LNG: likely, unlikely scenarios unfolding
by Lynne W. Jeter
Published: July 26,2004
Industry watchers say published reports of an offshore liquefied natural gas, or LNG, facility being built in Mississippi waters are nothing more than rumors run amok.
Earlier this month, a published report that “mixed apples and oranges … in a cat-and-mouse game,” explained an economic developer, indicated that the Mississippi Gulf Coast was vying for “a $5 billion natural gas terminal,” and that Gov. Haley Barbour would call a special session to consider a major incentive package, ranging from $150 million to $295 million, to attract the facility.
“There has never been a ‘Nissan-sized’ incentive package under consideration by the state for the Coast, there was no major employer prospect, and there is no special legislative session being considered at this time, other than for the bond bill that was filed during the regular session,” said Mississippi Development Authority (MDA) communications director C. Scott Hamilton. “The idea that the state would propose an incentive package of up to $295 million for a project such as ConocoPhillips’ offshore LNG terminal, which will probably employ 50 to 70 people, harms economic development efforts. Legislators, other leaders and citizens must now be disabused of the notion that MDA and the administration would be that stupid and/or irresponsible.”
A more likely scenario is that an onshore LNG terminal is being considered for Pascagoula.
Jimmy Heidel, appointed by Gov. Haley Barbour earlier this year in a new position as coordinator of economic development efforts for LNG projects and offshore drilling, said, “I can’t shed any light on exactly where the site is at all. I haven’t seen it. I haven’t been informed on that, so I couldn’t say exactly where it’s going to be, or if it’s going to be.”
First, a little history
LNG, a hazardous fuel shipped in large tankers to U.S. ports from overseas, entered the U.S. market in the 1970s. Demand for LNG evaporated during the early 1980s after new supplies of domestic gas were discovered. Today, LNG comprises approximately 2% of the overall domestic gas use. (The U.S. gets approximately one-fourth of its energy needs from natural gas, a cleaner-burning fossil fuel relative to coal and crude oil.) Some analysts predict the use of the super-cooled and potentially flammable fuel (LNG) could rise to 20% by 2020.
The renewed interest in building LNG terminals surged last June after Federal Reserve chairman Alan Greenspan endorsed LNG as a way to stabilize gas prices. To expedite development, in the last two years, the Federal Energy Regulatory Commission (FERC), which grants federal approval for new onshore LNG facilities, has decreased the processing time needed for approval of new pipelines in half, from 18 months to nine.
Only four LNG import terminals currently exist in the continental U.S.: in Cove Point, Md.; Elba Island, Ga.; Everett, Mass.; and Lake Charles, La.
Of the nearly 40 LNG terminals proposed or planned along the U.S. coastline in the last two years — officially on the books — none are located in Mississippi, said a FERC spokesperson.
Two weeks ago, ExxonMobil signed an agreement with the State of Qatar for the world’s largest single, fully integrated gas-to-liquid project. The corporation would bring massive quantities of natural gas into the U.S., and is seeking locations to unload it.
FERC recently approved two applications for onshore facilities. Last September, federal regulators granted Sempra Energy approval to develop a $700-million LNG terminal in Hackberry, La. In June, FERC granted approval to Chenier to build a new LNG terminal in Freeport, Texas. When contacted for this story, a spokesperson for Sempra said the company had no interest in locating a facility in Mississippi.
Last November, Trunkline LNG broke ground for an expansion on its LNG terminal in Lake Charles, the largest operating LNG import facility in North America. After the expansion is completed in January 2006, 225 ships are predicted to pass through the terminal annually.
“Each ship brings in roughly an average of $50,000 or more into the region through various services required, such as tugboat rental to get a ship up the channel from the Gulf of Mexico, a pilot’s fee because a pilot who knows the ship channel is required to be on board to help the captain navigate the channel, and various maritime fees, plus the purchases of supplies and fuel for the ship and purchases the crew might make in the community,” said John Barnett, spokesperson for Trunkline LNG Company. “We figure it adds about $11.25 million to the local economy on an annual basis.”
The U.S. Coast Guard, which grants approval for new offshore LNG facilities, has five proposed LNG terminals in the mill. ExxonMobil and Cheniere both want onshore facilities in Mobile Bay. Even though both companies retain options, community groups in Mobile, Ala., recently fought the projects because of safety and environmental concerns and claim to be “99% sure” of success, according to a spokesperson for one of the groups.
Despite having trouble progressing with a proposed offshore site in Mobile Bay, Exxon spokesperson Bob Davis said the company’s focus hasn’t shifted to Mississippi’s coastline.
