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Cold Reception 

Environmentalists and oil companies square off over the rapid development of Liquefied Natural Gas terminals.

State fisheries and environmental groups are struggling to catch up in the energy industry's race to construct a slew of new terminals off Louisiana's southwestern coast for the importation of Liquefied Natural Gas (LNG).

On Feb. 23, the U.S. Coast Guard and Maritime Administration issued a permit for the Shell Gas & Power LLC Gulf Landing terminal, to be located 38 miles off the coast of Cameron Parish. Organizations including the Louisiana Shrimp Association, the Louisiana Charter Boat Association and the Sierra Club are lining up in opposition to Shell's recently permitted LNG terminal, which they say could wreak havoc on the Gulf's fisheries.

State officials now say they are working with Shell to better determine the full impact of the terminal. Meanwhile, the Louisiana Charter Boat Association has launched a boycott of Shell, while the national Sierra Club is considering filing a lawsuit to halt the project.

Shell did not respond to requests for comment for this story.

Even pro-business Gov. Kathleen Blanco is asking for more information on the potential long-term ecological damage from LNG terminals. Many questions remain on how to measure the compound environmental effect of a series of offshore LNG terminals.

"All of this is happening too fast," says Sierra Delta Chapter Vice Chairwoman Leslie March. "There really hasn't been enough time to do a good study on this."

Four LNG facilities currently exist in the United States, including Trunkline LNG in Lake Charles. All of those sites are permitted as "closed loop" systems, which continuously recycle an enclosed pool of water. But Shell's new terminal is permitted as an "Open Rack Vaporization" or open-loop system. Terminals using the open-loop system suck in up to 200 million gallons of sea water a day (along with the water's living inhabitants) through a radiator-like structure and run it over panels with a temperature of minus-260 degrees Fahrenheit. The terminal then discharges the water -- now chlorinated and about 20 degrees cooler -- back into the sea.

"You're subjecting everything that's in that water to cold shock," says Jim Hanifen, assistant administrator for marine fisheries at the state Department of Wildlife and Fisheries.

Hanifen says that the federal Maritime Administration's recent fast-tracking of licensing for LNG terminals caught the state off guard. "The fast tracking did have some impact on how we responded, and there was some confusion," he says. "We did miss some deadlines."

The Deep Port Act passed by Congress in 2002, requires the Maritime Administration to complete its licensing process for offshore LNG facilities within 356 days. The law also gives adjacent states the right to veto that permit or make stipulations -- such as a closed loop system. However, any state veto or conditions must come within 45 days of the last public hearing on any proposed terminal. The last public hearing for Gulf Landing was held in New Orleans on Nov. 18. As of the state's Jan. 3 deadline, Blanco hadn't submitted any written comments to Maritime.

Wildlife and Fisheries secretary Dwight Landreneu did send a letter to the Maritime Administration on Jan. 3 expressing some concern over the open-loop system and asking for further study on the terminal's impact -- with the state's involvement. However, the Maritime Administration, operating under strict deadlines, issued the license for Gulf Landing on Feb. 16. In doing so, acting Maritime Administrator John Jamian wrote, "The 45 days time limit has passed without comment from the Governor of Louisiana and therefore the adjacent state is presumed to have granted its approval of the Gulf Landing project."

State officials are now left in the awkward position of trying to ensure that LNG facilities that are already permitted will work with them to find a solution. Blanco sent her first letter to Maritime a week later, reiterating the concerns of the state Wildlife and Fisheries Department and pleading for more review of the terminal's environmental impact. While the state is excited about LNG development in the state, she wrote, environmental concerns call for "a comprehensive monitoring and mitigation plan." Blanco also said that should the possible economic benefits from such a facility be outweighed by the long-term harm to the environment and fisheries resources, "then the risk would be unacceptable."


ONLY ONE OTHER SIMILAR TERMINAL exists in the world -- off the coast of Japan. But critics say the effect of that open-loop terminal, which is placed in an open-ocean setting, will likely pale in comparison to the impact of an LNG terminal in the Gulf of Mexico, adjacent to some of the world's most productive estuaries.

Susan Mopper, director of the University of Louisiana at Lafayette Center for Ecology and Environmental Technology, says even one open-loop terminal could have a noticeable impact on the Gulf's fish and crustacean populations. Not only would the terminal pose a threat to the eggs and delicately drifting larvae that represent the area's next generation of fish, but it also would suck up the tiny plankton that forms the base of the Gulf's food chain.

Mopper shudders when she considers the effect of a whole fleet of open-water LNG terminals. "It's just going to sterilize everything and that's the worst thing that can happen in the Gulf," she says. "It's similar in concept to the dead zone. It could create its own miniature dead zone."

The dead zone is a vast expanse of sea nearly the size of Louisiana, devoid of the Gulf of Mexico's usual bounty of fish and shrimp. It's barren due to a lack of oxygen, which scientists say stems from the pollution and excess nutrients channeled into the Gulf through the Mississippi River.

"We're already seeing sharp declines in fish diversity and crustacean diversity, so we really need to become more protective," Mopper says. "It seems like the damage could be even more than what current estimates are. I don't think you can really estimate it right now. That's the problem. People are really scrambling to get hard numbers."

The only estimates currently available come from the Coast Guard, which commissioned an Environmental Impact Study (EIS) during the Gulf Landing permitting process that is required for the federal permit. The EIS only examined the effect the terminal would have on four fish populations, and focused on redfish. In December, the EIS estimated that up to 8.5 percent of the redfish at Gulf of Mexico landings and 11.5 percent at Louisiana coast landings would be annually killed by an open-loop terminal.

