LUSBY, Md. — Mike Frederick can’t help but chuckle as he pulls a single-speed bicycle with a purple flower design out of a maintenance room and onto a wet sidewalk.
As vice president of Dominion Resources Inc.’s LNG Operations, he is helping to oversee a $3.8 billion project that will convert the company’s Cove Point LNG import facility on the shores of the Chesapeake Bay into one of the country’s first natural gas export terminals.
The project requires significant high-tech investments, including two large gas turbines, a high-volume liquefier and a 60-foot barrier wall meant to muffle sound.
Not included in those plans, however, is an enhancement of the low-tech mode of transportation that connects the onshore plant with an offshore pier.
The best way to move people between the two sites is by cycling through a 1 1/4-mile tunnel — specifically, Mr. Frederick said, using single-speed bikes with back-pedaling brakes.
The company sends bicycles through the narrow tunnel because it cannot operate any machine there that produces a spark; the tunnel runs parallel to natural gas pipelines that transport gas from a ship to the mainland and, eventually Mr. Frederick hopes, vice versa.
“Quite frankly, it’s a healthy way to get a workout in 15 minutes,” he said. “Nobody wants to admit they can’t ride a bike, so there have been some longer trips.”
There is not much remarkable about this particular bike — other than its purple rims and white walls on the tires. There aren’t even baseball cards in the spokes.
The quaint vehicles that connect mainland Maryland with the half-mile-long pier in the Chesapeake Bay stand in stark contrast to the grand plans Dominion Resources has for the site.
The project faces several regulatory hurdles and legal challenges. The Federal Energy Regulatory Commission will release its environmental assessment of the proposed project Thursday, kicking off a 30-day public comment period. FERC already has committed to holding a public hearing about the proposal during that period.
Mr. Frederick expects the commission to authorize the project in July. The Department of Energy approved the plan in September.
“We expected to have FERC authorization before now,” he said.
But the Cove Point plan has become a target of environmental groups that believe the project will disrupt marine wildlife, add more greenhouse gas emissions, increase pollution in the Chesapeake Bay community and amplify fracking in the Marcellus and Utica shale plays.
Dominion is involved in a dispute — and a civil lawsuit — with the Sierra Club and its Maryland chapter over Sierra’s assertion that Dominion is not authorized to export natural gas on that site, according to terms of a 1972 environmental protection agreement that Sierra struck with facility’s original owners. Dominion sued, and a local judge and an appellate judge both have sided with Dominion in the matter.
The Maryland Court of Appeals, the state’s highest court, has received the case.
“The proposed project would lead to a substantial increase in ship traffic of huge — and potentially explosive — LNG tankers on the bay and to Cove Point, as well as increasing the risks posed by dumping billions of gallons of wastewater into this large and complex estuary made up of a network of rivers, wetlands, and forests,” the Sierra Club’s Maryland chapter wrote on its website.
Mr. Frederick believes the organization is being disingenuous, adding he believes the opposition is part of a larger plan to decrease fracking nationwide.
“If we went away tomorrow, it won’t make one difference in the wells drilled in that shale,” Mr. Frederick said. “The pipeline system is changing. That gas is going out of that basin. Whether it comes here or not, it’s going out of that basin.”
The export terminal will have the capacity to export an average of 0.7 billion cubic feet of natural gas per day while the Marcellus Shale currently produces 13 Bcf/d. By 2016, most analysts predict that number will rise to 20 Bcf/d.
“This is a very small piece of what’s happening in those basins,” he said.
Earthjustice and the Chesapeake Climate Action Network also oppose the plan, and Chesapeake group has submitted an official complaint to the U.S. Securities and Exchange Commission about a filing in March seeking to raise $400 million to help fund the export project.
Chesapeake Climate Action Network director Mike Tidwell said Dominion Resources has concealed many aspects of the plan and has intentionally failed to disclose certain risk related to investors. Though Dominion has publicly stated its 60-foot barrier wall is to reduce sound, Mr. Tidwell said the wall also will serve to reduce vapor clouds and to protect the community from fire.
“Their culture of concealment, their culture of not being forthright on risk is established,” Mr. Tidwell said.
Chesapeake Climate Action Network and other organizations hope to derail the funding push in an effort to halt the project completely.
“This sort of shareholder activism and general activism focused on polluting infrastructure has been growing in the United States,” Mr. Tidwell said. “This is part of an ongoing and growing movement.”
The organizations are also urging FERC to produce a full environmental impact statement, a more thorough environmental study of the project. That would delay the project even longer.
Dominion Resources spokesman Karl Neddenien said the company submitted 12,000 pages to FERC as part of its application and has submitted an additional 9,000 answering the regulatory agency’s questions.
“We know how to keep things safe,” Mr. Neddenien said. “We take it very seriously.”
The terminal opened in 1978. In two years, about 80 ships parked at the offshore pier and pumped liquefied natural gas onshore. There, the gas was held in storage tanks until it was time to vaporize the fuel and send it into the pipeline and, later, to market.
But an increase in domestic natural gas production soured the need for imported gas and the ships stopped coming in 1980.
Dominion acquired the facility in 2002 and resumed import activity in 2003. But another increase in domestic natural gas production, spurred by Marcellus Shale development, has again eliminated the need for foreign fuel.
Dominion still has import contracts with BP, Shell and Statoil, but it uses Cove Point as a so-called “peaking” facility. It converts liquefied natural gas into gas vapor and pumps it into the pipeline when pressure is low.
This was a busy winter for the peaking service, Mr. Frederick said, as high storage withdrawals during a cold winter greatly reduced pipeline pressure.
Not that long ago Dominion was increasing its ability to import natural gas at Cove Point. In 2008, the company added two large tanks, increasing its storage capacity to 14.6 billion cubic feet of natural gas — an indication of how quickly the shale boom has changed the energy landscape.
If the plan before FERC is approved, Cove Point would become the closest export terminal to the Marcellus Shale, but there are several other export projects currently underway. The Department of Energy has approved seven natural gas export terminals, including Sabine Pass and Cameron LNG in Louisiana and Jordan Cove LNG in Oregon.
The Cove Point plan will require installation of two GE Frame 7 turbines, a new liquefier — which turns dry gas to liquid for transport — and a pre-feed treatment center to remove dust and sediment from incoming gas. Installation will take at least three years.
The terminal plans call for being able to service 85 ships annually, adding 75 jobs and generating $60 million in annual tax revenue — $20 million in income tax and $40 million in additional property tax.
The facility would still be able to operate as an import facility, but Mr. Frederick does not anticipate there being a market for natural gas imports given the shale boom.
If the plans for Cove Point project don’t come to pass, the gas will likely go elsewhere, especially since the Department of Energy has approved other export terminals.
Exports are a priority at the moment for an industry dealing with sluggish prices. Natural gas prices are about half of what they were in 2008 — good news for consumers but bad news for developers who have spent billions of dollars drilling in southwestern Pennsylvania and elsewhere.
For its part, Dominion has two 20-year contracts for its natural gas exports — one with an Indian company and another with a Japanese company that will equally split the 0.7 Bcf/d of gas.
Still, as the Cove Point project proves, getting the industry to a point where exports are part of the flow and part of the infrastructure is nowhere near as easy as riding a bike.
Michael Sanserino: email@example.com, 412-263-1969 and Twitter @msanserino.