Export anxiety: Where will pipeline’s natural gas wind up?

Pectra Eenergy map - Dana Williams |
Pectra Eenergy map

With the United States poised to become a net exporter of natural gas, some pipeline foes suspect that the controversial Northeast Energy Direct pipeline through Franklin County would deliver relatively low-cost liquefied natural gas to European and Asian customers as well as the New England energy market.

And, some pipeline critics fear, exporting too much natural gas from U.S. hydrofracked shale-oil fields will only serve to lower world natural gas prices while raising domestic prices. These findings are suggested in a study released by the U.S. Department of Energy last month.

By mid-year, the United States is expected to become a net exporter of natural gas because of the expected rapid growth of the nation’s industry that exports liquefied natural gas (LNG), along with a boost in Mexican pipeline capacity and reduced domestic demand for Canadian gas, according to analysts with Barclays Commodities Research.

The report, from a year ago, called it “a shift of tectonic magnitude,” with far-reaching implications for the national economy, geopolitics and natural gas markets.

The U.S. Energy Information Agency has predicted more conservatively that the country will become a net exporter of LNG in 2018, the same year Tennessee Gas Pipeline Co.’s proposed 412-mile NED pipeline would, if approved, begin operation, crossing eight Franklin County towns on its route from Pennsylvania shale fields to Dracut, north of Lowell.

Dracut is also the hub for a host of pipelines, including Spectra Energy’s Algonquin Gas transmission line carrying gas from the Texas Eastern line in Pennsylvania in the south, and the Maritimes and Northeast line running through New Hampshire, Maine and New Brunswick to Point Tupper in northern Nova Scotia.

The Maritimes and Northeast pipeline, with more than 75 percent ownership by Spectra, is planned to have its flow reversed, in the wake of declining imports of foreign LNG with gasification flow to U.S. markets and the growing potential for Marcellus shale gas to be exported abroad.

The M & N pipeline, built in 1999 to carry 800 million cubic feet of gas a day from drilling rigs off the Nova Scotia coast through Maine into southern New England, has been carrying less than half of that in recent years.

In a recent filing to FERC, the Franklin Regional Council of Governments, which has taken no position on NED, nonetheless joined other prospective intervenors to question the need for the pipeline.

TGP parent company Kinder Morgan “admits that the NED Project is not fully subscribed,” the COG says. “According to the application, the market path component … has a total capacity of 1,332,500 Dth/day, but only 552,261 Dth/day — or 41 percent — is committed under what the applicant claims are binding precedent agreements. For the supply path component, the applicant has executed precedent agreements for 751,650 Dth/day.”

The COG’s letter to FERC points out that UIL Holdings, which owns Berkshire Gas Co., is a priority subscriber for the project, but that as an affiliate of NED, it’s not considered to demonstrate need as much as unaffiliated, arms-length contracts. “In addition,there are no firm commitments from gas-fired electric generators for the market path component even after the most recent ‘Power Serve’ open season that closed on Oct. 29, 2015” for electric generators.

Vincent DeVito, a Boston attorney for Northeast Energy Solutions — a coalition of environmental organizations and land trusts including Franklin Land Trust — says the scale of the NED pipeline compared with the customers it has contracted with for sale of its gas points to the likelihood that a future customer will be a liquification facility/LNG exporter.

The planned export projects include:

∎  Pieridae Energy, which would process up to 292 billion cubic feet of natural gas per year for export from Goldboro, Nova Scotia. Its application before the U.S. Department of Energy’s Office of Fossil Energy, (DOE 14-179-LNG) specifically mentions the M&N Pipeline for supply of natural gas.

∎  Downeast LNG is seeking to liquefy up to 168 Bcf per year from Robbinson, Maine, on the western shore of Passamaquoddy Bay.

∎  Canaport, the LNG import terminal in Saint John, New Brunswick, owned by the Spanish energy giant Repsol and Irving Oil, is seeking approval for a 1.2 Bcf/day export terminal

∎  Bear Head LNG is applying to DOE to import up to 250 Bcf/year of natural gas from the United States for conversion of LNG near Point Tupper, Nova Scotia to be “delivery to export markets.”

∎  H-Energy, an Indian company, is looking at developing an LNG terminal in Melford, Nova Scotia.

Kinder Morgan spokesman Richard Wheatley reiterated last week, “We have no LNG export customers. We currently have one industrial customer in Atlantic Canada, Irving Oil, which is listed in the Nov. 20 NED Project FERC Certificate filing. The Atlantic Canada market has the same type of customers/shippers as New England, including industrial users, gas distribution concerns and electric generators.”

