cove point 046By Peter Galuszka

Riding a chunky, balloon-tire bicycle may seem awkward enough, but imagine pedaling in a six-feet-wide concrete tunnel for one mile on the bottom of the Chesapeake Bay in Maryland.

It’s amazing what we Bacon’s Rebellion bloggers do to keep you readers informed, but it’s all in a day’s work — just like sucking in your gut when we read your nasty comments.

I’m here in a plastic white hardhat  and safety gases trying to get used to the sense of confinement as we cycle to the terminal one mile off Dominion Transmission’s Cove Point facility to handle Liquefied Natural Gas (LNG).  Richmond-based Dominion bought the facility in 2002 to import LNG from various global points such as Trinidad and Norway.

The last time a commercial LNG tanker actually showed up to unload, it was October 2011. The fracking revolution and the resulting flood of gas negated the logic of importing. Now Dominion wants to export LNG and has invited me along to see the facility. I wrote about it this Sunday in the Washington Post.

I found this one a hard call. The environmental lobby is against exporting gas, saying it will increase domestic prices and better time should be spent on developing renewables.

I say no to the first and yes to the second. Gas is now about $4 per million BTUs, far down from the $12 or so level of a few years ago. When the fracked flood hit, prices went way down to $2 mmBTU, but my logic is that they’d have to export a lot of gas to make a real difference in pricing.

On the second point, the greens are right. Maryland has a renewable portfolio standard of having 20 percent of electricity generation come from renewables like wind or solar by 2020. It is now about 7 percent. Granted, the gas that Dominion wants to export will go to Japan and India which are outside of the standards (Virginia’s, true to form, are voluntary, of course!), but their $3.8 billion or plan to allow Cove Point to export does absorb resources that could go to developing renewables.

If the project gets approval from the Federal Energy Regulatory Commission and the Department of Energy as Dominion expects by 2014, it is in a position to tap two pipelines carrying Gulf Coast gas in Northern Virginia, which is also the terminus from another pipeline running from the north and Pennsylvania’s Marcellus Shale formation where fracking really has taken off in the past few years.

To be sure, the verdict’s still out on fracking, which involves tough chemicals and lots of high pressure water to shatter geologic formation and get gas and oil unavailable before. It still hasn’t been proven that the chemicals won’t end up in the groundwater somewhere and wells can give off methane which can be flammable and a global warming ingredient. New York State still has a moratorium on fracking. Out West, energy firms are slurping up precious water for fracking while leaving farmers and herders dry.

On the plus side, gas released half of  the CO2 as coal does, doesn’t kill miners and doesn’t result in highly destructive mountaintop removal. Only one person has been killed in a gas-related accident in more than 30 years of operation.

Cove Point has had a checkered history. It was built in the late 1970s during the energy crisis years and the suddenly went dormant when a pricing dispute with Algeria ended imports for a while. It’s been up and down since, with other owners. Dominion has agreements to lock in export shipping prices for 20 years and won’t own the gas which should make it immune from global gas price fluctuations. But before one thinks that exporting from Cove Point is some kind of Brave New World, consider that Dominion has all the contracts with two Asian utilities it needs. It isn’t looking for more customers.

There are 15 other export proposals in the U.S. and old field Senators are urging expediting permit processing. Dominion says that only six or so of the LNG export facilities will actually go through. That has more to do with economics than regulations.

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10 responses to “The Good and Bad of Exporting LNG”

  1. DJRippert Avatar

    It seems like there’s something wrong with a country which suddenly finds itself in possession of a plentiful supply of cheap energy and can only think to export the energy source. Wouldn’t it be more effective to use the cheap gas to make cost effective products and then export the finished goods?

    1. Extremely well stated.

    2. reed fawell III Avatar
      reed fawell III

      Very perceptive. Points up dark clouds ahead.

    3. Step back a minute. History teaches that undeveloped nations tend to export resources, while developed ones take the resources; use them in connection with other resources to create things of value; and export finished goods.

