With the Department of Energy predicting the price of natural gas will be lower this winter than last, liquefied natural gas supporters are fearful this false sense of security could cause complacency in the push for increasing LNG supplies in the United States. During today's OnPoint, Bill Cooper, executive director of the Center for Liquefied Natural Gas, makes the case for increasing LNG supplies. Cooper addresses concerns about the safety of LNG facilities and the potential for terrorism associated with the facilities. He also discusses the Coast Guard's assessment of the proposed Long Island Sound LNG project.
Monica Trauzzi: Welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Bill Cooper, executive director of the Center for Liquefied Natural Gas. Bill is also a partner at the law firm of Hunton & Williams. Bill, thanks for joining me.
Bill Cooper: Thank you for having me. I appreciate it.
Monica Trauzzi: Bill, the DOE recently released its winter fuel's outlook and it was fairly positive for consumers. They're predicting that prices of natural gas will be lower this year than they were last year. You're concerned however, that this may affect the push for liquefied natural gas. Explain what you mean.
Bill Cooper: I'm not as concerned about it affecting the push for liquefied natural gas or LNG as we call it, as I am that such a report could generate an overall complacency as far as trying to ensure new supplies for natural gas period, be it from foreign sources or Canada or even domestically. My concern is that with a report like that people have a tendency to think that the weather is going to be moderate and the prices are going to be lower, so therefore we really don't have to do anything about it. That really premises our energy policy on the effects of the weather. And if there's anything in the 21st century we should know it's that we can't control the weather and it's highly unpredictable. And so that complacency may cause us to not look for more supplies, not look for ways to try to ensure that folks can have enough natural gas for this winter. And that's our concern.
Monica Trauzzi: And you argue that if the supply is increased through LNG that the price well automatically drop down. But some would say that if the price of natural gas goes high enough, then the consumer will automatically be switching to safer, home-grown alternatives. Is that a viable option for Americans?
Bill Cooper: It is an option. It is not a viable substitute for fossil fuels. Natural gas, obviously, is the cleanest burning fossil fuel and in great demand here in the United States. We expect natural gas demand, at least according to the Department of Energy, to grow almost 38 percent between now and the year 2025 or the year 2030. So Americans want natural gas and they demand it. LNG can help be a price mitigator, depending on how much LNG actually gets to come in and how high that demand is running obviously. And we don't think that -- while there are other alternatives, we don't think they're viable substitutes for natural gas, certainly not in the amount of quantity needed to meet the demand and certainly not in pricing either.
Monica Trauzzi: I want to focus on some of the opposition that LNG is facing. It's cheap to transport, but people are fearful that the populations that surround the LNG facilities could be at risk. If there's a fire thousands of people could be affected by it. How do you respond to the concerns, because LNG facilities don't exactly have the best track record for safety?
Bill Cooper: Well, LNG facilities do have an excellent track record for safety and certainly LNG ships. In the 45 years that the LNG industry has been a commercial activity there has been no significant loss of cargo or accidents on the high seas in over a hundred million miles of LNG traffic, which is a stellar record compared to any other form of transportation on the oceans. For the facilities themselves, very highly regulated, robust security and safety features and I would argue that it's certainly a very low risk proposition.
Monica Trauzzi: But there have been accidents associated with LNG.
Bill Cooper: There have been accidents in some facilities, not because of the LNG. So, you know, you really can't say a boiler explosion in Nigeria may have occurred at an LNG facility, but the boiler was the same kind of boiler that you would have had in a school someplace in the United States. So it's not because of the LNG that caused the accident.
Monica Trauzzi: There's a proposal for an LNG terminal in the Long Island Sound right now. And the Coast Guard just released a report concluding that the project poses safety and security risks to the region. And I wanted to find out what your reaction was to the Coast Guard's assessment.
Bill Cooper: Well, obviously, the waterway suitability assessment that the Coast Guard issued, I would rely upon what it says versus the characterization that it's unsafe or unsecure. That particular project, of course, is in Long Island Sound and it would be under the jurisdiction of the Federal Energy Regulatory Commission, which uses the Department of Transportation regulations for safety and security as well as the Coast Guard. Highly regulated, very robust, scientific designs for these facilities. I just don't see the cause for concern in that community.
Monica Trauzzi: Another fear which has developed in recent years is the fear that an LNG facility could spur an act of terrorism. If a terrorist gets into one of these facilities or gets onto one of the barges it could be used as a weapon. How do you respond to these concerns? How real are they? Is the risk worth it to just transport LNG to our coasts?
