security, planning, prevention, and risk mitigation is closely coordinated with local, state, and federal authorities, including the U.S. Coast Guard. According to the Center for Liquefied Natural Gas (CLNG), such measures significantly reduce the risk of intentional events like acts of terrorism; and, they are administered and enforced on every LNG carrier, at every LNG import and export terminal, and at every liquefaction facility. To read details about safety measures and security precautions taken when importing and exporting LNG, visit www.lngfacts.org/about-lng/safetysecurity/.
The DOE’s approval of Dominion’s Cove Point LNG exportation also creates a major influx of much-needed, well-paying jobs to Maryland’s Western Shore, given the extensive Cove Point export terminal construction project. While economic, environmental, and safety concerns have been raised, it appears likely that other DOE LNG export approvals may occur due to the commissioned research findings, and the defined environmental and security regulations for producing and exporting natural gas.
Additional Links and Information
The Washington Post: http://www.washingtonpost.com/local/dominion-energy-plan-approved-for-exporting-natural-gas-from-terminal-in-calvert-county/2013/09/11/a7fbad88-1b12-11e3-8685-5021e0c41964_story.html
Department of Energy Press Release: http://energy.gov/articles/energy-department-authorizes-dominion-s-proposed-cove-point-facility-export-liquefied
Dominion Press Release: http://dom.mediaroom.com/2013-09-11-Dominion-Welcomes-DOE-Approval-For-Natural-Gas-Exports-From-Cove-Point
Dominion Cove Point Liquefaction Project: https://www.dom.com/business/gas-transmission/cove-point/liquefaction.jsp
NERA Economic Consulting Analysis (Study – Part 2): http://energy.gov/sites/prod/files/2013/04/f0/nera_lng_report.pdf
LNG Export Study – Related Documents: http://energy.gov/fe/downloads/lng-export-study-related-documents
Dominion corporate website: https://www.dom.com/index.jsp
Department of Energy website: http://energy.gov/
Hydraulic fracturing, or “fracking,” is a process whereby fractures are produced in a target rock formation that stimulates the follow of natural gas or oil. After vertical wells are drilled hundreds to thousands of feet below a land surface, fractures are created by pumping large quantities of fluids down a wellbore and into the target rock formation (The Process of Hydraulic Fracturing, www.epa.gov). http://www2.epa.gov/hydraulicfracturing/process-hydraulic-fracturing
Center for Liquefied Natural Gas (CLNG) website: http://www.lngfacts.org/