Collateral
Damage
With
the potential to kill millions of fish, are LNG open loop terminals worth the
risks?
By
AL ROGERS
Rodnreel.com
With
dwindling natural gas supplies in North America, there’s no question that we
need energy resources. We use natural gas to cook our meals and to heat our
homes. It also serves as the fuel that drives countless businesses and
industries. And as the price of natural gas continues to rise, the
petrochemical industry is exploring new alternative sources of energy.
Liquefied
Natural Gas (LNG) is being touted as the next big energy commodity and several
oil companies have set their sights on the Gulf of Mexico. This has become a
major concern for hordes of recreational anglers in Louisiana, conservation
groups, and agencies that manage the Gulf’s fisheries. The problem is not
the liquefied natural gas or the offshore terminals these companies hope to
construct.
The
crux of the issue is the “open loop” systems often used in the processing
of LNG at offshore terminals. At a single terminal, millions of gallons of
water will be taken in a day, every day. The Gulf water is pumped through the
open loop system where it flows over a series of panel coils that warms the
minus-260 degree liquefied fuel, turning it back into a gas for shipment.
Three
proposed LGN terminals off the southwest Louisiana coast have raised
objections from many officials with state and federal fisheries agencies. They
say that the companies’ proposal to use open loop systems have the potential
to destroy a significant amount of sea life in the Gulf of Mexico. Two
terminals have already received approval by the United States Coast Guard (USCG)
and the Maritime Administration (MARAD), two of the leading regulatory
agencies.
Figures
released last month indicated that there were only four active LNG import
terminals in North America. In addition, there were plans for another 49
terminals. Of those 49 – nine had received final approval while 22 projects
were in various stages of the approval process. Meanwhile, 18 LNG terminals
remain in the planning stages.
In
the last 14 months, applications for three LNG terminals off Louisiana’s
coast have been filed with USCG officials in Washington D.C. These were the
first three in an onslaught of applications that arrived at USCG headquarters
in late 2002. The first two were approved with little fanfare. The third
application, filed by Shell US Gas & Power LLC, is now under review. The
Maritime Administration (MARAD) will make a ruling in Washington by February
16, a USCG spokesman in Washington, D.C. said Tuesday. MARAD officials will
approve, deny, or conditionally approve Shell’s application. The conditions
could require Shell to implement a closed loop system at their proposed Gulf
Landing LNG terminal.
“That’s
the timeline we’ve set,” said Mark Prescott, chief of the Coast Guard’s
Deepwater Port Standards Division this week. “I don’t think we’ll get a
decision anytime before that.”
Prescott
said that there have been problems in the application process - particularly
with the requisite Environmental Impact Statement (EIS). Before any decision
is made on an application, the USCG consults with the National Oceanographic
& Atmospheric Administration (NOAA) and an independent environmental
consultant to complete an EIS. The impact statement takes into account
potential environmental problems, the economic and social impacts, as well as
what is best for the nation as a whole.
The
EIS also considers statements and letters from various state and federal
fishery management agencies, and conservation organizations.
“Right
now there’s a lot of activity going on between agencies that are in
disagreement with the environmental impact statement,” Prescott said.
“There’s an objection from NOAA that has to be resolved.”
There
is one thing that that all the agencies involved, and even the oil companies
agree on. If just one of these proposed open loop LNG terminals is constructed
off the Louisiana coast – fish are going to die. The monumental question is
how many? Estimates have been many and extremely varied.
If
Shell’s proposed Gulf Landing LNG terminal becomes a reality, there’s
little doubt that many species of finfish, crustaceans, fish eggs, larvae and
plankton will be sucked into the open loop system with 136 million gallons of
seawater every day. The estimates provided on only redfish losses at this
single terminal range from 8,000 pounds to 1 million pounds annually.
Red
drum spawn in offshore waters and their eggs drift back into the interior
estuaries. This, and the unknown potential losses of other sea life, is what
has everyone concerned.
“These
(open loop LNG terminals) will harm fish,” Prescott said. “The question we
have now is ‘what is an acceptable level?’ What we found and have agreed
on with NOAA were the numbers (of fish losses). But we don’t agree on what
those numbers mean.”
