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Senator Wants Kenai LNG Export Permit Revoked

Sen. Ron Wyden (D-OR), a frequent critic of FERC's handling of liquefied natural gas (LNG) projects, has asked Energy Secretary Samuel Bodman to review and revoke the Department of Energy's (DOE) recent order extending until 2011 ConocoPhillips' and Marathon Oil Corp.'s permit to export LNG from the Kenai terminal in Alaska.

"This order, which will allow the export of as much natural gas as is used by 1.4 million American families in a year, comes at a time when the president had demanded that the moratoria on oil and gas drilling along our environmentally sensitive coastal areas be lifted and Americans are being warned that their winter heating bills are going to be dramatically higher," Wyden wrote in a letter to Bodman. "The administration is trying to have it both ways -- arguing that we need to drill everywhere because we don't have adequate energy supplies, while finding that we have so much energy that big oil companies can export it overseas and keep prices here at home higher than they would otherwise be."

According to Wyden, DOE failed to meet the public interest test required by the Natural Gas Act and rejected requests by the state's largest electric utility, Anchorage-based Chugach Electric Association, that DOE "condition the export of Alaskan gas on assurances that Alaska's own need for natural gas was met."

"It is hard to see how the department concluded that the proposed export of Alaskan natural gas met the required public interest test with regard to either Alaskan or Lower 48 energy needs," wrote Wyden. "For the department to categorically reject an opportunity to provide additional supplies of energy to American consumers, both in Alaska and on the West Coast at a time of record energy prices, and instead let these companies send that energy to overseas markets, demands a secretarial-level review."

DOE granted Kenai an extension of its LNG export permit more than three months ago (see NGI, June 9). With the extension, which lasts from April 1, 2009 until March 31, 2011, ConocoPhillips and Marathon may export up to 98 Bcf to Japan and other countries on either side of the Pacific Rim. The Japanese have been importing LNG from the Kenai terminal since 1969 and some in Alaska believe that additional LNG liquefaction and exports to thirsty Asian markets should be included in the state's plans to commercialize its vast North Slope gas reserves (see NGI, May 19a).

While the Kenai LNG terminal is currently the only facility in North America permitted to export LNG, two others -- Cheniere's Sabine Pass terminal in southwest Louisiana (see NGI, Sept. 1). and Freeport LNG Development's terminal in Texas (see NGI, Aug. 18) -- last month filed for export permits. Neither Sabine Pass nor Freeport currently have liquefaction facilities and would only be able to serve as LNG storage and transit stations. In his letter Wyden said he is also "concerned" that Cheniere and Freeport have applied for LNG export permits.

According to Wyden, previous LNG exports from Kenai "were deemed in the public interest because there were no pipelines to the Lower 48 states and no West Coast LNG terminals to bring this gas to market," but the situation changed on May 15, when Sempra Energy opened for business its Energia Costa Azul LNG receiving terminal along the Pacific Coast of North Baja California, Mexico (see NGI, May 19b). DOE may have relied on "inaccurate and out of date information" about the viability of delivering LNG to the Lower 48, he said.

"The Costa Azul facility was specifically designed to provide natural gas to U.S. markets, as well as Mexican customers," Wyden wrote. "It is connected by a cross-border pipeline system capable of delivering natural gas to the U.S. market today, and that system is being expanded to provide even more capability. Under the North American Free Trade Agreement, there are no additional duties or tariffs on natural gas trade between the two countries."

Last month Wyden called on the Federal Energy Regulatory Commission (FERC) to refrain from taking any action on Bradwood Landing LLC's proposed LNG terminal in the Pacific Northwest and associated pipeline facilities until critical environmental and economic issues have had an opportunity to be vetted in a public meeting (see NGI, Aug. 11). FERC had placed the LNG project on the agenda at its July 17 meeting but later struck the item. At the time Wyden said he believed the agency would act on NorthernStar Natural Gas Co.'s Bradwood Landing project behind closed doors prior to its Thursday (Sept. 18) meeting.

The Bradwood Landing terminal, if approved, would be located on a 40-acre site at the former townsite of Bradwood in Clatsop County, OR, which is about 38 miles from the ocean up the Columbia River -- the main economic artery for the Pacific Northwest. The project, which would provide up to 1.3 Bcf/d of natural gas to the region, has become a politically charged issue in Oregon and Washington, with state legislators and landowners opposing it (see NGI, Dec. 24, 2007).

NorthernStar has taken recent action that will delay some of its site-specific preparation and operating permits as its awaits FERC's determination on the Bradwood LNG facility (see related story).

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