Energy | Ecotrope

LNG export in Oregon: "The truth is out"

Ecotrope | Sept. 22, 2011 1:52 p.m. | Updated: Feb. 19, 2013 1:35 p.m.

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Will Jordan Cove wind up liquefying natural gas from the Ruby Pipeline and shipping it from Coos Bay to Asia? The economics could make sense for the company, but critics say it's not in the public interest because it will drive gas prices up for the rest of us and make the U.S. less energy independent.

Will Jordan Cove wind up liquefying natural gas from the Ruby Pipeline and shipping it from Coos Bay to Asia? The economics could make sense for the company, but critics say it's not in the public interest because it will drive gas prices up for the rest of us and make the U.S. less energy independent.

For years, liquefied natural gas developers in Oregon shunned the idea of flipping their proposed LNG import terminals around to export natural gas instead.

But meanwhile, news was spreading about the nation’s boom in natural gas “fracking” – a new technique that allows drillers to tap natural gas reserves in shale rock. And other LNG developers in Louisiana, Texas and British Columbia started submitting permit applications to turn their LNG import terminals into export facilities and cash in on higher prices for natural gas in Asia.

Oregon’s LNG opponents saw the puzzle pieces coming together in southern Oregon years ago. The Ruby Pipeline started sending natural gas from Wyoming to Malin this year. And the proposed Jordan Cove LNG import terminal happens to have a pipeline, the Pacific Connector, which would run from Coos Bay to Malin.

With natural gas prices on the international market more than double the price of gas in the U.S., the math seemed to support LNG export more than imports.

But as recently as March, Jordan Cove executive Bob Braddock told the Coos Bay World he was turning down LNG export requests because it was “a stupid idea.” In July, he told The Oregonian he was in discussions with potential export customers.

Then, on Wednesday, he announced to a group of engineers in southern Oregon that the company was indeed submitting an application to export supercooled natural gas liquid from Coos Bay.

Will Oregon LNG, the company with an import terminal proposed for Warrenton, be next? It turns out Oregon LNG CEO Peter Hansen is presenting at an LNG export conference this fall on the topic of whether import companies can “shortcut” the permitting process to develop export facilities.

Brett VandenHeuvel, executive director of Columbia Riverkeeper, said he’s suspected LNG export was the plan for the past three years.

“LNG import never made sense,” he said. “U.S. gas prices are two or three or four times less expensive than they are on the international market. Why would we import more expensive gas? We recognized years ago this was the the game was to sell U.S. gas to Asia, and the gas companies undoubtedly recognized this would be highly controversial so they hid that fact as long as they could and now the game is up in Oregon. Jordan Cove has admitted it, Oregon LNG is speaking at an LNG export conference this fall, so the truth is out.”

Many of the environmental impacts are the same for import and export terminals – primarily salmon and forest habitat disruption. But there’s also a question of energy independence that has emerged from the debates over exporting LNG from the U.S.

The American Public Gas Association protested the federal approval of the export permit for Louisiana’s Sabine Pass LNG terminal because it could raise natural gas prices in the U.S. by 5 to 10 percent. It would link U.S. gas prices to international prices, which are more expensive and more volatile than the domestic market. And, critics argue, it would hurt all the industries in the U.S. that rely on inexpensive natural gas.

The Association made the case that U.S. could use its inexpensive and abundant natural gas to replace coal-fired power with cleaner electricity and put more compressed natural gas fuel in commercial vehicles. It could ultimately lead to less reliance on foreign oil and more energy independence for the U.S., the group said.

Steve Duin, a columnist for the Oregonian, wrote about the energy independence issue recently, and concluded that it should be harder for Jordan Cove to argue its export project is in the public interest when it applies for a new set of permits.

I figured this argument deserved some sort of response. So, I dug through the Sabine Pass LNG export approval from the U.S. Department of Energy. Here’s why the company argued exporting LNG from Louisiana IS in the public interest:

  • All the new gas production in the U.S. is causing prices to drop and drilling to slow down. Exporting will “encourage domestic production,” the company argued.

  • More gas production will be good for the economy and will help balance out the price increases. Exports can always be cut back if natural gas supplies in the U.S. drop off.
  • The export terminal will create 3,000 temporary construction and engineering jobs, 150-250 full time jobs, and 30,000 to 50,000 jobs indirectly in the gas exploration and production sectors.
  • Exporting LNG will help balance the U.S. trade deficit
  • Putting restrictions on LNG exports would be anti-competitive and inconsistent with U.S. trade policy; Imports and exports serve the public interest through the open exchange of goods
  • The U.S. has more gas supplies than it needs. Its gas consumption went down from 2000-09, and official projections foresee just a .2 percent increase in U.S. gas needs by 2035.

So…do we have a verdict? The U.S. Department of Energy sided with Sabine Pass, though noted regulators would be watching to make sure the gas supplies in the U.S. were meeting domestic demand and that we weren’t exporting too much overseas.

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