NOAA
has invested much time and money into programs designed to rebuild the stocks
of redfish. This may be the reason why NOAA officials are reluctant to accept
any “acceptable levels” of industry-related redfish mortality. It is
believed that red drum will suffer the greatest losses. And these proposals
are being considered in a time when it is illegal to harvest redfish in
federal waters. The law is in effect because red drum are considered to be
dangerously over-fished.
Estimates
from an final environmental impact (FEIS) study on the Gulf Landing project
estimates that that Louisiana could lose 1 million pounds of redfish a year if
this project materializes. This represents 11.5 percent of the average annual
red drum harvest in Louisiana. It could also be an economic disaster for the
recreational fishing industry here. Studies conclude that it could cost
Louisiana $34.2 million and nearly 3,000 jobs in the recreational fishing
industry.
However,
Shell officials said Thursday that they disagree with the initial impact
statement and expect the USCG to soon release a corrected version that will
show “the likely annual average
redfish loss will be 98 percent less than the 11.5 percent indicated in the
first FEIS. Shell contends the new data will indicate that the project’s
impact on redfish to be less than one percent of redfish caught
annually by recreational fishermen.
“It
is regrettable that inaccurate information has been reported in some media
outlets and we appreciate the USCG’s and NOAA’s efforts to correct the
impact numbers,” said Greg Koehler, Gulf Landing project manager.
Koehler
added that the USCG’s independent evaluation will conclude that the open
loop system at Gulf Landing will result in no significant impacts on redfish,
shrimp or any other species,” Koehler said.
The
recreational redfish industry is a significant economic force in the Gulf
States. In a recent report by the American Sportfishing Association (ASA) –
“Sportfishing in America: Values of Our Traditional Pastime,” recreational
fishing for redfish brings a national economic impact of $164 million in
direct expenditures. The total economic impact is estimated to be $298 million
(in 2001 dollars).
In
a letter from the Gulf of Mexico Fishery Management Council (GOMFMC) to the
Coast Guard, chairman Julie Morris said the council has grave concerns about
the impacts that open loop systems will have on the fish stocks they manage.
She also criticized the oil companies who are filing applications for not
evaluating “other, less damaging alternatives in the FEIS.”
GOMFMC
officials said redfish would not be the only species affected. Others would
include fish eggs, larval and adult brown shrimp, white shrimp, red snapper,
triggerfish, Spanish mackerel, cobia, dorado, juvenile vermilion snapper,
adult lane snapper, greater amberjack, lesser amberjack, bluefish, bonito, and
king mackerel.
The
estimated 1 million-pound loss of just redfish represents 8.5 percent of the
entire annual catch in the Gulf of Mexico.
However,
red drum mortality estimates from NOAA were somewhat fewer. Prescott said
their “best guess” is eight-tenths of one percent of the total redfish
harvest in the Gulf of Mexico in 2002. That translates into an annual loss of
100,900 pounds of redfish from the Gulf Landing terminal. However, Prescott
said with variables, such as changes in environmental conditions, factored in
over a 30-year period, the mortality numbers could range from 8,000 to 488,000
pounds annually.
The
federal figures were garnered from data collected by the Coast Guard and NOAA.
They reviewed all of the available data and developed a standardized protocol
and model from which their numbers were derived.
At
a glance there appears to be huge discrepancies in the figures. But Harry
Blanchet, finfish program manager with the Marine Fisheries Division of
Louisiana Department of Wildlife & Fisheries (DWF) said he’s not
surprised.
“With
the LNG facilities, the main impact they’ve looked at so far is the
entrainment of the fish larvae and eggs,” he said. “First you have to
consider how many of these fish would be entrained (engulfed by the open loop
system), and what difference it will make on the population.”
For
example, a spawning redfish may release 100,000 eggs offshore. The vast
majority of these eggs may never become fertilized and become juveniles. It is
possible that only three or four will be fortunate enough to become mature
adults. And when you factor in environmental changes, the formula only becomes
more complicated.
Another
problem Blanchet sees is the limited amount of offshore fisheries data at the
DWF. Much of the research and studies have focused on the interior estuaries,
nursing grounds that are seen as most vital to fisheries worldwide.
