Seagulls sit on the natural gas pipelines of a massive industrial pier that towers five stories over the Chesapeake Bay in Southern Maryland. But there are no workers on the docks of the Dominion Cove Point Liquid Natural Gas pier in Calvert County, because no commercial shipments of natural gas have arrived in more than a year.
The silence here -- with sailboats breezing past, and sunlight glittering off the waves -- could change dramatically, however, if the Dominion company receives approval from federal, state, and county governments for a $3 billion proposal to rebuild the facility to allow liquid natural gas (LNG) exports.
The Chesapeake Bay would have the first LNG export pier in the East. Dominion plans to build equipment to chill natural gas to 260 degrees below zero so the fuel can be more easily transported from Maryland around the world on ships in a condensed, liquid form. As many as 75 tankers a year, each about 1,000 feet long, could arrive to load up at the pier.
“It would be a remarkable turn-around,” said Bruce McKay, Managing Director of Federal Affairs for Dominion (shown at right), as he stood before at the pier’s idled cranes. “There will be thousands of jobs created here, in the community, and across the state of Maryland during construction. It will be one of the biggest capital construction projects in Maryland in quite some time.”
Hydraulic fracturing -- or "fracking" -- to extract natural gas is controversial. But nowhere is the potential of fracking's transformation of America’s energy supply more obvious than here at Cove Point on the Chesapeake Bay.
A new report from the International Energy Agency projects that –- because of the rise of fracking and horizontal drilling -- within three years, the U.S. may overtake Russia as the world’s biggest producer of natural gas. Fracking could also allow America to overtake Saudi Arabia as the world's leading oil producer by 2030, according to the agency.
The Cove Point natural gas terminal was built in the 1970s to receive tankers full of super-cooled and compressed natural gas from Egypt, Algeria and other countries. Shipments arrived here until 1980, and then the pier shut down for 15 years when gas prices dropped in the U.S. The pier re-opened in 2003, and then underwent a more than $500 million expansion in 2008 with the expectation that imports would soar because natural gas supplies were almost tapped out in the U.S.
But that wasn't even close to true. Today, the pier is almost deserted. The rise of hydraulic fracturing produced a glut of natural gas in the U.S. This drove gas prices down, eliminating the need to import the fuel.
Rock-bottom prices for American gas right now means there would be a huge market for it overseas, especially in Japan, which is trying to shift from nuclear energy to more natural-gas generation, McKay said.
“The environmental impact (of rebuilding the Cove Point facility) really will be minimal because we are using so much of the existing equipment and footprint here,” McKay said. “It should have very little impact to the Bay. We are not doing any dredging.”
The 70 to 75 ships a year that would arrive to fill up with liquid natural gas would be about the same number as during the pier's heyday (as an import facility) in 2005-2006, McKay said.
But the plan still faces hurdles. Among them is a lawsuit between Dominion and the Sierra Club, which since the 1970s has held legal agreements on the land surrounding the plant to protect woods and wetlands adjacent to the Calvert Cliffs State Park.
The Sierra Club wants to block the project in part because it wants to prevent the export of liquid natural gas, said David O’Leary, chair of the executive committee of the Maryland chapter of the Sierra Club.
“Fracking has a variety of air quality impacts,” O’Leary said. “There are water quality problems, from the spills on the surface; possible ground water contamination; and additional greenhouse gas emissions.”
Drilling companies dispute this negative picture. But it is not just a few greens who oppose exporting natural gas. Industries in America also worry about exporting gas because this will drive up gas prices in the U.S.
Manufacturers use natural gas as the primary ingredient in nitrogen fertilizers, and petrochemical companies also rely heavily on the fuel. Industry experts say these kinds of businesses are building new factories in America these days because natural gas prices are so low –- about a quarter of what they were seven years ago.
This construction and job growth could be slowed by higher gas prices, said Kevin Book, managing director of a Washington DC-based research firm called Clearview Energy Partners.
“Natural gas prices are low in the United States because North America functions effectively as an island, economically speaking, because the natural gas in the United States does not trade with the natural gas in markets where it is more precious and priced higher,” Book said. “So the question is really about how fast that price will go up, and how much the price will go up.”
Homeowners in the U.S. could also be hurt by higher natural gas and electricity bills if export terminals are built as proposed in Maryland, Georgia, and along the Gulf Coast, according to the American Public Gas Association.
“It is going to hurt natural gas consumers here,” said Dave Schryver, Executive Vice President of the association, which represents community-owned nonprofit utilities, many in small towns across the country.
This assessment is not shared by the Brookings Institution, which released a report in May that said the construction of export terminals in the U.S. would have a positive impact on the U.S. trade balance, and stimulate more gas industry jobs in this country.
Exporting natural gas would likely create more jobs for drillers in the U.S. But critics say it could also undermine American energy independence by shipping overseas a limited natural resource that should be conserved.
By Tom Pelton
Chesapeake Bay Foundation
(Second and sixth photos from the top by author; other photos from Dominion)