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June 26, 2014





Downeast LNG changes plans, proposes export/import facility
by Edward French


    After waiting nearly eight years for federal permitting for a liquefied natural gas (LNG) export terminal in Robbinston and having finally received a positive final environmental impact statement (FEIS) in May but no final approval yet, Downeast LNG plans to file a new application with the Federal Energy Regulatory Commission (FERC) to redesign the project so that the facility also could export natural gas. While the new plan would allow for both importing and exporting natural gas, Downeast LNG also is proposing to purchase domestic natural gas at low prices in the summer, keep it stored in Robbinston and sell it at a higher price during the winter to help meet the peak demand in New England.
However, critics of the plan wonder why the proposal is being kept alive, since they believe it does not make economic sense. And Save Passamaquoddy Bay, which opposes the project, recently asked FERC to dismiss the current project application "with prejudice," meaning the company would not be allowed to refile it.
Dean Girdis, president of Downeast LNG, says, "Having a bi‑directional facility will give us the ability to respond to market conditions and customer needs while increasing the supply of natural gas in the state, whether we are importing or exporting." The proposed project will have the ability to liquefy 270 million cubic feet of gas a day (mmcfd) or regasify 100 mmcfd of LNG, as market conditions warrant.
     FERC spokesperson Tamara Young-Allen says the revised project will require the filing of a new application to FERC, and the Department of Energy will need to authorize the exporting of LNG. She says FERC applications usually take 18 months to two years before a decision is made, although the Downeast LNG application for an import terminal has been under consideration by FERC since December 2006. There is no deadline for when a decision needs to be made by FERC on the original application.
     Girdis says Downeast LNG will prefile with FERC in a couple of weeks for a bi-directional facility, with a full application being filed in January. The company's current application with FERC for an export terminal would "stay as is," but without the commission making a decision on it. The new application will include the removal of one of the two tanks, add liquefaction capability and a new engineering design. However, the environmental studies conducted for the current application could be retained. Downeast LNG also will have to file for state permits; the company had withdrawn its state permit applications for an import terminal in 2007.
     Girdis is hopeful that construction of the redesigned terminal could begin in 2016 and the facility could be operating by 2019 or 2020. The estimated cost of constructing the facility is $1.3 to $1.4 billion, which is double the estimated cost of the original project.
     To export natural gas, Downeast LNG would obtain the gas from the Maritimes & Northeast Pipeline. Houston-based Spectra Energy Corp., which owns the pipeline that currently transports gas from Canada through Maine to Massachusetts, announced plans earlier this year to allow the flow to reverse and to send natural gas north from the shale gas fields in New York and Pennsylvania into New England and Canada. Girdis says the Downeast LNG proposal would help support the building of new pipelines to the region by contracting for 300 million cubic feet per day. The company also would release up to 20 days of pipeline capacity annually to New England consumers on the coldest winter days to increase gas supply, thereby reducing high winter spot gas prices in the region.
     Girdis says the LNG would be exported to countries in Europe, noting the demand created by the current geopolitics in the region. "Russian gas makes a lot of people nervous," he points out.
      As for importing natural gas, Girdis says the facility "may not need to import to regasify" the natural gas. Instead, the Robbinston terminal could be a "peak shaver facility," with natural gas purchased during the summer months when the price is low and liquefied and stored in the tank. During the winter, when the price is higher, Downeast LNG would regasify and sell the natural gas. Girdis says the terminal could handle about 3.3 billion cubic feet per day or 33 days worth of gas in its storage tank. Although the market for natural gas has changed dramatically with the development of the shale gas fields in the northeastern U.S., making import facilities like Downeast LNG and Canaport in Saint John look to exporting natural gas, Girdis doesn't think such a dramatic market change will happen again.
      Girdis points out that a recently updated economic impact study by Professor Todd Gabe of the University of Maine indicates that the project would generate significant economic benefits. According to the study, over the three‑year construction period the proposed LNG terminal will generate on average 2,350 full‑ and part‑time jobs and labor income of $375 million. After the terminal is completed, the statewide impact of its annual operations C including multiplier effects C would be an estimated $68 million in output, 337 full‑ and part‑time jobs, and $21.6 million in labor income. The impact of the LNG terminal's annual operations on the Washington County economy -- including the multiplier effects -- would be an estimated $46.4 million in output, 207 full and part-time jobs and $14 million in labor income.

Critics offer sharp assessments
     Critics of the Robbinston LNG proposal are pointed in their assessments. Barbara Shook, senior reporter-at-large for the Energy Intelligence Group in Houston, Texas, comments, "I have no idea why they're still pursuing this. There's no reason for this project to be kept alive." She asks, "Why would they want to be an import terminal? There's market but no supply. It makes more sense in the short run but not the long term. I don't know where they'd get their supply." Shook also wonders where the facility would get the gas to be an export terminal. "It's a real question whether they could obtain natural gas to export," she says, noting that it would depend on reversal of the gas flow in the Maritimes & Northeast Pipeline and when that will happen is "a total unknown."
     "The real issue is the economies of scale," says Shook, noting that LNG facilities are very expensive. She says that the Downeast LNG proposal is "pretty small," proposing to be able to liquefy 270 million cubic feet per day, while Gulf Coast facilities can handle 2 billion cubic feet per day. She notes that the LNG facilities on the U.S. Gulf Coast have similar economies of scale as ones in Qatar and Australia. "This thing in Quoddy -- they're thinking too small."
     As for Canaport's plans to export natural gas, Shook says, "I don't think they're going to get the gas. I don't think the U.S. will allow it." Exporting the gas from the U.S. into Canada will require U.S. regulatory approval, and Shook expects U.S. natural gas companies will ask why they don't have "first dibs" on the gas. Shook also notes that there is more pipeline capacity to transport the gas from the shale gas fields to the Gulf Coast than to Canada. "They're more inclined to export through the Gulf so U.S. companies can make the money," she says.
     Save Passamaquoddy Bay also is sharp in its criticisms of the proposal. On June 24, the group filed a motion to FERC to dismiss or deny Downeast LNG's permit applications with prejudice, arguing that Downeast LNG has abused the permitting process by withholding information from FERC and the public. Bob Godfrey of Save Passamaquoddy Bay says, "Girdis, Downeast LNG and investors did not just suddenly make their decision to change the project C in July of 2013 Downeast LNG spent $2.5 million to buy the project property. They obviously have been planning this for quite a while. As a result, Downeast LNG's FERC applications are for a project very different from the project the company has actually been planning."
     Godfrey says that since the same safety, environmental, cultural and economic problems remain, the government of Canada is no more likely to allow LNG ship transits for the new proposal than for the existing proposal. He comments, "Downeast LNG's new proposal simply appears to be Dean Girdis' way of continuing to milk his cash cow investors while saving embarrassment from surrendering to reality. Girdis and Downeast LNG have been wasting federal and state taxpayers' time and money now since 2005 with cockamamie schemes that have no merit."

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