The
application to construct the Gulf Landing LNG terminal was submitted by Shell
US Gas & Power LLC. The proposed port, located 38 miles south of Cameron
in 55-foot depths would consist of a terminal to receive, store and regasify
LGN.
Opponents
believe there is a viable, but more expensive alternative – a closed loop
system for LNG terminals. Anglers and industry officials now hope to urge the
regulatory agency officials in Washington to support this idea.
“We’re
very concerned about the impact this will have on redfish and other
species,” said Jeff Rester, habitat program manager with the GSMFC. “We
need to stress that we’re not against liquefied natural gas. But we do have
concerns about the open loop systems. We believe there is a viable alternative
that will not impact our fisheries.”
Because
of the devastating effects that open loop systems have on marine ecosystems,
only closed loop systems are used at onshore LNG terminals in the United
States. These are usually located in or near interior estuaries, where most
juvenile marine species grow and mature.
Some
have criticized the company for not “fully analyzing the environmental
impact study to fulfill National Environmental Protection Act (NEPA)
requirements.” A letter last month from the GSMFC to the Coast Guard cited a
“lack of compensatory measures.”
Shell
and other companies hoping to build Gulf LNG terminals have shown little
enthusiasm about using closed loop systems offshore. Shell has been criticized
by the GSMFC for not even evaluating the closed loop system, which uses the
same water over and over like a radiator. During the process of vaporizing
LNG, it must first be warmed. While an open system uses a constant flow of
Gulf waters, closed systems must burn liquid natural gas to complete the
process.
Shell
officials contend that some 50 pages in the FEIS were dedicated to the
comparison of open and closed-loop systems.
The
main reason oil companies want open loop systems off the Louisiana coast is
that they are considerably less expensive to operate. According to Shell’s
FEIS, the additional operating costs of a closed loop system at Gulf Landing
will be between $21 million and
$43 million. The additional operating costs are so significant that a Shell
spokesman said Wednesday that if a closed loop system were mandated in next
month’s final decision, it would “not be economically feasible to build
and operate the Gulf Landing terminal.”
In
Shell’s FEIS, the additional cost of operating a closed loop system will be
somewhere between $20,798,886 and $43,354,831 annually, depending largely on
fluctuations in the costs of natural gas. But monetary losses tied to the
recreational fishing industry, according to the GOMFMC, are estimated to be
$34,270,000.
“There
are going to be costs associated with this project,” Rester said. “With an
open loop system, the public will bear the cost. If a closed loop system is
used, the company will bear the cost.”
There
is currently one onshore LNG terminal in Hackberry, south of Lake Charles, a
closed-loop onshore facility. It has been in operation since the early 1970s.
Because of the prolific marsh estuaries in the Lake Calcasieu area, an open
loop system here would devastate the speckled trout and redfish populations,
according to biologists.
A
large number of companies want to bring a lot of LNG to the United States over
the next few years. However, the reality is that few of them will ever be
built. But a worrisome fact is that oil industry officials are taking a hard
look at the Gulf of Mexico, particularly off the Louisiana and Texas coasts.
“By
2110, we’re estimating there will be five new (LGN) terminals in North
America,” said Ed Porter, a senior associate with he Ziff Energy Group. In a
story published in NGI (Natural Gas Intelligence), an oil industry newsletter,
Porter has forecasted “two terminals around the Gulf Coast …” He also
said Ziff Energy “sees the most growth in the Gulf Coast region.”
Oil
industry officials believe this is happening for several reasons. One is that
Louisiana already has the existing offshore infrastructure. In fact, plans for
the two approved LNG terminals off the Louisiana coast have plans to tie into
existing natural gas lines.
Another
reason is that unlike Florida, the Bayou State has long been oil country since
the first offshore oilrig was built off the coast of Terrebonne Parish in the
1940s.
“It’s
something that we’re used to,” Rester said. “We’ve grown up with it.
Florida has their beaches. But for people in Louisiana oil platforms are a
common site.”
A
number of state and federal agencies, including the Gulf of Mexico Fishery
Management Council, Gulf States Marine Fisheries Commission, Louisiana
Wildlife and Fisheries, Louisiana Department of Wildlife and Fisheries, and
Coastal Conservation Association – Louisiana, have voiced concerns on the
potential dangers of open-loop systems.
