Dominion Resources plan approved for exporting natural gas from terminal in Calvert County

Correction: An early version of the article incorrectly said that Dominion Resources designed the natural gas shipping facility at Cove Point in Calvert County in the 1970s. The terminal was built by a predecessor to Dominion along with another pipeline company. After several changes of ownership, Dominion purchased the facility in 2002. This version has been corrected.

September 11, 2013

The Obama administration has approved a Dominion Resources proposal to export liquefied natural gas from Maryland’s Western Shore, a plan that would tap into the surge in domestic production of gas extracted from shale.

Dominion, which about a decade ago purchased a terminal at Cove Point in Calvert County to import natural gas, hopes to spend as much as $3.8 billion to build new facilities for exports, and it has signed ­20-year contracts to ship natural gas to customers in Japan and India. Because neither country has a free-trade agreement with the United States, Dominion needed approval from the Energy Department for the exports, which the department conditionally granted Wednesday.

The department has received more than two dozen similar requests in the past three years from companies hoping to take advantage of the shale gas boom. However, many major manufacturers that use natural gas as fuel or raw material have opposed new export facilities for fear that they could result in higher prices and a less-competitive industry.

The United States has been an importer of natural gas for many years and has no ports with the capacity to export the fossil fuel. But a novel drilling technique commonly known as fracking has led to a glut of domestically produced gas. Dominion’s approval is only the fourth such authorization the federal government has granted and the third since May.

In a written statement, Rep. Steny H. Hoyer (D-Md.), whose district includes Cove Point, called the approval “an important necessary step toward bringing new, well-paying jobs to Calvert County.”

The project still must clear several regulatory hurdles, and environmentalists promise to do everything possible to stop Dominion from exporting gas.

“Natural gas is causing significant havoc across the country,” said Deb Nardone, the director of the Sierra Club’s Beyond Natural Gas campaign. She cited air pollution from the controversial practice of fracking and said her organization is prepared to consider all available legal options if the company receives final regulatory approval.

The Sierra Club has already sued Dominion in Maryland, arguing that a 1972 settlement between the company and Cove Point’s previous owner limits how Dominion can use the facility.

Michael Levi, an energy expert at the Council on Foreign Relations, acknowledged the environmental dangers of fracking, but he argued that regulation would be a better way to address them.

“Blocking exports would address only a tiny piece of the environmental challenge,” he said. “The problem is not exports. The problem is bad practices by some operators, and you need to go after that.”

At export terminals, natural gas is cooled to 260 degrees below zero Fahrenheit to liquefy it and then loaded onto tankers with insulated containers. Dominion will have to build cooling facilities at Cove Point, an expensive and labor-intensive project.

The company hopes to start construction next year and produce its first shipment of LNG in 2017, when about 85 ships would begin docking at the terminal annually. Dominion is authorized to export 770 million cubic feet of natural gas from the facility per day, containing enough energy for about 2.6 million homes.

For two years, the Energy Department did not act on any pending applications while awaiting a study it commissioned on the economic consequences of exporting natural gas. That study, by NERA Economic Consulting, concluded that LNG exports would have minimal effects on U.S. natural gas prices.

The department has approved three applications in the past five months, and new Energy Secretary Ernest Moniz, who has been supportive of LNG exports, said in June that the department would move “expeditiously” and rule on a case-by-case basis.

“If this is the sign of the administration and the Department of Energy pushing these licensing approvals along at a quicker pace, then all credit to them,” said the American Enterprise Institute’s Gary Schmitt, who supports natural gas exports.

But Jennifer Diggins, a spokeswoman for the steelmaker Nucor, said in a statement that “this decision raises the risk of increased consumer prices and utility bills and could limit the prospects for a sustained manufacturing renewal in America.”

Max Ehrenfreund is a blogger on the Financial desk and writes for Know More and Wonkblog.
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