Philly looks to get into gas exports as old Alaska plant bows out

Philadelphia officials are eyeing liquefied natural gas exports as a means to cash in on the rich resource in the nearby Marcellus and Utica shales.

An export facility would take advantage of, and build on, the city's extensive refining and chemicals infrastructure as well as its rail connections and port, city and industry officials say.

"Philadelphia is in a unique position," testified Steve Forde, policy and communications chief for the Marcellus Shale Coalition, at a hearing last week convened by the Philadelphia City Council together with state Sen. Michael Brubaker, chairman of the Pennsylvania Senate International Commerce Caucus.

"While true that neither the Marcellus nor Utica shale formations underlie southeastern Pennsylvania, it is also true that Greater Philadelphia is at the doorstep of one of the most important natural gas plays in the world. And the economic opportunities that exist because of it are abundant," Forde told officials.

The hearing was third in a string of sessions addressing how the city of Philadelphia can better position itself to capture world business opportunities, according to Lois Kang, a legislative aide for City Councilman David Oh (R). She described last week's session, on natural gas, as "informational," adding that the discussion of LNG exports was at a "conceptual phase."


Mitchell Bormack, a vice president with international consulting, engineering and construction management firm TRC Companies Inc., testified that he has had confidential talks with parties interested in building an LNG export terminal in Philadelphia.

Bormack told officials that new LNG export terminals can take four years just to permit and billions of dollars to build, and noted that the first movers will have the best chance of capitalizing on global LNG markets. "Given some of the existing infrastructure in Philadelphia's gas and port facilities, it would probably require a little less time and money here than the quoted averages," he added.

Bormack said his company also has had conversations about the viability of building a gas-to-liquids plant in the region that would convert methane to liquid transportation fuels.

"There is keen interest in siting a facility in Philadelphia or nearby. This would bring permitting, design and construction jobs; long-term operating jobs; and significant tax revenue on the order of the construction of an LNG facility," Bormack said.

It is unclear whether there are serious proposals in play for an LNG terminal or GTL plant to be built in the Philadelphia area. Both require sophisticated financing to get off the ground and entail regulatory hurdles that few companies can take on, and can engender strong local opposition. But the city has a long history of industrial activity that could lay the groundwork for a successful project.

Alaskan terminal wrapping up shipments

Even as a wave of projects springs up to build the first modern U.S. LNG export terminals, one such shipping facility, in Alaska, is faced with a likely shutdown.

The Kenai LNG terminal has been shipping LNG to Japanese buyers for 40 years, as the only existing terminal licensed to send the fuel to countries with which the United States lacks a free-trade agreement. But its owner, ConocoPhillips Co., is planning to let its license lapse at the end of this month.

A company official said there is currently no plan to renew the plant's Energy Department export license when it expires March 31. "ConocoPhillips will consider pursuing a new export authorization only if local gas needs are met and there is sufficient gas for export. Right now, ConocoPhillips is unaware of sufficient gas supply," company spokeswoman Amy Burnett said.

The Kenai facility is isolated from natural gas produced on the North Slope, where it is typically reinjected underground for lack of a means to transport it to market. Exxon Mobil Corp., BP PLC and ConocoPhillips are in long-running negotiations with the state over financing for a pipeline project, estimated to cost $50 billion or more, that would bring that natural gas to the coast for export.

The Alaskan natural gas market is also physically separate from the one in the lower 48 states due to a lack of connecting pipelines.

Advocates for the state's natural gas industry have argued that because of that separation, Alaskan exports should not be included in the controversy surrounding the potential expansion of LNG exports from the mainland. That controversy has focused in part on predictions that exports would slightly increase domestic natural gas prices; natural gas infrastructure expansion in Alaska is generally associated with greater access for residents and lower prices.

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