“The
stance of that the CCA has taken is that we encourage the use of closed loop
systems,” said executive director Jeff Angers. “The oil companies have
expressed no willingness to even consider (closed loop systems).”
Stressing
the point that the open loop systems kill a plethora of marine species, he
said recreational anglers “from Brownsville, TX, to Venice, LA, to Miami,
FL” should be concerned about the recent developments.
“Open
loop systems filter up to millions of gallons of water per day in the
degasification process and would kill billions of fish eggs, larvae and
plankton each year,” according to a Coastal Conservation Association press
release. “On the other hand, closed loop systems use a limited amount of
water and cause much less harm to the area biota.”
Wayne
Swingle, GOMFC executive director, strongly agrees.
“Our
consensus is that we are opposed (to open loop systems),” he said this week.
“If this was a short term process it would be different. But operating year
round, non-stop, these systems will pump millions and millions of gallons of
water through.”
The
scope of the projects and the enormous volumes of water that pass through the
systems are what must be considered. Swingle said many offshore species could
drift planktonically for six months at time, although they spawn offshore and
eventually drift into the inshore estuaries.
How it all
started
To
most people in Louisiana it seems that Shell’s Gulf Landing LNG terminal
came quickly. And the fact is – it did. The application process for these
kinds of projects used to take much longer. But the time frame was drastically
reduced when in late 2002 Congress passed an amendment to the Deepwater Port
Act of 1974. The amendment essentially streamlined the application process.
The
rush to jump on the LNG bandwagon came shortly after the amendment was passed.
It
was business as usual on Nov. 25, 2002 when Congress passed the seemingly
routine amendment to the Deepwater Port Act of 1974 (DWPA). The change in the
law shifted some administrative agencies to different regulatory duties. But
in some corporate big oil boardrooms, there was reason to celebrate.
Their
efforts to help push the amendment through Congress had finally paid off.
Section 106 of the Maritime Transportation Security Act had passed, and many
heads of major oil companies saw the potential for huge profits.
The
first application was filed only hours after Congress passed the amendment to
Deepwater Port Act of 1974. It was the proposed Port Pelican LNG terminal, to
be located 36 miles south-southwest of Freshwater City in Vermillion Block
140. The paperwork arrived at USCG headquarters in Washington surprisingly
fast.
“I
remember the day it happened,” Prescott recalls. “November 25, 2002. The
amendment had passed that morning. Chevron-Texaco walked into my Admiral’s
office with an application. I guess they wanted to be the first kids on the
block to file.”
Rester
said he doesn’t even believe the USCG was aware that Section 106 had passed
when the Port Pelican application brought to their offices. Although it was
approved, construction has not started. If built, Port Pelican is expected to
draw in 176 million gallons of water a day.
The
next application came shortly afterwards. It was filed by El Paso Energy, and
approved by the USCG for their proposed Energy Bridge project. Located 116
miles off the coast of Cameron, it also intends to use an open loop system. It
too, has yet to materialize.
The
2002 amendment - Section 106 of the Maritime Transportation Security Act,
changed the Deepwater Port Act of 1974 to include the storage, transportation
and handling of natural gas. This amendment provided the natural gas industry
the means to pursue the construction of offshore terminals for receiving
liquefied natural gas (LNG).
The
1974 legislation authorized the Secretary of Transportation to issue licenses
to “own, construct and operate deepwater ports.” These ports could be
either a floating or man-made structure, other than a vessel, located in
federal waters. It applied only to facilities, storing, transporting or
handling oil, and was enacted to allow deep-draft oil tankers to unload
offshore because many U.S. ports were too shallow for large ships.
However,
Section 106 changed the Deepwater Port Act to include the storage,
transportation and handling of natural gas. This amendment provided the
natural gas industry the means to pursue the construction of offshore
terminals for receiving liquefied natural gas (LNG).
In
addition to allowing the construction of LNG terminals, the amendment shifted
the regulatory responsibilities of various governmental agencies. It
transferred the oversight of offshore natural gas terminals from the Federal
Energy Regulatory Commission (FERC) to the Maritime Administration (MARAD),
with the Department of Transportation (DOT) and the Coast Guard, which moved
from the DOT to the Department of Homeland Security in 2003.
