Dominion's hopes rise for ambitious natural gas exports

Michael D. Frederick, vice president of LNG for Dominion, stands on a dock with the massive LNG terminal behind him on the Chesapeake.
Michael D. Frederick, vice president of LNG for Dominion, stands on a dock with the massive LNG terminal behind him on the Chesapeake. (CLEM MURRAY / Staff Photographer)
Posted: July 14, 2014

LUSBY, Md. - Not many ships dock these days at the gigantic Dominion Resources pier that sprouts out of the Chesapeake Bay here, about a mile off Maryland's western shore.

Since the American shale-gas boom began, there has been little call for imports of liquefied natural gas for which this pier and a massive onshore processing plant opened 36 years ago. The pier, which can accommodate two 1,100-foot LNG tankers simultaneously, is mostly home for a raucous and untidy colony of gulls, well-fed from a nearby landfill.

"Everybody tells us we have the biggest gulls in Calvert County," Keith Lavender, the marine supervisor at Dominion Cove Point LNG Terminal, said on a tour last week.

But Dominion hopes that huge LNG tankers once again will begin making regular stops here in a few years.

Only this time, they'll be loading up on American natural gas for shipment to Asia.

The Federal Energy Regulatory Commission (FERC) is set to rule this summer on Dominion's application to export up to 770 million cubic feet of natural gas a day from Maryland, the closest export outlet for producers in Pennsylvania's booming Marcellus Shale region.

"Thanks to technological advances, the U.S. has enough natural gas to meet not only America's consumer demand, but also to export some supply in the form of LNG without significant impacts on domestic prices," Diane Leopold, president of Dominion Energy, told a House Foreign Affairs Committee panel in May.

The effort to export surplus gas production has attracted considerable opposition. Some consumers, including the petrochemical industry, say exports will drive up prices and retard manufacturing. Environmentalists fear harm from more drilling.

A coalition of anti-drilling activists plans a "Stop Fracked Gas Exports" rally today at FERC headquarters in Washington. While the focus of the rally is the Cove Point project, which is about 60 miles from Washington, the aim is to halt all natural gas exports in the name of reducing greenhouse gas emissions.

"Building new fossil-fuel infrastructure keeps America tied to the past," Sierra Club executive director Michael Brune said in a statement.

Dominion is operating here as though final approval is only a formality.

The U.S. Department of Energy has given preliminary approval to six of the 31 projects that have applied for federal approval to export LNG - Cove Point, three in Louisiana, and one each in Texas and Oregon.

FERC has authorized two. But it sent Cove Point a positive signal in May when it released a draft assessment that determined the adverse cumulative impacts of the $3.8 billion Maryland project would be "temporary and minor."

Construction is set to begin as soon as FERC gives its final approval, said Michael D. Frederick, Dominion's vice president of LNG operations. Last year, Dominion agreed to export its output to buyers in Japan and India.

Ups and downs

Dominion owns 1,107 acres at Cove Point, of which 800 acres of forests and a marsh are in a permanent conservation easement. An additional 90 acres are leased to the county as a park. The plant itself takes up 131 acres.

The Cove Point facility is kind of a monument to the roller-coaster fortunes of natural gas. The plant first opened in 1978 as an import facility, when domestic natural gas supplies were so scarce that homeowners were turning down their thermostats, and gas utilities turned away new customers.

But domestic supplies improved, and imports ceased after 1980. The facility was largely dormant until 1995, when its owners installed new equipment to liquefy gas in the summer for storage for utilities in Washington, Baltimore, and Atlanta to use during the winter days.

Dominion acquired the terminal in 2002, and reopened it for imports the next year. Shell, BP, and the Norwegian producer Statoil signed 20-year agreements that provide Dominion with income.

More than 300 ships have delivered LNG to Cove Point since imports resumed in 2003. But domestic shale-gas production boomed, imports fell off - they couldn't compete with cheap domestic gas. Dominion now receives only about one shipment a year to keep the facility filled with super-cool LNG so that its equipment is maintained at a constant frigid temperature.

To convert the facility for exports, Dominion needs to install a series of large turbines, compressors, and electrical generators to provide the huge amount of energy needed to cool natural gas to minus-260 degrees, the point at which the gas converts to a liquid. "The cryogenic equipment is very expensive," Frederick said.

The large liquefiers for the project will be manufactured by the Air Products Co. at its Wilkes-Barre facility and shipped to Maryland by barge.

Dominion will also build a 60-foot sound wall to reduce noise to residents south of the plant.

Tax windfall

Dominion says construction will generate 3,000 jobs for more than three years. When the project is completed, Cove Point's workforce of 100 will expand by 75 employees.

The plant's property-tax bill will increase from $15 million a year to $55 million, or about 30 percent of Calvert County's total.

Much of the infrastructure is already in place - pipelines, seven huge insulated storage tanks, and the offshore pier, which is connected to the onshore operations by a 1.25-mile underwater tunnel.

Environmental groups say they are likely to challenge FERC's expected approval because the agency did not take into account the cumulative greenhouse gas emission impacts that Cove Point would trigger from the production, transportation, processing, shipping, and eventually the consumption of the natural gas.

Dominion maintains that if Cove Point is not built, it won't halt shale-gas production, the aim of opponents. Another facility will get the export license.

"If this project isn't built," Frederick said, "that gas will go somewhere."


amaykuth@phillynews.com

215-854-2947 @maykuth

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