Natural gas exports eyed through Calvert County

COVE POINT — — It's quiet these days at Dominion's liquefied natural gas terminal in the Chesapeake Bay. Only five tankers docked last year at the pier a mile off the Calvert County shoreline, and not much traffic is expected this year, either.

But thanks in large part to booming production of natural gas from shale deposits in neighboring states, the East Coast's largest LNG terminal could be bustling again in several years — exporting the heating and industrial fuel to other countries, instead of importing it.

Dominion, based in Richmond, Va., has won approval from the Department of Energy to use Cove Point for exporting liquefied natural gas to about 20 nations with which the United States has free-trade agreements. The company is now seeking federal permission to allow shipments to virtually any foreign country, except those barred because of trade embargoes.

The company is awaiting that green light before deciding whether to proceed with plans to convert the terminal to an export facility, said spokesman Dan Donovan. Other federal, state and local approvals also would be needed for construction of a gas liquefaction plant at the 1,100-acre site and for what the spokesman said would be relatively minor modifications to the offshore pier. If it moves forward, the terminal's work force could nearly double, Dominion said.

The O'Malley administration, which has imposed a de facto moratorium on shale-gas drilling in Western Maryland until it finishes studying the environmental impacts, has taken no position on Dominion's bid to handle gas exports at Cove Point. Abigail Hopper, the governor's energy adviser, said in an email it would be premature to comment.

But environmental activists can be expected to oppose it, given their objections to "fracking," the hydraulic fracturing technique used to extract shale gas.

"There's a long list of environmental and public safety concerns related to this practice," said Mike Tidwell, executive director of the Chesapeake Climate Action Network. "I think it would be a mistake for the state of Maryland to begin granting the right to companies to bring shale gas through our state and export it to other countries."

Environmentalists and residents living near shale gas drilling sites contend that fracking has been responsible for contaminating wells and local streams, and causing other problems. Companies have been fined for some spills, and the Environmental Protection Agency tentatively identified fracking fluids in groundwater in a Wyoming town where much drilling has occurred.

But industry officials and state regulators have disputed the EPA finding and maintain that fracking — in which large quantities of water, sand and a variety of chemicals are pumped into the ground, then withdrawn — is not responsible for any contamination. The technique has been widely used in the West for years.

While drilling proceeds apace in Pennsylvania and West Virginia, the O'Malley administration has held up requests to drill into Marcellus shale deposits in Western Maryland. A task force appointed to study safety and potential environmental impacts is one year through a projected three-year review.

The nation is awash in natural gas right now, with production outstripping consumption and a record amount in storage for this time of year, according to the U.S. Energy Information Administration. The prices that gas companies are getting for their product are at the lowest point in a decade, and at least a couple have announced plans to scale back drilling in Appalachia's Marcellus shale deposits, which have played a major role in feeding the current boom.

Driven in part by the glut and also by tighter air-quality regulations, utilities are looking to build or convert power plants to burn natural gas, while some foresee manufacturing enjoying a rebound with cheaper energy costs.

LNG tankers have been calling since the late 1970s at Cove Point, which is about three miles south of the Calvert Cliffs nuclear reactor. The facility handled imports from Algeria for a couple years, then was mothballed as domestic gas production soared. It reopened briefly in 1995, then was dormant again until 2003, when Dominion won federal approval to reopen it. The company has expanded its capacity to handle as much as 1.8 billion cubic feet of gas daily, and increased the capacity as well of the pipeline serving the facility.

The Energy Department has authorized Dominion to export up to 1 billion cubic feet of gas through Cove Point to nations that have signed free-trade agreements. It's one of eight terminals in the lower 48 states — and the only one in the Mid-Atlantic — applying for broader long-term export authorization, as the industry looks to capitalize on the current glut of domestic gas production.

Dominion is investigating the export potential of Cove Point because of its connection via pipelines to the Marcellus shale gas fields in Pennsylvania and West Virginia, Donovan said, and to Utica shale gas recently discovered in Ohio.

Some have questioned the wisdom of permitting significant gas exports, worried that it could drive up prices domestically.

A coalition of environmental groups has filed comments with the Energy Department opposing Dominion's application, arguing that exporting gas will increase utility bills of American consumers and spur more shale gas drilling, which they contend is fouling groundwater and streams.

Michael Helfrich, the Lower Susquehanna Riverkeeper, says he's also worried about construction of pipelines to get the gas to the terminal, which he fears will chop up forests and increase polluted runoff to the river and the bay. Already, two new pipelines are being laid on either side of the river, he said.

"I see all the shale gas north of me. I see the export facility south of me. I just see a crisscross of new pipelines coming from every direction," he said.

Manufacturers also are worried that a surge in U.S. gas exports could drive up prices for the fuel, wiping out the benefits they have seen lately from low energy prices.

A recent study by the Energy Information Administration projected that if all the gas export requests pending now were granted, prices of the fuel could soar by 36 percent to 54 percent by 2018, depending on economic conditions and how rapidly natural gas production could be increased to take advantage of higher prices. Electricity prices also would go up between 2 percent and 9 percent, the study forecasted, though it assumed utility bill increases would be more limited because power plants would switch from burning natural gas to coal.

"By anyone's measure, these are substantial cost increases," Paul Cicio, president of the Industrial Energy Consumers of America, said in a statement. The manufacturers' group warns that higher gas costs will hurt the economy and cost factory jobs.

Meanwhile, another EIA study recently cut in half estimates of the amount of gas available in the ground in the United States, calling into question just how much supply could be increased and for how long.

Dominion spokesman Donovan contended that the federal energy studies "have shown that there's enough gas to both meet our demand locally and ship it overseas. There's just so much of it, it would have only a small effect on the price, and it would create jobs."

The company predicts that converting to exports at Cove Point would allow it to hire about 70 more employees, on top of the 75 who already work there. Opening up new, more lucrative markets abroad for domestically produced gas could generally boost the U.S. economy, reduce the national trade deficit and support more than 14,000 new jobs, the company forecasts.

The company says upgrading the terminal for exports also could generate about $40 million a year in additional property tax revenues for Calvert County, a sizable increase for the Southern Maryland county, which has a $232 million budget for this year.

"Obviously it will help our tax base in a very positive way," said Gerald W. Clark, president of the Calvert board of county commissioners.

He said Dominion has been a "good corporate neighbor," despite what he characterized as "minor" complaints from neighboring residents about noise generated by the terminal's facilities. Though there's always at least a remote risk of catastrophic explosion of the natural gas stored there, Clark said, officials consider it a safe operation.

"We live every day with a gas plant [and] a nuclear power plant, and you'd be hard-pressed to come down to Calvert County and find people that will say anything negative about the facilities," he said.

As for environmental opposition to enabling fracking, Clark countered that "the gas is there already" and being extracted in other states, even if Maryland officials haven't decided whether to permit drilling in this state. "It would be nice to have something we can export in this country," he said.