Like
several others, the application for Gulf Landing was filed shortly after the
heavily lobbied amendment passed. Shell went through all the proper channels
under the new law. It first submitted the application with the USCG for a deep
water LNG facility. Then came a review of the project, and the first draft of
an environmental impact statement. The EIS was reviewed by various agencies
including NOAA Fisheries, EPA, Minerals Management, Environmental Protection
Agency, and the U.S. Fish and Wildlife Service.
The
final environmental impact statement was released on Dec. 3, 2004. The
one-month public comment period ended January 3, 2005.
Some
criticized the company for not “fully analyzing the environmental impact
study to fulfill NEPA requirements.” A letter last month from the GOMFC to
the Coast Guard cited a “lack of compensatory measures.”
A
response from Shell stated that the company would minimize impingement and
entrainment impacts at Gulf Landing by placing the seawater intake portion of
the open loop system near the lower third section of the water column, 36 feet
below sea level. Company officials said they would also maintain a minimum
water velocity of (0.15 m/s). In addition the company has promised to
implement a monitoring plan with the NOAA Fisheries.
The big payback
Considering
the potential losses, fisheries officials plan to demand compensation from the
oil companies.
Larry
Simpson, executive director of the Gulf States Marine Fisheries Council,
suggested “ … the terminal owners should be required to mitigate each year
for the loss of 1 million pounds of redfish and the loss of other sea life.
Officials
with the GSMFC now wants Shell to pay $34.2 million a year in “mitigation
costs” attributed to the loss of redfish and other sea life.
“This
is just standard mitigation procedure,” Rester said. “For instance if
someone were to build a camp or a dock and they negatively impacted the area,
they are required to (compensate) in some way. It may be by creating a new
area of marsh, or purchasing a credit at a mitigation bank.”
The
point the GSMFC was stressing is that if you take $34 million from the red
drum industry, Rester said, you should replace it.
“This
is new territory for us,” he added. “How do you compensate for more than
$34 million in lost redfish and industry-related jobs.”?
NOAA
Fisheries told the USCG that they “remain concerned about the potential for
significant, cumulative fishery impacts.”
Another
letter this month from NOAA to the USCG suggested that the impact on
recreational and commercial fishing from the LNG project “would be
transferred to the American public.”
The
History of LNG
Natural
gas liquification dates back to the early 19th Century when British
chemist Michael Faraday experimented with different kinds of gases including
natural gas. German engineer Karl van Linde built the first practical
compressor refrigeration machine in Munich in 1873.
The
first LNG plant was built in West Virginia in 1912, while the first commercial
liquification plant was built in Cleveland, Ohio in 1941. Here, LNG was stored
in insulated tanks at atmospheric pressure.
Today
there are 113 active LNG facilities across the United States, with the highest
concentration in the Northeast.
The
process of liquefying natural gas made it possible to transport the fuel to
distant destinations. In January 1959 the world’s first LNG tanker carried
LNG from Lake Charles, La. to Canvey Island, United Kingdom.
In
1964 the British Gas Council began importing LNG from Algeria, making the UK
the world’s first importer and Algeria the first exporter. LNG terminals and
import terminals were later built in the Atlantic and Pacific regions of the
United States.
Between
1971 and 1980, United States natural gas companies built four marine natural
gas terminals. One, operated by CMS Energy, was in Lake Charles. The others
were located in Massachusetts, Georgia and Maryland.
After
receiving a peak volume of 253 billion cubit feet in 1979 (which represented
1.3 percent of the U.S. gas demand) LNG imports declined for two reasons. One
was because de-regulation led to increasing North American natural gas
production. The second was price disputes with Algeria – the sole provider
to the U.S.
But
in 1999 the first Atlantic Basin LNG liquefaction plant came on line in
Trinidad and Tobago. This event, along with an increasing demand for natural
gas in the United States, particularly for electric power generators and
increasing natural gas prices, resulted in a renewed interest in the American
market.
Today,
the major oil companies are touting LNG as the answer to our country’s
energy needs. But at what cost are we willing to pay?
