Daily Archives: April 16, 2012
Houston-based Cheniere Energy on Monday cleared the final major hurdle to exporting natural gas when federal regulators approved the firm’s plan to build a plant in southwest Louisiana for liquefying the fuel.
The decision by the Federal Energy Regulatory Commission puts Cheniere on track to convert its existing Sabine Pass terminal for receiving liquefied natural gas by 2015 — a timeline that would make it the first LNG export facility in the lower 48 states. One operates now in Alaska.
The company aims to export up to 3.5 million tons per year from the facility in Lake Charles, La. Cheniere plans to build the liquefaction plant in two stages, adding 191 acres to the existing terminal’s space. The facility would still be able to receive liquefied natural gas from tankers.
“Obtaining approval from the FERC is one more milestone for our liquefaction project,” said Cheniere CEO Charif Souki. “We will now finalize the financing arrangements in order to commence construction.”
About half a dozen other companies, including Texas-based Freeport LNG, also are pursuing exports to take advantage of the glut of natural gas produced in the U.S. using horizontal drilling and hydraulic fracturing techniques that free hydrocarbons from dense shale rock formations.
Exports would allow natural gas producers and processors to capitalize on higher prices globally compared to the United States. In the U.S. Monday, natural gas futures settled just over $2 per million British thermal units after hitting 10-year lows last week.
In Cheniere’s case, the strategy is a bid to put its receiving terminal to work. The Sabine Pass terminal went online in 2009, just as U.S. natural gas production surged and killed the need for LNG imports.
When natural gas is cooled to 256 degrees below zero it becomes a liquid that tanker ships can transport. At its destination it is converted back into gas. Cheniere’s Sabine Pass terminal is outfitted with regassification and storage equipment now.
In approving Cheniere’s liquefaction plant plans, FERC also could also give a boost to U.S. producers with big natural gas portfolios.
But a rise in natural gas prices would increase consumers’ monthly bills and also would be bad news for chemical manufacturers that use natural gas as a building block to create other products.
Congressional Democrats have proposed legislation that would ban new LNG exports. Rep. Ed Markey, D-Mass., who is pushing a ban, said the expert terminals would mean sending U.S. natural gas to China and Europe 00 and “exporting our manufacturing jobs abroad along with the fuel.”
“America should exploit her competitive advantage with lower natural gas prices to create jobs in the United States, not export natural gas to create more profits for oil and gas companies,” Markey said.
And environmentalists have asked top Obama administration officials to require a broader review of the consequences of the surge in natural gas drilling that probably would result from selling the fuel overseas.
Critics fear hydraulic fracturing can contaminate water supplies and cause localized earthquakes. Sierra Club Executive Director Michael Brune said in a statement Monday that exports would increase production and hydraulic fracturing, “making a dirty fuel more dangerous and putting more American families in at risk.”
- USA: Cheniere to Raise Up to USD 4 Billion in Debt for Sabine Pass Liquefaction Project (mb50.wordpress.com)
- USA: Cheniere Urges FERC to Approve Sabine Pass Liquefaction Project (mb50.wordpress.com)
- Will the US Become the World’s Largest Exporter of LNG? (appliedagrotech.net)
- USA: Cheniere CEO Sees Domestic Gas Prices at USD 2/MMBtu (mb50.wordpress.com)
- Cheniere: Sabine 1,2 Train Construction Start in H1 2012 (USA) (mb50.wordpress.com)
- USA: Cheniere, KOGAS Ink Sabine Pass LNG Deal (mb50.wordpress.com)
- USA: Sabine Pass LNG Gets Cargo (mb50.wordpress.com)
- Cheniere sees summer application for Corpus plant (appliedagrotech.net)
- Why America’s Missing Out on the Billion-Dollar Global LNG Game (mb50.wordpress.com)
The Obama administration wants Americans to realize what a good job it and the Bush administration did saving the economy from a second Great Depression. But they’d prefer not to make this case directly. They want journalists to do it for them.
On Friday, the Treasury Department convened one of its semi-regular, invitation-only background press briefings for journalists. Senior Treasury officials spoke to us, answered our questions, and showed us a “deck,” which is annoying industry jargon for a PowerPoint presentation. “I just know this is going to be a fucking waste of time—another dog-and-pony show,” another journalist told me on our way into the meeting. The central message of the dog-and-pony show was that the US response to the 2008 financial collapse was pretty effective, especially when compared to how other countries reacted to different crises. The PowerPoint presentation used terms like “bank investment programs,” but what the Treasury gang was talking about was the highly unpopular financial bailouts (as opposed to the auto bailouts, which the Obama team views as a political winner).
The Treasury officials said many true things. It’s certainly possible that if the government hadn’t acted quickly, the 2008 financial crisis could have been as disastrous as the Great Depression. Many of the bailouts—or “rescues,” as Treasury calls them—have resulted in net gains for the taxpayers. (The current value of the government’s shares in AIG, for example, exceed the amount of money it has yet to recover from that bailout.) The Treasury is right that countries confront major economic crises frequently and that the United States will probably face one again. And it’s legitimate for the Obama administration to worry that its successors will look at the interventions made in the markets in 2008 and fear that such action is not worth the immense political costs. Consequently, they discern the need to get good press for these bailouts.
The journalists in the room justifiably focused their questions on things that the Obama administration and the Treasury Department have not done well enough: helping struggling homeowners, lowering unemployment, and moving towards a financial order where these sorts of crises are no longer inevitable. The Treasury folks mostly wanted to talk about how successful the bailouts were. But they made that argument in a no-direct-quotes, no-television, you-can’t-even-say-our-names briefing for 20 or so journalists on a Friday afternoon. In other words, in a manner that would not associate them too closely with this argument. They did it in this fashion because they want to influence our future reporting (a fair-enough desire). But they don’t want to take on the political challenge of directly defending their massively unpopular actions in the public eye.
Senior Treasury officials clearly believe that the financial sector bailouts were a brave choice that worked out as well as anyone could have hoped, and they said as much on Friday. I’m bound by the agreement not to quote any of them directly.
But when asked about the bank bailouts in public, Obama and top administration officials usually mention that the Bush administration launched the bailouts, talk about them as something America “had” to do, and change the subject as quickly as possible. One example is Obama’s 2010 State of the Union address. “If there’s one thing that has unified Democrats and Republicans, and everybody in between, it’s that we all hated the bank bailout,” Obama said. “I hated it. I hated it. You hated it. It was about as popular as a root canal.” He went on to describe the bailout as a “necessary” step taken by “the last administration,” arguing that “if we had allowed the meltdown of the financial system, unemployment might be double what it is today,” with more businesses closed and more homes lost.
In that speech, the bailout was the equivalent of cutting off your hand when it’s caught under a bolder and you’re dying of thirst: a terrible thing to which there was no alternative. That’s a bit at odds with how senior Treasury officials spoke about the bailouts on Friday: a wise choice that worked out better than anyone could have anticipated, and a program that makes the administration proud. That appraisal is not on the record.
- Taxpayers to make money on TARP, Treasury says (bottomline.msnbc.msn.com)
- Treasury Dept. defends bailouts (politico.com)
- Taxpayers Set to Lose $30+ Billion on the Auto Bailout – Tea Party Nation (gds44.wordpress.com)
- Treasury points out bailout profits (upi.com)