On May 7, the U.S. Department of Energy issued a final authorization for Dominion to export domestically produced liquefied natural gas (LNG). Dominion’s LNG operation, Cove Point, located on the Chesapeake Bay in Maryland has been approved to export LNG up to 0.77 billion standard cubic feet per day (Bcf/d) of natural gas for a period of 20 years.
LNG is formed when natural gas is cooled to around -260 F, which becomes a clear, odorless, noncorrosive, nontoxic liquid. According to the American Petroleum Institute, the volume of natural gas shrinks by approximately 600 times when liquefied. LNG has been handled safely for decades, with more than 100,000 LNG vessels making trips without incident.
Highly regulated, the LNG industry is overseen by the Federal Energy Regulatory Commission, the Department of Transportation, the U.S. Coast Guard and the Department of Homeland Security, just to name a few. Under the Natural Gas Act, countries that do not have a free trade agreement (FTA) with the U.S. must be granted permission from the Department of Energy to allow export authorization. It has taken years to gain the federal support needed for the U.S. to export domestically produced LNG to countries that do not have a FTA with the U.S.
Approval of LNG exports is huge—positively impacting: the industry, Dominion and other LNG exporting companies alike, numerous states producing the resource, Calverty County (the home of the facility), and it will affect the entire nation. The Cove Point liquefaction project is estimated at $3.4-$3.8 billion, creating thousands of construction jobs, 75 permanent jobs and expected to create an additional $40 million in annual tax revenue for Calverty County.
In Ohio, Dominion operates Dominion East Ohio, one of its two local distribution companies and has additional gas processing infrastructure in the state. The Ohio transmission system and Ohio natural gas will now be part of the network used to send product to Cove Point for export.
In the U.S. Energy Information Administration’s Annual Energy Outlook for 2015 (AEO2015), it predicted natural gas becoming the dominant U.S. energy export, pending the enactment of additional policy changes. With its new federal approval, the Cove Point facility is projected to be operational in late 2017. On point with reality, the report found the U.S. becoming a net exporter of natural gas as early as 2017.
Also in the AEO2015 forecast, domestic natural gas production is expected to continue increase and in 2015 alone could continue to do so at a record average production rate of 72.4 Bcf/d. In Ohio, this resource is abundant in the Utica shale, and many other shale formations across the country contain the resource.
According to Dominion, once completed Cove Point will produce about 5.25 million metric tons of LNG annually, for it’s already contracted service agreements with two overseas companies. LNG transported from Cove Point can reduce global greenhouse emissions by millions of tons a year as a replacement for coal that is currently used in overseas electricity generation. Shipments from Cove Point are projected to reduce U.S. trade imbalance by at least $2.8 billion annually, to as much as $7.1 billion.