A Pieridae Energy spokeswoman confirmed Tuesday that her company, which has received Canadian approval to import natural gas from this country and approval from the U.S. Department of Energy to export LNG to free-trade agreement countries — with non-FTA exports still pending approval — has no plans to reveal who it is contracting to buy its feedstock natural gas from.

Yet DeVito points to language in both the Bear Head LNG and Pieridae LNG export projects — both of whose license applications NEES is intervening in — as mentioning “proposed Northeast pipelines” as supplying their gas.

In the case of Bear Head, DeVito’s June 15, 2015 filing with the Department of Energy that its proposed 250 Bcf/day export application to Canada isn’t entitled to be automatically approved, as it would be for a trade-free agreement nation, because the project would export “North American LNG to (unspecified) foreign markets.”

Price issue

A recent DOE study of the “macroeconomic impact” of increasing U.S. exports of LNG — apart from the global political pressures to do so — concludes, “While selling natural gas at higher prices on the world market would increase profits for U.S. gas producers, the narrowing of the price gap between the United States and the rest of the world would erode some of the benefits that have accrued to U.S. consumers and manufacturers.”

Robert Godfrey, who has been looking at LNG proposals for 11 years for the Eastport, Maine-based environmental group Save Passamaquoddy Bay, says he doesn’t believe that all of the export ventures, being eyed at the same time that Pacific Coast LNG terminals are also under consideration, will succeed in being built.

But he says that in addition to issues that his organization has about safety and the environmental consequences of the Downeast terminal in the mouth of the Bay of Fundy, he has personal concerns about the implications of the effects on climate change.

“We’re headed down a catastrophic path related to climate,” he says. “Adding more pipelines means more burning, it means we’re becoming more dependent on fossil fuels. … It’s insanity.”

Planned export of natural gas — production of which has been booming because of controversial Marcellus shale hydrofracking — could short-circuit the lower energy prices that are the chief stated rationale for building NED and other natural gas pipelines in the Northeast, argue opponents of those projects, as the relatively low price rises because of international demand and infrastructure like the $5.2 billion NED are factored in.

The overall costs to the U.S. economy could even be higher, Industrial Energy Consumers of America President Paul N. Cicio testified before the Senate Committee on Energy and Natural Resources.

“Energy policy should maximize ‘permanent’ long-term job creation for the U.S. economy, not just the oil and gas industry,” Cicio said, arguing that the anticipated hike in natural gas prices in this country and the drop in prices in Asia as a result of planned increase of LNG exports — as projected could cost thousands of U.S. manufacturing jobs. “Using natural gas in the manufacturing sector will increase eight times more permanent jobs than exporting it. The top seven LNG export applications combined will only create 1,890 permanent jobs. Increasing natural gas prices to parity with global LNG prices long-term removes the U.S. economic advantage,” he said.

Cicio cites the DOE study on exports as saying 20 billion cubic feet a day could be exported by 2025, raising the gas price here by 15 cents per million BTUs while cutting Asia’s MBTU price 73 cents — a combined 88-cent loss in terms of competition with Asian manufacturers, translating to a 40 percent hike in costs.

“When we export, we are selling our future. We are reducing our competitiveness in manufacturing. That makes it even harder to produce the middle-class jobs this country desires,” he says. “It’s very poor public policy. Public interest should weigh heavily on the side of how it impacts people, in terms of jobs and the cost of heating our homes or the cost electricity.”

A real concern, he said, is that contracts are approved by DOE for 20 years or more, when “a lot can happen over 20 years that we cannot foresee today. Twenty-year commitments without a safety valve is a great uncertainty, and places all the risks of exports on the consumer and all the benefits on the producer. We feel that’s out of kilter.”

The proposed Trans-Pacific Partnership agreement, Cicio fears, would give automatic free-trade status to China and Japan, which is now the world’s largest importer of natural gas.

On the Web: 1.usa.gov/1meDd36 1.usa.gov/1PTfbpY

You can reach Richie Davis at rdavis@recorder.com or 413-772-0261, ext. 269

Author: RICHIE DAVIS Recorder Staff

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  1. Good article! It is troubling that the US Government (FERC, DOE, State)and easily allowing considerable LNG export and giving away our competitive advantage of low gas prices.

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  2. FERC requested public comments on a proposed rule that would better align gas pipeline transportation scheduling practices of the natural gas and electricity industries, so that more pipeline capacity could be available for electricity generators that rely upon natural gas.

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