      This has nothing to do with free markets. It’s more of the trading for short-term gain that has screwed up this country. All bow before Wall Street. Impose an export tax that captures a significant portion of the value of exporting; use the proceeds to reduce the federal deficit; and let them sell wherever they want.

      1. larryg Avatar

        natural resources are not only finite but they offer the country a way to use it literally as a fuel for value added industry.

        the resources won’t be there forever and the time will come when “peak” will likely be reached even though fracking and technology have extended that time.

        who benefits from exporting it? Not the domestic purchasers who will likely at some point find themselves bidding with others internationally for the price.

        That’s exactly what Kestone wants to do – they want to build a pipeline across the US then uses our refining capacity to export their product.

        From a pure libertarian orthodoxy -it might make sense and probably even more so if the pipelines were truly obtained via willing seller – willing buyer …. instead of govt-assisted eminent domain.

        I just think we should be a little more honest with ourselves about the “reality” of the “free market” and the truth which is it’s not really “free” to start with (not with ED) but then at least as important – if the “free market” with a finite resource what is really best for the country in the longer run?

  2. Breckinridge Avatar

    Either you believe in free markets or you don’t, and we cannot complain of barriers thrown up by others if we decide to place a barrier to block LNG exports. Yes for a while you could artificially depress the price within the US market, creating benefits for US consumers in the short run. But if you allow exports and allow the price to find its market level, that provides more money coming into the US — much of it finding its way to the owners of the resource (whether a farmer, a mountain landowner, or a large corporate entity with 7.5 million stockholders.) The so called balance of trade matters too.

    Long before fracking techniques came along we’ve had several plentiful sources of cheap energy we’ve refused to exploit — some of them fossil fuels and the other big example being nuclear, which the Ignorance and Fear Brigade have successfully stymied (with some unfortunate help from the industry itself.)

    1. I agree with Breckenridge on this one. Don’t worry, the cost of natural gas will remain a lot cheaper in the U.S. than in Europe and Asia, even if we start exporting gas. The process of liquifying, shipping and de-liquifying the gas is pretty expensive. Our manufacturers will continue to enjoy a significant advantage in energy prices.

      1. larryg Avatar

        would anyone’s opinion change if an analysis showed how many years of estimated supply we had … with no exports – and then with exporting?

        so … say without exports we had a 100 year supply and with exports a 50 years supply. Would that affect your opinion?

  3. larryg Avatar

    well, how “free” is a free market in which the producer gets to use eminent domain to obain cheap right-of-way so they can then move their product to market and the profits go to the owners and shareholders and not the people whose land was taken for the pipeine?

    Shouldn’t the owners of the land needed for transport to markets also be considered a legitimate stockholder instead of a forced non-free market transaction to benefit the company?

    Second, fossil fuels are a finite resource. Once they are gone – then does US then need to be taxing people to provide “security” for the places in the world who will supply us with fossil fuels after we have depleted ours?

    Isn’t the whole send-our-kids-to-be-sliced-and-diced in the Middle East at least somewhat predicated on the premise that we’d not be in the Middle East unless it was a strategic interest?

    How “free” is a free market predicated the use of ED to force transactions on people and spending 1/2 of our tax revenues on to protect our energy interests?

  4. larryg Avatar

    I believe in “free markets” and the idea seems to be very popular these days but it’s also important to take a hard(er) look at the issues where “free market” is in play.

    And I find it ironic that we talk about “free markets” when the natural resource companies have the right of eminent domain which basically give them superior rights to other property owners.

    How can we believe the market is “free” when one group of property owners can force another group to engage in a transaction that is forced and not “free”.

    More to the point – what exactly is the justification for pipeline operators having superior rights over other landowners?

    Isn’t the justification that it serves a public purpose and “good”?

    if that’s true – then isn’t the issue of public purpose also legitimate for a property owner who benefit from ED – also legitimate for determing the public purpose of export?

    fossil fuels are finite. they are a unique national resource that can, as DJ points out, provide, value added benefit to the US and US jobs.

    If nat gas owners need ED to move their product, isn’t it fair to also consider whether export serves a public purpose also ( beyond a private purpose?)?

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