“We’re working on two sites in Texas, and we’re looking at an offshore site in Louisiana,” he said. “We’re still looking at the Mobile site, and we’ll continue to hold a three-year option to purchase nearly 200 acres for $38 million.”
Cheniere spokesperson David Castaneda said of the company’s LNG applications for five sites, only three have been activated.
“We haven’t moved forward with our application in Mobile Bay,” he said. “We’re still holding an option.”
Castaneda could not say if the company was interested in locating an LNG terminal in Mississippi.
“We’ve only disclosed information when we’ve found suitable sites,” he said.
In the pipeline
The hullabaloo concerning inaccuracies in published reports in Mississippi relates to ConocoPhillips’ proposed terminal 11 miles south of Dauphin Island, Ala., approximately 20 miles from the Port of Pascagoula. The company sent an application for a proposed offshore facility to the Coast Guard in April, which would reportedly include two underwater concrete gravity base structures with liquefied natural gas containment, topside loading and vaporization structures and a 32-mile pipeline.
The U.S. Coast Guard is holding public hearings on the Mississippi Coast only because of the proposed location’s proximity to the state.
“It is generally believed the ConocoPhillips LNG terminal will be built in federal waters, probably south of Dauphin Island, Ala., not even south of Horn Island, Miss.,” said Hamilton. “There is no reason to give such a project any Mississippi incentives, as it will not even be on Mississippi land or in our tidelands.”
Jolie Shifflet, spokesperson for the Coast Guard, said of the five applications for offshore facilities in the Gulf of Mexico, “none of them are for offshore terminals in Mississippi.”
Linzi Crain, spokesperson for ConocoPhillips, said no onshore LNG facility is being proposed by the corporation to accompany the offshore terminal proposed south of Dauphin Island.
“The reason for the hearing in Mississippi is because it’s a designated adjacent state,” she said. “There could, however, be economic advantages to Mississippi, both in possible construction work and ancillary businesses to service the terminal.”
And now, the real probability
Even though nothing is officially on FERC’s books, rumors persist that an onshore LNG terminal is being proposed for the Mississippi Gulf Coast. Economic developers indicate the only probable site is in Pascagoula, with “the off chance of a site in Hancock County, and no opportunity in Harrison County.”
“Until a planned facility gets a docket number from FERC, it doesn’t exist,” said an industry veteran. “That’s FERC’s secret back door.”
If an onshore LNG facility is proposed for the Mississippi Gulf Coast, the project would have opposition from competing business and environmental interests, such as recreational and commercial fisherman who are required to stay a half mile away from vessels. The Navy homeport, Northrop Grumman and Gulf Islands National Seashore would also want concerns addressed.
Vessels carrying LNG measure 75 feet in width, and concerns have been expressed about their presence shutting down two-way traffic in the Port of Pascagoula’s shipping channel that accommodates approximately 500 vessels annually.
“We routinely handle ships close to this size. At a minimum, our channel is 300 feet wide,” said Mark McAndrews, executive director of the Jackson County Port Authority in Pascagoula. “There’s been a site at the port that various energy companies have looked at for a project like this, dating back to the 1970s. In the late ‘70s, the site was taken by Tenneco to do an LNG terminal but nothing ever materialized. As to anybody doing anything right this red-hot minute, I honestly don’t know.”
State transportation commissioner Wayne Brown, who represents the southern district, said no one has discussed with him the possibility of a proposed onshore LNG terminal in Mississippi.
“I have not been privy to anything in an official capacity,” he said.
Environmentalist camps are divided over opposition to the LNG expansion projects because natural gas is much needed and is a cleaner fuel source. The national energy committee of the Sierra Club has asked its members not to oppose the LNG project off Dauphin Island, and in fact, to support it when possible, saying that having a deepwater port is safer than bringing ships into major populated areas, where an explosion could wipe out everything within a half mile.
After spending several days earlier this month touring the Trunkline LNG onshore terminal in Lake Charles, Heidel said he is convinced that onshore LNG operations are secure.
“All the demonstrations we went through, seeing the precautions taken, it’s a very safe operation,” he said.
Heidel indicated that a demonstration might take place in the next few months on the Gulf Coast “to (show) firsthand that this is a frozen product, and it’s very hard to ignite. If the vapor does come off of it, it’s contained.”
“I understand that some people are concerned about the volumes that would be located in one place, but I’m convinced now after being in Lake Charles … that facility is very safe,” he said.
When more than 300 economic development professionals in Mississippi gathered on the Gulf Coast earlier this month for the annual Mississippi Economic Development Council conference, the topic of proposed LNG terminals “wasn’t one we talked about very much,” said MEDC president Max Hipp. “Reports about an LNG project have been very vague.”
Contact MBJ contributing writer Lynne W. Jeter at email@example.com.
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