RE: Federal Docket #USCG-2013-0363 Comments on Liberty LNG s Port Ambrose Deepwater Port License Application Draft Environmental Impact Statement. Submitted by Catskill Citizens for Safe Energy, March 16, 2015. Tracking number 1jz- 8hr8-k8rg. Purpose and Need: The Draft Environmental Impact Statement (DEIS) frequently relies on outof-date data and fails to consider more recent data that convincingly demonstrates that a multi-decade expansion of domestic natural gas production is likely to render imported liquefied natural gas (LNG) uncompetitive in the target market for the foreseeable future. The DEIS fails to explain how Port Ambrose will be able to withstand the same long-term market forces that are forcing other East Coast import facilities to curtail operations, shut down altogether, or turn to gas exports in order to remain viable. According to the federal Energy Information Agency (EIA), U.S. natural gas production increased by more than 45 percent between 2005 and 2014. 1 Fueled by shale gas extraction, EIA predicts that domestic production will continue to increase at least through 2040. 2 In other words America s shale gas boom is likely to outlast the useful life of the Port Ambrose Deepwater Port. As domestic gas supplies have increased, the demand for imported LNG has plummeted. U.S. imports peaked in 2007 at 777,000 million cubic feet (MMcf). By 2014 that figure had dropped by over 90 percent, to just over 59,000 MMcf. 3 EIA s Annual Energy Outlook 2014 forecasts: The United States transitions from being a net importer of 1.5 Tcf [trillion cubic feet] of natural gas in 2012 to a net exporter of 5.8 Tcf in 2040, with 88% of the rise in net exports (6.5 Tcf) occurring by 2030, followed by slower growth through 2040 (Figure MT-42). The rapid increase in the production of domestic natural gas has predictably led to steep and sustained price declines for both natural gas and LNG. In 2008 the annual spot price of natural gas on the Henry Hub was $8.86/million British
Thermal Units (MMbtus). By 2013 the price had plummeted 58 percent to $3.73. 4 EIA predicts that the Henry Hub spot price will continue to decline in 2015, to $3.07. 5 And as the EIA recently reported: Liquefied natural gas (LNG) imports have fallen over the past five years because higher prices in Europe and Asia are more attractive to LNG exporters than the relatively low prices in the United States. 6 A survey of recent World LNG Estimated Landed Prices 7 published by the Federal Energy Regulatory Commission (FERC) demonstrates that LNG typically sells for two to five times more in Europe and Asia than in the U.S. An LNG exporter in Trinidad or Qatar is unlikely to sell their product for $2.36 or $2.70 in the U.S. when it can be sold for $7.00 or more in the United Kingdom or Spain. (Figures are drawn from FERC s World LNG Estimated March 2015 Landed Prices. ) In short, there is overwhelming evidence that U.S. LNG import facilities such as Port Ambrose will be unable to withstand the macroeconomic trends that are likely to shape the natural gas and LNG markets for the foreseeable future. As evidence consider what has happened to the five existing LNG import facilities on the East Coast: The Distrigas LNG terminal in Everett, Massachusetts is the oldest LNG import facility in the U.S., and arguably one of the more successful ones. It benefits from long-term contracts with both suppliers and customers. Nevertheless, by 2013 the Boston Globe reported Distrigas has experienced, a huge drop in imports as domestic supplies have soared. 8 The Globe also reported that Distrigas now retains just one primary customer, a power plant that is bound by a contract that does not expire for more than ten years. Boston harbor contains the only two existing deepwater LNG ports on the East Coast. Together they cost approximately $750 million. One, the Northeast Gateway Deepwater Port, opened in 2008. It received several shipments of gas during its first years of operation, but has received just one LNG shipment in the last five years. The other, Neptune Deepwater Port received a few shipments of gas when it became operational in 2011. In 2013, it voluntarily suspended operations after two years of inactivity. Imports at Dominion s Cove Point terminal in Maryland dropped by 90 percent between 2007 and 2014. 9 Its sponsors are currently modifying the facility in order to be able to export domestically produced gas overseas.
