Public Safeguards Given Little Weight at Conference on Natural Gas Expansion

by Katie Weatherford, 7/30/2013

On July 25, the Bipartisan Policy Center hosted an event to explore the impact of the rapid expansion of shale gas on the U.S. economy, trade, and geopolitics. Most of the discussion from panelists focused on the economic opportunities that exports of liquefied natural gas (LNG) abroad would create for U.S. firms. But Sen. Ron Wyden (D-OR), in a keynote speech, highlighted the importance of strong public protections as the U.S. maps out its energy future. He cautioned that the United States needs to "look before we leap" as we make choices about expanded energy development.

Liquefied Natural Gas and the Permit Approval Process

Liquefied natural gas is natural gas that has been converted into a liquid by rapidly reducing its temperature. The liquefaction process substantially reduces the volume of the gas and makes it much cheaper to transport by ship over long distances. Once the liquefied natural gas reaches the import terminal of its new destination, it is heated and returned to its gaseous state.

In the United States, a company cannot import or export liquefied natural gas or construct terminals without first obtaining approval from the U.S. Department of Energy's (DOE) Office of Fossil Energy and the Federal Energy Regulatory Commission (FERC). FERC is responsible for authorizing the siting and construction of import and export facilities and ensuring that an environmental impact statement is completed in accordance with the National Environmental Policy Act (NEPA). The Energy Department is the lead agency that has authority to decide whether a project will move forward.

DOE is only authorized to approve a permit application if it finds that the project is "consistent with the public interest." The current public interest standard is not difficult to satisfy. A permit to export liquefied natural gas to a free trade partner is automatically considered to be in the public interest. If the firm applying seeks to export to a non-free trade partner, the public interest standard is still presumed to be satisfied, but DOE must publish the permit application in the Federal Register and solicit comment from the public about the proposal before it can be approved.

The Expanding Liquefied Natural Gas Market: Looking before Leaping

Only a decade ago, before the United States experienced a natural gas boom, the conversation about domestic energy policy centered on building import terminals. The government approved permits for the importation of liquefied natural gas, and 11 import terminals were built across the country. However, until recently, only one export terminal had been approved in the U.S. (in Alaska). But with the shale gas boom over the past decade, companies are now applying for permits to convert existing terminals to export terminals and to build new ones.

As of April 2012, DOE and FERC have approved a permit for Cheniere Energy to build liquefaction plants at its Sabine Pass terminal in southwest Louisiana and export to free trade and non-free trade countries. Despite opposition to the approval, in May 2013, the DOE approved another permit by Freeport LNG to export liquefied natural gas to non-free trade partner countries from a new terminal that will be built on the Gulf Coast in Quintana Island, TX. Currently, 19 applications to export to non-free trade countries are under review at DOE. DOE has already approved 23 applications to export to free trade countries (including the Sabine Pass and Freeport LNG projects); three applications are pending approval. The DOE has said it will speed processing of the export permits in 60-day intervals. The industry is pushing hard, warning that if the U.S. does not act fast, it will miss the window of opportunity to enter the global liquefied natural gas marketplace.

Public interest and environmental groups, like Sierra Club, are concerned that expanding liquefied natural gas exports will pose a substantial threat to public health and safety because of increased production of natural gas. They argue that DOE's public interest standard fails to adequately assess whether the projects will actually provide public benefits. In fact, expanded exports are expected to cause a rise in the price of natural gas domestically, which would negatively affect U.S. consumers and industries, such as manufacturing and trucking, that rely on these low prices. And exporting natural gas is not expected to reduce climate-change causing emissions domestically or abroad. The Obama administration's efforts to forge two new free trade agreements have heightened these concerns, since the exporting license is automatically approved if the recipient is a free trade partner.

In addition to environmental concerns, looking at three past accidents shows why concerns about the safety of liquefied natural gas operations are also justified.

In January 2004, an accident at a steam boiler used in the liquefaction process caused a huge explosion in the Algerian port of Skikda, killing approximately 30 people and injuring 70 more. In addition to the lives lost, it cost Algeria between $800 million to $1 billion to rebuild the port, and up to an estimated $300 million in export revenue was lost. In 1944, 70 years prior to the explosion in Algeria, a gas leak and explosion from liquefied natural gas-related activities killed 128 people in Cleveland, OH. A smaller accident occurred in Cove Point, MD, in October 1979, when a leak led to an explosion in an electrical substation at a receiving terminal, killing one operator and injuring another.

The natural gas industry and its supporters argue that importing and exporting liquefied natural gas is safe and point to the small number of recorded accidents as evidence. But the U.S.'s role in the liquefied natural gas market has been relatively small to date, with only 11 import terminals and one export terminal operating since 1969. If all applications are approved, the industry would be permitted to export 29.9 billion cubic feet per day to free trade countries and 28.5 billion cubic feet per day to non-free trade countries.

As the global liquefied natural gas market expands dramatically, the possibility of accidents will, too. Since the terminals will be in port cities, the potential loss of human life will be significant, as will the possibility of leaks and damage to ocean life. The permitting process needs to stringently review and assess these risks to ensure public health and safety, not speed permits through to satisfy the voraciousness of the gas industry.

Photo by U.S. Naval Forces Central Command/U.S. Fifth Fleet, used under a Creative Commons license