As the United States pushes for greater energy independence, what role will natural gas and, more specifically, liquefied natural gas (LNG) play? During today's OnPoint, Gordon Shearer, chief executive of Weaver's Cove Energy discusses his company's plan to build an offshore LNG terminal in Fall River, Mass. Shearer addresses local opposition to the plan and discusses the safety concerns that are often associated with LNG. He also discusses the greenhouse gas impacts of LNG and how it compares to other energy options in terms of overall emissions.
Monica Trauzzi: Welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Gordon Shearer, CEO of Weaver's Cove Energy. Gordon, thanks for coming on the show.
Gordon Shearer: Monica, thank you for having me. It's a pleasure to be here.
Monica Trauzzi: Gordon, Weaver's Cove is seeking to build an LNG terminal in Fall River, Massachusetts, and the proposal has faced some very strong opposition from legislators and also the public in the area. Let's start off by getting everyone up to speed on where things stand in the permitting process.
Gordon Shearer: Well, Monica, where we stand in the permitting process is we have our primary permits and approvals from FERC, going back now almost three years. And we have been working our way slowly, painfully at times, through the process of getting the remaining state and federal permits necessary to start construction on the project. And so a lot of those permits have issued, notwithstanding some of the other media reports, and some of them are in appeal, so they're being challenged on legal grounds. And we've just recently filed a new modification to our original permit where we're relocating the berth for the LNG ships at some distance away from the terminal. So, that's also underway as well.
Monica Trauzzi: And we'll talk about that in just a second. How long has this project been in limbo?
Gordon Shearer: I don't know that we'd say it's in limbo. It's moving. It just doesn't necessarily look like that from the surface. The analogy is the duck. You know, there's not much sign of movement, but the legs are paddling furiously. So, we are moving forward at a slow and measured pace and it's been since really the mid-2003 time period.
Monica Trauzzi: And you recently faced a bit of a legal setback. I don't know if you would call it a legal setback, but there are talks that it is a setback. The U.S. Court of Appeals for the District of Columbia dismissed claims by your company that the state environmental regulators in Massachusetts and Rhode Island had waived the right to deny Weaver's Cove's request for permits because the regulators didn't act within a year of your request. How much of a setback is it?
Gordon Shearer: I don't think we see that as much of a setback frankly. This is a new area of law that arises out of the Energy Act of 2005, so the courts and the agencies are still feeling their way through how this should be applied to these types of situations. And what the court ruled there is we hadn't suffered any harm because the permits we really need hadn't issued yet. And these permits we appealed are prerequisites to the main permits and so the main permitting agency, the Corps of Engineers, now has to decide if it's going to issue its permits or not. And if it then finds that it can't because of the underlying permits, then we've been told by the court we can go back in and at that point we can seek a redress from the court.
Monica Trauzzi: And how far are you willing to go legally to get this project off the ground?
Gordon Shearer: Well, I think the key here is that we believe, and we've believed since the beginning, New England is in desperate need of new supplies of natural gas, of new natural gas infrastructure. Prices are the highest in the country. Electric prices are driven by gas prices and, therefore, it's critical for that part of the nation to get more energy supply in. Are we totally altruistic? No, because its high priced it's also a very attractive market in which we can operate, so we see that as a balance. The key is balancing the need for energy supply with environmental safety and security considerations that are so much a part of where we are in a post-9/11 world.
Monica Trauzzi: Let's talk about security, because one of the main concerns that residents have with this proposed project is that it could pose serious safety risks, including the risk of a terrorist attack. There are these images about these tankers looking like Roman candles and that they're floating time bombs. Are people wrong to think that or is this a legitimate concern?
Gordon Shearer: I think people are wrong to think that way and that's not just me speaking. Let's take the safety issue. This is, for its size, one of the safest industries in the world, bar none, 50,000 voyages of LNG tankers into some of the world's busiest harbors, Tokyo Bay for example, over a period now of almost 40 years without a single incident or accident in which anybody, any member of the public, was injured or any harm was done to the environment. That is a record that any other industry would have a hard time matching. From a standpoint of security, it's post-9/11. It seems to me we don't have clear answers. Nobody can say what is or is not a security risk, but it's a very good stalking horse for people who oppose anything to say, ah, but you haven't taken terrorism into account. So if you oppose something you just say, well, that's a security risk and nobody can prove that it isn't.
Monica Trauzzi: But there is a threat.
Gordon Shearer: I'm not aware there's any specific threat, other than there's a general concern about threats to infrastructure and any kind of flammable, chemical, or other kinds of critical infrastructure in this country. So, everything in that point could be at risk of being threatened by terrorism. We have been very careful how this project has been designed. We've taken into account the government's findings on safety, security, and, by and large, we've come up with a project design and construct that really addresses most of those concerns to the satisfaction of the federal regulators who've got that responsibility.
Monica Trauzzi: And you mentioned the new proposal for an offshore berth and it was sort of proposed as a way to help address some of the community concerns, but it's failed to silence all critics. Are you confident that you'll be able to get that option passed along?