The fifth LNG import facility on the East Coast is located at Elba Island, GA. It began importing LNG in 2011 but quickly went into decline. Imports decreased by 78 percent between 2012 and 2013. 10 As with Cove Point, Elba Island s sponsors are seeking to add liquefaction and export capacity to their facility As a new venture, Port Ambrose would not benefit from long-term, contracts that advantageously lock in suppliers and customers. There will be nothing to help it overcome the enormous disparity between the landed price for LNG in the U.S. and the much higher prices in the rest of the world, a disparity that is likely to persist for many years to come. In light of these established, long-term economic trends, there is no reason to believe that Port Ambrose will somehow succeed while all other East Coast LNG import facilities shut down, lose business, or are reconfigured to export gas overseas. The claim that Port Ambrose is needed because the target market does not have sufficient infrastructure to transport [domestic natural gas] to the end users is suspect. 11 In fact, one major new pipeline, and others already under construction or awaiting approval, are dramatically increasing capacity in lower New York State and on Long Island, the target markets for Port Ambrose gas. The DEIS fails to rigorously analyze the impact of these new or potential infrastructure improvements. Spectra s New Jersey-New York Expansion Project became operational in November 2013. It now delivers up to 888 million standard cubic feet per day (MMscf/day) to Manhattan, effectively doubling the amount of gas into that borough. Later this month Williams expects to complete construction of the Transco Rockaway Lateral, which will provide Brooklyn with an additional 647 MMscf/day of capacity. An April 2014 report 12 prepared by Concentric Energy Advisors for Liberty Natural Gas states that several existing regional pipelines can be modified to increase gas deliveries to the target market. These include the Iroquois Pipeline, which could be expanded to handle an additional 400 MMscf/day. The Concentric report also notes that market area natural gas storage could also provide numerous benefits to the NYC/LI Metro Region 13, yet the DEIS fails to consider the potential impact of a new gas storage facility at Seneca Lake, NY with a capacity of 1.5 billion cubic feet (bcf). It is not clear that Port Ambrose will be able to deliver significant quantities of LNG to the target market. The DEIS states that Port Ambrose would be designed to transport an average of 400 MMscf/day, but it fails to quantify
how much gas it will actually be able to deliver at a profit during periods of peak demand. If Liberty Natural Gas has to compete with European markets for available LNG supplies, it is obvious that it will normally be unable to buy gas that can be sold at a profit in the target market. For this reason, the project sponsors are forced to fall back on the claim that Port Ambrose might be made viable by supplying gas during peak demand periods, when gas sells at a premium. Liberty Natural Gas commissioned a report ICF International report 14 to buttress this claim. The report subtitled Lessons of the Polar Vortex of 2013-2014 found that although the 2014 Polar Vortex temperatures were not unique to NY/NJ, the region s natural gas price spikes were. Only New England, which like NY/NJ is situated at the terminus of the North American natural gas pipeline grid, experienced triple-digit natural gas prices. [Emphasis added.] Other areas from the upper Midwest to the Southeast U.S. also saw temperatures plummet, but did not experience the same degree of natural gas price volatility largely because they do not have the same natural gas delivery constraints. 15 On the website, http://portambrose.com, under Project Need, the project also compares the constrained New York and New England gas markets and asserts: The introduction of LNG into New England markets via new projects similar to Port Ambrose has been proven to reduce winter average pricing spikes by over 50% in 2009 and 2010. 16 Why, in the spring of 2015, does the sponsors website cite the positive impact of new projects similar to Port Ambrose, but reference data from 2009 and 2010? The answer is simple. The unnamed, new projects referenced by Liberty Natural Gas are none other than the Northeast Gateway and the Neptune, the two deepwater ports in Boston Harbor that have been rendered obsolete by America s prolonged domestic shale gas boom. Despite the Polar Vortex of 2013-2014 and this year s record cold winter, Gateway received a single gas shipment in December 2014 (its first since 2010) while Neptune remains closed. Unlike New England, New York has vastly expanded its gas delivery infrastructure in the past few years. If even two extraordinarily cold winters cannot create a market for imported LNG in the delivery-constrained New England market, why is it reasonable to suppose expensive imported LNG will be able to compete with cheap natural gas in the much less constrained New York market? Section 5.3.3 Port Security If Port Ambrose does become operational, even sporadically, it will pose an unnecessary and unacceptable risk to the region. LNG is a known terrorist target, yet the DEIS fails to analyze some obvious scenarios that could put
