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ASSOCIATED PRESS: Energy firms make room for liquefied natural gas

EXTRACT: Environmental concerns also have flared. On March 28, Shell Oil Co. dropped plans to build a terminal in the Gulf of Mexico after opposition from fishermen, who opposed Shell’s plans to use millions of gallons of seawater in the process. Opponents feared that would kill fish larvae.

THE ARTICLE

Storage terminals are on the rise amid concerns about safety and the environment.

By Alan Syre
Wednesday, May 09, 2007

HACKBERRY, La. — Just down the road from this fishing hamlet in the bayou country of southwestern Louisiana, a massive complex is rising to handle the nation’s growing demand for natural gas.

Cranes tower over arena-size containers that are 170 feet tall and 250 feet in diameter. Sempra Energy Inc. expects the $750 million terminal to begin operating next year as the arrival point for tankers carrying liquefied natural gas, or LNG.

Although the energy industry regards LNG as a vital step in keeping up with the demand for natural gas in the United States, proposals to build terminals are raising environmental and safety concerns.

Not widely used until natural gas prices jumped in recent years, gas cooled to minus 260 degrees and turned into liquid is the only practical way to import supplies from overseas.

Energy companies have proposed building 35 terminals in Texas and nine other states and five offshore areas near the coast. The Federal Energy Regulatory Commission has approved 18 terminals.

Most of the projects are proposed for the Northeast, which has seen huge price increases for heating oil; California, where natural gas is in high demand for power generation; and the Gulf Coast, where LNG processors can easily pump the finished gas product into interstate pipelines.

Among the projects are a $700 million terminal near Freeport, being built by Freeport LNG Development LLC; McMoRan Exploration Co.’s Main Pass offshore terminal off Louisiana with a $1 billion price tag; and Hess LNG LLC’s terminal proposed to go near Fall River, Mass.

As the nation’s thirst for energy grows, market prices have sparked new interest in natural gas.

In 1999, gas traded on the New York Mercantile Exchange at an average of $2.35 per million British thermal units. Last year, the price averaged $9.20. In between, there were spikes as high as $20.

The United States consumes about 60 billion cubic feet of gas per day, about a quarter of its energy consumption. Gas heats more than 60 million U.S. homes and is the fuel of choice for generating power in many areas.

At the same time, supplies are getting tighter.

In the Gulf of Mexico, production has declined by more than 4 billion cubic feet per day since 2001, while production in the North Sea is dropping 15 percent a year as easy-to-reach deposits run out. Alternatives such as deepwater drilling in the Gulf are more expensive.

Importing natural gas in its compressed liquid state often is a cheaper alternative, said Darcel Hulse, chief executive officer of Sempra Energy.

Natural gas is important for more than home heating and production of electricity. The chemical industry uses natural gas as a raw ingredient in products and to generate steam and power.

But with LNG plant construction comes fears of accidents or terrorist attack. Although natural gas is not flammable in its liquid state, opponents worry about leaks at terminals and on tankers that would allow the liquid to heat up quickly and return to its flammable gas form.

Environmental concerns also have flared. On March 28, Shell Oil Co. dropped plans to build a terminal in the Gulf of Mexico after opposition from fishermen, who opposed Shell’s plans to use millions of gallons of seawater in the process. Opponents feared that would kill fish larvae.

But the biggest concern centers on safety.

In 2004, an explosion at an LNG plant in Algeria killed 30 people. The worst accident on record happened in 1944, at a Cleveland LNG plant that burned and killed 128 people after a tank leaked LNG into the sewer system where it became a flammable vapor and exploded.

A congressional study in March said fire from a terrorist attack on an LNG tanker could cause the gas to ignite so fiercely that it would burn people a mile away. The General Accountability Office, which is the investigative arm of Congress, urged the Energy Department to perform new research on the risks for such ships.

Tim Riley, a lawyer and consumer advocate in Oxnard Shores, Calif., said not enough is known about the potential hazards of an LNG spill for the government to continue licensing terminals safely.

“The sheer volume is what makes it eminently dangerous,” said Riley, co-producer of a film titled “The Risks and Danger of LNG.”

Industry advocates say the safety fears are exaggerated.

Sempra said its storage tanks are designed to withstand winds of 150 miles per hour and are elevated nine feet off the ground for flood protection at its Hackberry project.

In addition, LNG tankers have booked 100 million sailing miles without a death or major accident, and modern storage tanks are built with aluminum alloys and reinforced with concrete to withstand LNG’s frigid temperatures, said Bill Cooper, executive director of the Center for Liquefied Natural Gas.

LNG tankers have double hulls, with 6 to 10 feet of space between the two hulls and an insulation layer around the storage tanks, he said.

“We’re talking about a very robust, sturdy ship design,” Cooper said.

 

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