Two months later, after the time frame for state and public comment on the permitting had expired, the EIS substantially lowered its initial estimates, saying that a maximum of 3.8 percent of the redfish eggs and larvae could be killed annually by the terminal's LNG processing.

Gulf fishery observers are concerned over the wide disparity between the initial and final estimates -- and maintain that the lower 3.8 percent number would still be devastating to the already low redfish count. (Commercial fishing of redfish has been banned since 1988 in an effort to rebuild stock of the overfished species.)

"We don't know enough to be able to fully evaluate the potential impacts of the open-loop system," says Hanifen of Wildlife and Fisheries. "Ideally, we should have more information especially if there is going to be more projects like this. There were other data sets that could have been used that could have given some better indications."

Five other LNG terminals slated for Louisiana have already received Coast Guard approval, two of which are offshore. One of these, Energy Bridge, slated for completion later this year by Excelerate Energy in Houston, is not expected to use an open-loop system. The other, Chevron Texaco's Pelican Point, was put on hold last month. The Federal Energy Regulatory Commission lists another five proposed sites for terminals either on or off Louisiana's coast that have yet to be permitted, with a total of 11 proposed for the Gulf of Mexico.

Environmental and fishery protection groups have been caught off guard by LNG's rapid development. Darryl Malek-Wiley of the Sierra Club Delta Chapter says the problem started when a number of LNG facilities applied for permits off the coast of Texas and Louisiana before the environmental community was aware of them. "We're all playing catch up," he says.

Even the LNG terminal's corporate owners are scrambling to keep up with LNG's rapid development. LNG is currently exported from countries in Africa or the Middle East, and liquefaction involves cooling gas to minus 216 degrees Fahrenheit, reducing it to a fraction of its size for economical shipping. David Dismukes, associate director of the Louisiana State University Center for Energy Studies, says liquefaction facilities exporting LNG are currently operating at about full capacity. Any new terminals here will require additional investment in countries such as Algeria and Iraq that have an abundance of natural gas.

"In addition to the $600 to $800 million of investment we see here (in Louisiana), there's probably about double that on the front end (in producing countries)," Dismukes says.

The lack of infrastructure on the supply side is what caused Chevron Texaco to suspend work last month on its offshore terminal at Pelican Point -- the first offshore LNG facility to obtain a permit. "We're just trying to keep pace with our suppliers and make sure there's alignment," says company spokesman Matt Carmichael. He acknowledges growing opposition to offshore open-loop terminals but adds that Chevron, like Shell, has agreed to extensive monitoring for any project that goes on line.

"We have all our permits," he says. "We're going to move forward as the project dictates."

While Chevron's project is on hold, Shell has a number of working investments overseas that should be able to supply its Gulf Landing terminal for its planned opening by 2009. Shell's Web site says LNG facilities will help the country to stabilize rising natural gas prices. It predicts that domestic demand for natural gas will increase by more than 50 percent by 2020.

Meanwhile, Dismukes of LSU helped conduct an energy study clearly outlining why Louisiana -- with its extensive pipeline infrastructure and a high natural gas demand for its chemical industry -- is such a perfect match for LNG. (Louisiana uses almost as much natural gas as the entire country of China.) The report estimates that construction of the proposed offshore facilities and added pipelines alone could mean a total of $1.4 billion for the state, with annual operations generating around $141 million in total economic impact.

Dismukes says the opportunities have not only attracted multinational companies with their own direct links to liquefaction facilities, but also local ventures who are moving ahead without any suppliers -- confident they will be able to operate in merchant fashion.

"There is some urgency," Dismukes says. "As more and more of these LNG facilities come on line, they're going to start to have a dampening effect on prices. So that last one to go up is probably going to be the least profitable." For that reason, oil and gas industry executives predict that only a few of the proposed LNG terminals will actually get built.

Dismukes says the current market allows for LNG facilities (such as the one in Lake Charles) to buy imported LNG at about $3.50 per 1,000 cubic feet and sell the same amount at the Henry Hub piping terminal in Erath for about $6, almost doubling their money.

But the profit margins are the only hard numbers currently associated with LNG terminals. Malek-Wiley of the Sierra Club warns the state has been burned before by not fully examining environmental consequences.

"Louisiana has an experience with what the energy industry can do to our coast. We're now dealing with billions of dollars in damage to our eroded coastlines," Malek-Wiley says, blaming oil industry canals for a significant part of the state's coastal erosion problem. "Now we're going to put in these LNG facilities that could cost billions to our fishermen. We should get smarter."

Meanwhile, the Louisiana Charter Boat Association began collecting Shell boycott signatures at last week's Louisiana Sportsman Show at the Louisiana Superdome. Association director Charlie Smith says that by Gambit Weekly press time on Friday, the group already had 700 names. "And we all know that Friday, Saturday and Sunday are the big days," he says. Late last week, the 1,000-member Louisiana Shrimpers organization announced that it is joining the boycott.

Will the opposing sides be able to come to an acceptable compromise? No one currently knows that answer. "Everything has a trade-off," says state Wildlife and Fisheries administrator Hanifen. "We want to make sure that balance is in the right place and I can't say exactly where that's going to be."

click to enlarge USCG PHOTO BY PA3 KELLY NEWLIN
  • USCG photo by PA3 Kelly Newlin
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