CONTRIBUTORS

Time for a liquefied natural gas reality check

Posted Jan. 09, 2012, at 4:35 p.m.

In a recent BDN OpEd, a small group of liquefied natural gas opponents continued its relentless spinning of misinformation about Downeast LNG and gas markets in New England. The agenda appears to be to use whatever distortions they can to keep jobs and economic development out of Washington County.

Our opponents don’t want LNG, that’s clear. But they are more intent on spreading falsehoods to confuse Mainers than they are on speaking truthfully.

Over the past seven years the list of inaccurate statements made about our project has only grown. Most recently, for example, opponents incorrectly stated that our proposed LNG terminal “would place thousands of Mainers and New Brunswickers in harm’s way” because we refuse “to comply with the U.S. Coast Guard” regulations. This is simply not true.

Our terminal cannot and will not be built unless we comply with Coast Guard regulations. Downeast LNG received Coast Guard approval in January 2009. We received approval because the Coast Guard concluded that our project would be safe.

The same opponents also unfairly suggested that we claim that Native American tribes have no rights in the waterways near our proposed facility. Downeast LNG has never made any such statement. Downeast LNG simply abides by the Maine Indian Land Claims Settlement Act of 1980. We follow and respect Maine and federal law.

Downeast LNG has faced many challenges — developing a LNG terminal requires numerous environmental studies and significant regulatory oversight. We have successfully addressed all of the changing regulatory requirements and numerous permitting delays initiated by federal agencies in Washington. We expect a final decision later this year on our federal application, and we will subsequently file with the state of Maine thereafter.

We face commercial challenges as well. The growth of domestic shale gas production through the use of fracking technology has radically changed the U.S. gas industry. There are still some unknowns about shale gas, such as the potential environmental impact of fracking fluids and perhaps most important, the pending introduction of new fracking regulations.

Since 2008, despite low natural gas prices and the growth of unconventional shale gas in the U.S., total LNG imports into New England and New Brunswick have grown by over 300 mmcfd (million cubic feet per day). Both regions are more dependent on LNG than in the past.

According to the Nova Scotia Offshore Petroleum Board, offshore Nova Scotia gas production — the initial source of gas for the Maritimes & Northeast pipeline — peaked at 601 mmcfd in December 2001 and by November 2011 had fallen to 248 mmcfd, a 59 percent decline. In contrast, for the first nine months of 2011, Canada’s National Energy Board reported LNG imports of 329 mmcfd into New Brunswick, though there were none just three years earlier. LNG imports to New Brunswick offset the decline of Nova Scotia production.

According to the U.S. Energy Information Administration, LNG imports into the Everett LNG terminal near Boston have remained constant between 2003-2010, averaging 455 mmcfd, though 2010 saw a decline of 9 percent. Concurrently, total gas imports into Maine through the Maritimes pipeline have increased from 290 mmcfd in 2006 to 359 mmcfd in 2010, largely due to the increased availability of imported LNG from New Brunswick.

Despite the abundance of shale gas production in the U.S., New England is more reliant on imported LNG than it was just five years ago. Gas demand continues to grow and gas pipelines from the southern U.S. to New England are near capacity. Building new gas pipelines to transport shale gas faces daunting challenges: lack of rights-of-way due to land development and high construction costs through dense communities. No new pipeline projects have been proposed.

As we have seen, markets can change quickly and substantially over a decade. The U.S. gas market has seen radical change with new domestic supplies and huge price swings. If Downeast LNG is built by 2016, from start to finish it will have taken eleven years — seven years for permits and four years to build. Some markets are very responsive to changing needs such as the Internet, for example. Unfortunately that is not true for U.S. energy infrastructure. When it takes more than a decade to permit and build infrastructure, companies do not build for today’s market but for tomorrow’s.

While our energy future may be full of uncertainties, it is a safe bet that Maine is going to need a lot more natural gas. And there is absolutely no question that the people of Washington County, for whose strong support we are so grateful, can use the jobs and economic activity. And this is why Downeast LNG remains committed to bringing natural gas and important economic benefits to this area.

Dean Girdis is CEO and president of Downeast LNG.

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