Bill Cooper: Well, I think you have to -- there's sort of a two-stage analysis that one should follow. Number one, look at the risk of bringing in say LNG to meet a growing robust demand for natural gas here in the United States versus a risk of doing nothing. In the New England area alone LNG comprises, on a daily basis, somewhere between 25 and 30 percent of the entire natural gas supply. On a very cold day in New England that LNG supply will approximate nearly 50 percent of the natural gas demand in the New England area. The cost of doing nothing is very great as we hear statistics every year about people that die of hypothermia because they don't have enough heat for their homes, enough fuel supply for their homes or they can't afford the bills. The risk of bringing in LNG however is very small and manageable. When we think about a terrorist attack, for instance, people, a lot of times, will leapfrog over the analysis that they have to do to determine what the actual consequence is. And I would direct folks to the Sandia report, back in December 2004, which really set forth a four step process that you should use in determining are these LNG facilities or the vessels, are they really a risky proposition? Number one, what is the risk itself? Is an LNG tanker really a high-risk target for a terrorist attack? And we have to do that analysis and first of all you have to look at the robust construction of an LNG tanker. The outer hall is an inch and a half steel plate, six to ten feet of air and sometimes water as ballast, then an inner hull of a steel alloy, a thick insulation layer, then the cryogenic material that protects the product. It's not some paper thin ship that you can penetrate with an easily accessible ...
Monica Trauzzi: But after 9/11 they did shut shipments down through the Boston Harbor because they wanted to ensure public safety.
Bill Cooper: Well, after 9/11 we did a lot of things to ensure public safety, almost a shut down in entire sectors of the industry, not just LNG. And I think it was, obviously, a precaution that people felt needed to be taken. As we truly analyze the risk in a post-9/11 world and we see, now, that the risk in a post-9/11 world for LNG shipments coming into the United States is very small.
Monica Trauzzi: We're seeing the LNG debate playing into the midterm elections as well. Things are heating up in California between Phil Angelides and Governor Arnold Schwarzenegger. Angelides opposes LNG plants off the coast of California. How much of an effect is this happening on your overall push for LNG terminals on the California coast?
Bill Cooper: Well, I don't think the election is adding anymore or taking away any of the debate about LNG. And once it enters into the political arena, of course, people tend to take more notice of it. But as it grinds through the regulatory process, and that's exactly what's happening in California, the emphasis has always been there and will always be addressed from our industry to assure that the safety and security of these facilities meet the highest standards.
Monica Trauzzi: We're also seeing opposition from just ordinary, everyday people in Eureka and Vallejo, California, for example. Protesters were able to stop facilities from being built in their area. So are just ordinary people having an impact on your push to increase LNG in the U.S.?
Bill Cooper: Well, obviously, we want to be very sensitive to the communities and their concerns. And that's why all of our companies, and CLNG in particular, engage in a public outreach program to try to dispel the myths that surround LNG. For instance, a lot of folks, if you just ask somebody on the street, say in one of those communities, they think LNG is this time bomb coming in on a ship. Well, the truth of the matter is that LNG won't even burn in a liquefied state. And once it's gasified, now it's a gas, it's not explosive in an uncontained environment and it just simply burns back to the source. Once you start explaining that to people and they understand that this is not some highly explosive, highly volatile substance, then they get over their fears and are willing to talk about the issues in a more informative way, which helps us advance the cause of these various applications.
Monica Trauzzi: Do you expect the discussion about LNG to change at all after the midterm elections? And what are you hoping for from the next Congress that's going to be coming in in January?
Bill Cooper: I don't really anticipate the debate to change a lot on the national level after the midterm elections. I think a bigger factor there is going to be the severity of the winter. If we see a very early cold spell, particularly in the Northeast, or a prolonged cold spell that really exacerbates our natural gas supplies and what we have in storage, I think that will drive the debate far more than the midterm elections. As far as the upcoming Congress goes, Congress has acted when it enacted the Energy Policy Act of 2005 and instituted a regimen for LNG permitting and involvement for the states and the roles of the federal government versus the states. So I really don't expect a whole lot of activity legislatively from the upcoming Congress, in the 110th Congress.
Monica Trauzzi: As our energy needs continue to increase we're going to need to rely more and more on foreign sources, for natural gas for example. Are you at all concerned about the effect that this is going to have on national security because it's maintaining our energy dependence on these volatile foreign sources of natural gas and oil?
Bill Cooper: I'm not concerned. I think we have often talked about, here in the United States, about energy independence and that's, I guess, a buzzword that started after the oil embargoes back in the 1970s. And really, it's another myth that we just need to dispel. What we really need to be concerned about is energy interdependence. We cannot be self-sustaining and grow our economy at the rate we would like to, to keep Americans working and have the luxuries of the 21st century for just about everybody. We have to have more energy supplies and we can't produce enough of it here. In particular, when you compare that to the government policies that prevent access to our domestic supplies, we have to go someplace else to get it. Now natural gas is found in abundance all around the globe, so it really mitigates against any one particular region of the world or any one country or a group of countries being able to control supply, such that you could see some formation of a cartel like OPEC or something like that. So what we should do is negotiate with those sources and get as many different places to bring natural gas into the United States as we possibly can for diversity purposes. And that will guarantee our security.
Monica Trauzzi: We're going to have to end it on that note. Bill, thanks for joining me.
Bill Cooper: Thank you very much. I appreciate it.
Monica Trauzzi: This is OnPoint. I'm Monica Trauzzi. Thanks for watching.
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