US pulling the LNG plug

Add natural gas terminals to the list of projects that people do not want in their backyards. As the supply of natural gas tightened in recent years, energy companies announced plans to build a host of new terminals where  large amounts of gas could be imported by tanker in liquefied form and then distributed by pipeline to American customers. But a growing outcry over the environmental and safety risks associated with the terminals is blocking those plans in one community after another, eroding hopes that imports of liquefied gas will provide any relief from high gas prices for years to come. Opposition has been most pronounced in California, New England and  northwestern Mexico, where environmental and civic groups have focused largely on the danger of catastrophic explosions at terminals, either from accidents or from terrorist attacks. 

The problems that companies have had in gaining approval for terminals, which can cost from US $500 million to US $1 billion and take three to five years to build, come at a critical time for a rapidly growing sector of the energy industry. Wholesale gas prices have risen by more than half in the last two years, climbing above US $6 for each million BTU’s in most areas of the country and reaching almost US $7 in the New York area. Nearly every major energy company and many smaller ones have bet that over the next decade or so, the international market for  natural gas will develop to rival that for crude oil, with American demand serving as a major driving force. For that to happen, the United States would need a vast expansion of its capacity to import gas from outside North America.

Those bets have begun to look shaky in recent months, as several  high-profile gas projects have been killed. Intense local opposition led the Calpine Corporation to withdraw plans in March for a gas receiving terminal at Eureka in Northern California. ConocoPhillips canceled a terminal project in Harpswell, Maine, for the same reason. Marathon Oil pulled out of a project near Tijuana, Mexico, that would have supplied gas to Southern California after the land for it was seized by the state government of Baja California.  Exxon Mobil suspended work on a terminal near Mobile, Alaska Encouraged by those decisions, opposition has spread to projects in the Bahamas, Florida, Massachusetts, and other parts of California and Maine, often from local officials who said that energy companies had singled out their communities as easy targets: small towns, on the margins of larger population centres, that were judged to have little political influence. “They might consider us docile here, but we’re going to fight this thing tooth and nail,” said Manuel Lpez, the mayor of Oxnard, California, a working-class, predominantly Latino city 46 miles northwest of Los Angeles.

Two companies, BHP Billiton and Crystal Energy, have proposed offshore gas terminals nearby. In other communities, officials who were initially willing to  consider terminal projects have changed their minds after being hit with a storm of opposition. Last week,  a June referendum on the Hope Island gas  terminal project proposed by TransCanada PipeLines was called off, less than a week after first scheduling it, when scores of local residents packed a council meeting to speak against the project, according to The Portland Press-Herald. One council member, Michael Savasuk, told the paper that the issue was “too big for any one town.” In all, some 30 terminal projects in the United States and several more in Mexico and Canada are still being pursued to import  liquefied natural gas. Minor amounts of gas - less than 2 percent of national consumption - now reach the United States by ship through five existing terminals.

The shipments are coming mainly from Nigeria or Trinidad and Tobago; large-scale expansion could add countries like Qatar, Indonesia, Russia and Peru to the list. Importing natural gas is much more complex and expensive than importing crude oil or refined products like gasoline, because the gas must be chilled to minus 260 degrees and carried in specially built tankers under high pressure, then warmed again before it can  be distributed. Opposition to liquefied natural gas terminals has intensified because of two recent revelations. One involved an explosion at a gas plant in the Algerian port city of Skikda in January that killed more than 20 people. Sonatrach, Algeria’s national energy company,  initially attributed the explosion to a faulty steam boiler, but a subsequent investigation suggested that a leak of liquefied natural gas could have been the cause.

The explosion renewed fears about an  industry that, on the whole, has had a good safety record over the last 30 years, with countries like Japan and South Korea importing arge amounts of liquefied gas without incident. On top of concerns over a Skikda-type accident occurring in the United States, opponents of gas terminals have seized upon a passage in Against All Enemies, the recent book by Richard A Clarke, the Bush administration’s former counterterrorism chief, in which Carke wrote that Al Qaeda operatives may have been traveling to Boston from Algeria on liquefied gas tankers shortly after the terrorist attacks of Sept. 11, 2001. “Had one of the giant tankers blown up,” Clarke wrote, “it would have wiped out downtown Boston.” Clarke wrote that officials persuaded the Coast Guard to temporarily close Boston Harbor, halting gas shipments by the Belgian energy company Tractebel for several weeks.