American lives and property at risk. It also fails to determine the cost of protecting the public, and it makes no attempt to determine if the required security resources even exist. There are many small airports within the vicinity of Port Ambrose where pilots and passengers are not subjected to the same screening regimen that is employed at major international airports. What is to prevent a terrorist from loading a small private plane with explosives and flying it into a liquefied natural gas regasification vessel (LNGRV) containing more than 5 million cubic feet of LNG, which, on exposure to ambient air temperature, would immediately form an immense, explosive vapor cloud? Unaccountably, the DEIS does not even consider such a scenario. The DEIS also fails estimate the cost that would have to be borne by taxpayers if Port Ambrose were to become operational. The Boston Globe reports that LNG tankers supplying the Distrigas facility in Everett, MA require a small navy of Coast Guard ships and other armed escorts. 17 The cost of this small navy may be justified in the case of Distrigas because it is an established and important part of the New England s gas delivery system, but Port Ambrose is, at best, a highly speculative business venture that is unlikely to ever play a significant role in its target market. In February 2011 New Jersey Governor Chris Christie vetoed a license application 18 for a deepwater port similar to Port Ambrose because he was concerned that it would place an undue burden on the U.S. Coast Guard, Homeland Security personnel and first responders. The DEIS makes no attempt to determine if these resources have the capacity to adequately protect the public from the risks inherent in operating a deepwater LNG port near important shipping lanes and in a densely populated region of the country. Section 2 Description of the Proposed Action and Alternatives: As the DEIS acknowledges, the construction of Port Ambrose could interfere with the construction of a proposed wind farm in the same area. This alone is reason enough to deny Liberty Natural Gas license application. Offshore wind can play an important role in developing sustainable energy systems for the region; all the evidence suggests that imported LNG, a polluting and dangerous fossil fuel, will only play a minor and increasingly unimportant role in the regional energy market. Footnotes: 1. U.S. Energy Information Administration, U.S. Natural Gas Marketed Production http://www.eia.gov/dnav/ng/hist/n9050us2a.htm Year: 2005 18,927,095 Million Cubic Feet Year: 2014 27,259,815 Million Cubic Feet
2. The Annual Energy Outlook 2014 with projections to 2040 published by the U.S. Energy Information Administration predicts a 56% increase in natural gas production between 2012 and 2040. (Page MT 23) http://www.eia.gov/forecasts/aeo/pdf/0383(2014).pdf 3. U.S. Energy Information Administration, Liquefied Natural Gas Imports http://www.eia.gov/dnav/ng/hist/n9103us2a.htm 4. U.S. Energy Information Administration, Henry Hub Natural Gas Spot Price http://www.eia.gov/dnav/ng/hist/rngwhhda.htm 5. U.S. Energy Information Administration, Short-Term Energy Outlook, March 10, 2015. http://www.eia.gov/forecasts/steo/report/natgas.cfm 6. Ibid. 7. FERC s World LNG Estimated march 2015 Landed Prices can be viewed at http://www.ferc.gov/market-oversight/mkt-gas/overview/ngas-ovr-lng-wld-pr-est.pdf. Other recent overviews can also be readily found online. 8. 2 costly LNG terminals sit idle by Jay Fitzgerald, The Boston Globe, January 23, 2013. http://www.bostonglobe.com/business/2013/01/23/offshore-gas-terminals-mass-bustfar/qu8dyzzf6ybnasdnatt1zj/story.html 9. Reversing the flow: With Cove Point, U.S. seeks to become a gas exporter by Lawrence Lanahan posted on America.aljazeera.com, May 14, 2014. http://america.aljazeera.com/articles/2014/5/14/cove-point-us-wantstonaturalgas.html 10. U.S. Energy Information Administration, Elba Island, GA Liquefied Natural Gas Imports from Qatar. http://www.eia.gov/dnav/ng/hist/ngm_epg0_iml_yelba-nqa_mmcfa.htm 11. Executive Summary Port Ambrose DEIS Volume 1, page 19. 12. Benefits Associated With Incremental Natural Gas Supplies Delivered to New York City, Prepared by Concentric Energy Advisors for Liberty Natural Gas/ Port Ambrose, April 2014. 13. Ibid. Page 11. 14. Cost of Natural Gas Capacity Serving the New York and New Jersey Energy Market Lessons from the Polar Vortex Winter of 2013/2014, Prepared for Port Ambrose LNG by ICF International, July 2014. Page 2. 15. Ibid. Page 2 16. http://portambrose.com/project-need/ 17. 2 costly LNG terminals sit idle by Jay Fitzgerald, The Boston Globe, January 23, 2013. http://www.bostonglobe.com/business/2013/01/23/offshore-gas-terminals-mass-bustfar/qu8dyzzf6ybnasdnatt1zj/story.html 18. Re: Application of Liberty Natural Gas for the LNG Deepwater Port Offshore of Monmouth County, New Jersey Docket Number USCG-20010-0993, February 8, 2011. See http://catskillcitizens.org/learnmore/christie%20veto.pdf