Gordon Shearer: Well, I think you're right; it's failed to silence all critics. I don't think you could design anything in this world that would silence all critics. And if there was something like that, it would cost so much money nobody could afford it. So, we think that it addresses what we were told and we've been told repeatedly was the biggest concern people have, which was bringing ships up a narrow river close to populations. Even with all of the protective and security measures and precautions we would have taken, people were still nervous. So, we've moved that aspect of the project some distance away, so the ship is now a mile away from the nearest point of land. And based on government findings, based on the Department of Energy and Sandia National Labs analysis, that's the point at which the risk is down to acceptable levels.
Monica Trauzzi: And the natural gas would pass through pipelines underwater?
Gordon Shearer: It actually would go under water as liquid, so this is a new technology. It was not available to us when we originally designed the project. It's now coming onto the market for the first time and it provides us an option that didn't exist three years ago.
Monica Trauzzi: Why LNG? With Congress now debating a cap-and-trade legislation and all this emphasis being put on reducing emissions, LNG seems to be more carbon intensive than regular natural gas. So, is this the way to go when it comes to greenhouse gas emissions and reducing our overall emissions?
Gordon Shearer: Well, I don't know that, I think when you get to cap and trade, in fact, the risk we run, and there have been several recent studies on this, the risk we run is we are going to drive energy consumption, especially for power generation in this country, more towards natural gas and away from coal. And, if we do that, we've got ourselves a serious problem in terms of we're already struggling. Absent LNG coming into the country today, we would be short of supply and, therefore, prices would be much higher than they are. If we keep driving more gas consumption without expanding production, which we are struggling to do, and imports from Canada are falling, LNG has to make up the gap. And LNG is not dramatically different from an environmental, greenhouse gas perspective than other forms of gas production and transportation. The newest project in the world, in northern Norway for example, is using reinjecting the CO2 emissions back into the reservoir where the gas is coming out of. So, there are solutions to that that may be easier to manage in an LNG context than they are in conventional natural gas.
Monica Trauzzi: What are the net benefits of building this LNG facility to the Fall River area and the people in that area?
Gordon Shearer: They fall into what I call direct community benefit and then the broader, regional benefit. The direct community benefit is in the form of jobs. It's a very depressed area of the state. This project will generate something in the range of 300 construction jobs over a three to four year time period. That's a big slug in the economy. It invests about $200 to $300 million directly in the economy. Over time, it will also generate a lot of real estate taxes. We would be the largest real estate taxpayer in the community by a factor of 10 I believe, so it's a huge net economic boost. There are jobs associated with it. It's a long-term player. It's a clean, safe form of energy. I know people don't necessarily agree with that.
Monica Trauzzi: That's debatable, yeah.
Gordon Shearer: That's debatable and we can have that debate. But I think the track record shows that the safety part, it's hard to argue with the history. The other benefit clearly, more diffuse and less specific to Fall River is the benefit to energy prices. Just to put that in context, ISO New England, which runs the power grid up there, did an analysis last summer, an independent analysis based on a lot of different stakeholder reviews. We are totally dependent, and will be for the foreseeable future, on natural gas and the price of natural gas for the price of electricity. They calculated that on an annual basis, the difference between high-priced natural gas and low-priced natural gas to energy consumers in New England would be $10 billion a year in cost differential for electricity delivered to your house or your business. That is a huge number.
Monica Trauzzi: And so moves by Senators Kennedy and Kerry to have the Taunton River considered a wild and scenic, what are your thoughts on that, because that would not allow for any industrial use of that area?
Gordon Shearer: Well, I think that's interesting because it's already an industrial river. It's got coal-fired power plants, shipyards, barge operations, oil terminals already on the banks of the river. And if the Taunton River is a wild and scenic river, then every river in the country, including the East River and the Hudson River in New York City are going to be designated wild and scenic. So that's a real threat. That's an abuse of the concept of the legislation. If that goes through then everybody is at risk. However, the good news is that, if we do pursue this offshore option and it works out to be feasible, then we avoid the issues because the ships are no longer in the Taunton River and we no longer need to dredge the river. So, we actually solve the problem that the senators seemed to be trying to solve through legislation.
Monica Trauzzi: What about the impact on marine life and fishery resources? That's a big concern as well.
Gordon Shearer: It is and because of that we've agreed to extraordinarily stringent limitations on when we can do construction or dredging in the river in the waterway. We have to avoid all the spawning fish, fish migrations. We have to come up with mitigation to move shellfish and replace them, to reseed anything. And so it's a big issue and it's heavily dealt with, so that's already being well and truly addressed and there are very, very few short-term impacts associated with the construction. And the long-term impacts, there are no measurable long-term impacts to fisheries.
Monica Trauzzi: What's next for your company, next steps?
Gordon Shearer: Next step is to pursue the offshore option that we've got underway at the Federal Energy Regulatory Commission. We'll pursue and work through the legal appeals and meanwhile we'll continue to try and tell our story our way and see if we can persuade the public and, more importantly perhaps as well, the politicians that this is an important and critical requirement that we've got to bring this energy supply to the region.
Monica Trauzzi: Well, it's not just this area. LNG is controversial all around the country, so it's an interesting issue to watch.
Gordon Shearer: Yes.
Monica Trauzzi: Thank you for coming on the show.
Gordon Shearer: You're very welcome. Thank you for having me.
Monica Trauzzi: This is OnPoint. I'm Monica Trauzzi. Thanks for watching.
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