Every solution potentially carries the seeds of a new problem in the quest to solve America’s energy challenges.
The history of crude oil is the gold standard in measuring the trials and tribulations of trying to secure new supplies so as to keep pace with rising demand. The record with crude has been mixed and fraught with peril, some of it self inflicted. Does a similar fate await the future of natural gas?
It’s getting easier to answer in the affirmative. The underlying dynamic for the anxiety is a familiar one: consumption is rising, thereby provoking questions about supply. The U.S. Energy Department, in its Annual Energy Outlook 2005 that was published last month, predicts that this nation’s natural gas consumption will ascend by an average 1.5% annually through 2025. That’s slightly higher than the expected 1.4% growth for total U.S. energy consumption.
Several catalysts give rise to increasing demand for natural gas. One is that the fuel burns cleaner than crude oil, making it the politically correct energy source of choice when compared with oil or coal. Two, there’s a relative abundance of natural gas within the United States. But while the environmental advantage is written in stone, the supply issue is an evolving truth, and therein lies the problem.
More to the point: where will the additional natural gas that’s required to satisfy future demand come from? Imports will play an increasingly larger role, the Energy Department predicts. America has a fair amount of natural gas, but rising demand and current consumption trends threaten to marginalize that advantage over time. No wonder then that through 2025, natural gas imports will grow at a 4.1% rate, or more than two-thirds faster than crude oil imports, the government forecasts.
The not-so-subtle suggestion is that domestic natural gas production won’t be able to keep pace with demand. Sound familiar? You’ve heard it before, and you’ll hear it again…and again, starting now: “U.S. supply is not likely to grow meaningfully over the remainder of the decade,” warns Simmons & Co. The Energy Department suggests as much in projecting that domestic NG production will rise by around half as much as consumption’s rate of increase in the years ahead.
If importing more natural gas (NG) is an obvious solution, the details are nonetheless complicated. And we’re not even talking here about the hazards of relying on foreign supplies. While that’s not to be dismissed, for the moment we’re focused on the opponent within.
That starts with the fact that NG is traditionally moved via pipeline. That’s works well on terra firma, but NG imports are transported across oceans, and that means moving the stuff by ship. To make the NG shipping business economical, the gas is liquefied, or compressed. So far, so good.
The glitch is that compressing and decompressing NG is a technically sophisticated enterprise and thereby it ends up being a fairly capital intensive project. Indeed, the United States doesn’t have enough liquefied natural gas (LNG) terminals that can perform such tasks at the moment to handle a material increase in imports. Yet the Natural Gas Supply Association, informs that LNG imports will rise sharply in the years ahead, jumping more than 1,000% by 2010 from 2002’s totals. Perhaps, although that outlook can only become reality if the U.S. builds more LNG terminals.
That’s neither news nor theoretically beyond the pale. In fact, the Federal Energy Regulatory Commission (FERC) reports that a number of new LNG terminals have been proposed. Indeed, companies are willing and able to build new LNG terminals, if only the powers that be would let them. But what’s planned and what’s delivered are two different things, and at the intersection lies politics.
In a sign of the times, Sen. Jack Reed (D-R.I.) has become a poster boy for LNG opposition. “The LNG terminal approval process is flawed,” he charges, according to Intelligence Press via The gentleman from the Ocean State goes on to explain,

There is no regional approach to determine how many facilities a region needs and where they should be placed. Developers in the name of federal ‘preemption’ are challenging states’ basic authority to approve permits for these facilities. And FERC has moved ahead with its process while the Coast Guard struggled to get its safety and security reviews completed.

Make no mistake: there are bona fide safety concerns with LNG terminals, as there are with oil refineries, nuclear power plants, and backyard propane tanks for BBQs. The safest course would be to avoid building new plants, which pretty much sums up the state of affairs with oil refineries and nuclear power plants of late. Are LNG terminals headed for a comparable future? At the very least, LNG terminal projects look set to get stuck in the quagmire of political and legal debates.
The issue at hand is whether the states’ power to regulate the building of new LNG terminals trumps FERC’s. The advocacy group Public Citizen issued a battle cry on the topic by proclaiming like-minded voters to “Stop Congress From Undermining Local Control Over LNG.”
Tyson Slocum, research director of Public Citizen’s energy program, explained last November in a press release, “Communities are leery of LNG facilities because of security reasons. LNG tankers and marine terminals make significant terrorist targets because of the enormous quantities of fuel carried by the tankers (up to 10 times the amount of fuel of a typical crude oil ship), the risk of fires, and the hazards associated with the heating of the LNG at the marine terminals.”
A pessimist could argue that the natural gas debate in the 21st century is headed for this reduction ad absurdum: safety or energy. (Go ahead, take a minute before you decide.)
In the meantime, the dialogue over who has the authority to give the green light to new LNG terminal construction will play out in the legal and legislative systems. Whatever the merits and flaws of the arguments pro and con, it seems clear that if the states win, there could very well be fewer LNG terminals than would otherwise be built. We don’t have any hard evidence to support that speculation, but we do have eyes in our head. As such, even a cursory study of Joe Sixpack’s historic predilection for seeing the world through NIMBY (not in my backyard) colored glasses on matters of oil refineries suggests a few ideas.
Taking the obvious cue, one could leap off the deep end and predict that no new LNG terminals will be developed if the forces aligned with Public Citizen emerge triumphant in the courts. The reasoning may fly under the cover of safety, or environmentalism, or god knows what (lawyers are clever souls). But no matter the argument, the result would be the same. A missing LNG terminal would leave a void no less empty (apologies to Billy S.).
If that future proves accurate, veteran energy observers aren’t likely to be surprised. Indeed, no new oil refineries have been built in the U.S. since 1976, a Knight Ridder News story last year advised, even though demand remains in a perennial upswing. Why, a skeptic can rightly ask, should LNG terminals fare any differently?