Release Date: September 10, 2003

The LNG import facility at Cove Point, MD Photo: AGA

WASHINGTON, DC - With the nation facing potential natural gas shortages in the short term, and increasing demand for gas in the longer term, the U.S. Department of Energy's Office of Fossil Energy has selected the National Association of Regulatory Utility Commissioners (NARUC) to help educate critical energy decision makers about liquefied natural gas.

The project stems from an emergency natural gas summit held in June in Washington, DC. It was there that Secretary of Energy Spencer Abraham told energy leaders that low levels of natural gas in storage could lead to huge price increases for consumers this winter.

"This is not just about low reserves or supply and demand imbalances," Abraham said at the time. "This is about real people and the real problems they confront when gas prices soar. It's about senior citizens, living on fixed incomes, being forced to choose between skyrocketing heating bills or some other of life's necessities."

At the time of the summit, natural gas storage was 32 percent below 2002 levels. By the end of July the outlook had improved, but working gas in storage was still 17 percent below end-of-July 2002 levels. In addition to short-term supply issues, the energy industry is concerned about stable, affordable supplies of natural gas in the longer term, since U.S. consumption of natural gas is expected to increase by more than 50 percent by 2025.

Liquefied natural gas, or LNG, has been touted as a possible solution to longer term supply and demand issues. "LNG is the same natural gas used in homes for cooking and heating, but it has been cooled, and slightly compressed above atmospheric pressure into a liquid for transport and storage," says Tony Zammerilli of the Gas Supply Projects Division at the National Energy Technology Laboratory which will manage the NARUC project.

"The liquefied gas is transported in double-hulled ships specially designed and insulated to prevent leakage or rupture in an accident," explains Zammerilli. Worldwide, there are 17 LNG export terminals, 40 LNG import terminals, and 136 specially-designed LNG ships. LNG facilities liquefy and store domestic natural gas production during the summer for re-gasification during the winter heating season.

Although the LNG industry in the United States has, until recently, occupied a small niche in the domestic natural gas market, LNG imports are expected to help fill a growing gap between domestic gas production and consumption. In the past two years, the United States has imported LNG from Trinidad, Algeria, Australia, Nigeria, Oman, Qatar, Indonesia, and the United Arab Emirates. Other countries with significant quantities of natural gas are developing LNG export capability.

The United States has the largest number of LNG facilities in the world; 113 facilities are active, including four import terminals. Two of the import terminals, in Elba Island, GA, and Cove Point, MD closed in 1980 but were recently reopened and are now are receiving LNG on a regular basis. Terminals in Everett, MA, and Lake Charles, LA, have continued to receive LNG imports.

The new Office of Fossil Energy-funded project aims to enhance communication between critical energy stakeholders to ensure the responsible development and deployment of LNG. In the first phase of the project, NARUC will begin a series of regional and national dialogues that will lead to the production of three documents:

1. A comprehensive LNG white paper for state public utility commissions.
2. A draft LNG communication plan for a "case study" state which could be adapted to other states.
3. A comprehensive LNG primer for state energy and environmental officials.

Both the regulatory community and industry are important to the accelerated development of LNG. To make more LNG available, energy companies must invest in the "LNG value chain" - the terminals, ships, storage tanks, trucks, and pipelines that carry and store LNG. Without the support of the regulatory community, it will be difficult to encourage private sector investments in new or mothballed facilities.

State legislators and the public are equally important. Concerns about safety, security, and environmental protection are shared by all. To support LNG as a reliable and affordable resource, legislators must develop public policies that ensure safe operation of LNG facilities, protect them from terrorist activities or accidents, and preserve the environment.

"The DOE/NARUC partnership is providing essential outreach," says NETL's Zammerilli. "By communicating, addressing concerns, and pulling together we can meet the increased demand for natural gas in general, and LNG in particular."

The project coincides with Secretary Abraham's call for a second natural gas summit, which will convene later this year and focus exclusively on liquefied natural gas.

"The Global LNG Summit will provide another forum through which we can examine additional options to increase our liquefied natural gas supplies," Abraham said in July when announcing the second summit. "We must focus on smart uses of energy, along with using our natural gas resources to our own best benefit and expanding those resources to better meet our energy needs."