Natural Gas Sector Gets Congressional Action on LNG Tax Rate Drop

Liquefied natural gas (LNG) as a transportation fuel option is back on the competitive race track, thanks to a part of the temporary (three-month) highway funding bill passed by the U.S. Senate Thursday, according to natural gas vehicle (NGV) advocates. The House-passed version had a similar provision.

Image Source:  www.freightlinertrucks.com

Sourced through Scoop.it from: www.naturalgasintel.com

>” […] At a Congressional hearing last December, the global energy and procurement director for Atlanta-based UPS called for “removing barriers” to NGVs, adding that if Congress really wanted to accelerate the adoption of LNG use in heavy-duty trucks and more use of U.S.-produced natural gas supplies, it needed to eliminate “disproportionate taxing of LNG compared with diesel fuel.”

Noting that President Obama was expected to sign the latest measure, Newport Beach, CA-based Clean Energy Fuels Corp. said the new leveling provision will effectively lower the tax on LNG by 14.1 cents/gal. Twenty-six state legislatures have already taken similar action, a Clean Energy spokesperson told NGI.

Clean Energy CEO Andrew Littlefair said the use of LNG in heavy-duty trucks, locomotives and large marine vessels has been growing steadily in North America, and “anyone who cares about a cleaner environment and energy independence should be very grateful for what the U.S. Congress has done, making LNG much more competitive.”

Executives with America’s Natural Gas Alliance (ANGA), and the NGVAmerica and American Gas Association (AGA) trade associations echoed Littlefair’s sentiments.

“We applaud Congress for including language to equalize the federal highway excise tax on LNG,” said ANGA CEO Marty Durbin. “This provision has garnered strong bipartisan support over the years, and we are thrilled to see it become law.”

Calling the action a “common-sense change” that will mean greater fuel cost savings, NGVAmerica President Matt Godlewski said the passage of the LNG provision is great news for trucking fleets that are looking for clean-burning fuels. His calculation places the excise tax on LNG at 24.3 cents/DGE, compared to its current 41.3 cents/DGE level, Godlewski said.

“Currently, fleets operating LNG-powered trucks are effectively taxed for their fuel at a rate 70% higher than that of diesel fuel,” he said.

An AGA spokesperson clarified the number to point out that the current federal excise tax on both diesel and LNG is 24.3 cents/gallon, but because LNG does not have the same energy content/gallon of fuel, it takes 1.7 gallons of LNG to equal a gallon of diesel. “Since the excise tax is based on volume (gallons) — not energy content — LNG is taxed at 170% of the rate of diesel on an energy equivalent basis,” he said.

“This provision provides the level playing field that natural gas has needed to reach its full potential as a transportation fuel,” said Kathryn Clay, AGA vice president for policy strategy.

Each of the trade groups has been lobbying Congress for some time to take this corrective action on LNG. Under the new provision, the energy equivalent of a diesel gallon of LNG is defined as having a Btu content of 128,700, which AGA said is equal to 6.06 pounds of LNG.

Separately, the new measure defines the energy equivalent of a gallon of compressed natural gas (CNG) as having a Btu content of 115,400, or 5.66 pounds of CNG. […]”<

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China’s Switch to LNG From Coal Will Cut Global Pollution

To many people, natural gas seems to be more of the same, a continuation of the old fossil fuel path that has driven industrialization, air pollution and global warming.

Source: www.vancouversun.com

“> […]  China is currently producing twice the greenhouse gases of the United States. And its emissions are growing rapidly. Its emissions surpassed those of the U.S. in 2006, reached double the U.S. in 2014, and are expected to rise by seven per cent per year for the foreseeable future. China obtains 70 per cent of its electricity from burning coal, by far the worst polluter. China has plans for doubling its use of coal in the next 10 to 15 years. Meanwhile, the emissions from the U.S. have stabilized, partly from a slowing economy, but the biggest effect came from a switch from coal to natural gas. If you replace an old coal power plant with a modern natural gas one, you can cut carbon dioxide emissions by a factor of three.

Natural gas doesn’t cut emissions to zero; it is still a fossil fuel. But it obtains much of its energy from hydrogen, an atom that out numbers the carbon atoms in methane (the key component of natural gas) by 4:1. Natural gas can be burned with much higher efficiency than coal, by use of a combined cycle turbine that harnesses both gas and steam power generation.

China wants to move away from coal, to natural gas, nuclear, and solar. Their chief concern is not global warming, but the horrific air pollution that is killing an estimated 4,000 people per day in China, 1.6 million per year. […]”<

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Russian Energy Producer Rosneft LNG Plant Reported Delayed for Two to Five Years

MOSCOW (Reuters) – Russian energy producer Rosneft may have to delay development of its liquefied natural gas (LNG) plant on the Pacific island of Sakhalin for at least two years, sources said, after prices fell and financing all but dried up due to Western sanctions.

Source: www.reuters.com

>”[…] Rosneft, which has spearheaded President Vladimir Putin’s drive to increase oil and gas output and secure Russia’s energy dominance, signed an agreement with Exxon in 2013 that aimed at starting production of 5 million tonnes per year of LNG from 2018 at Sakhalin.

Russia is the world’s largest exporter of natural gas but mostly exports it by pipeline to customers in Europe. Once liquefied, natural gas can be transported by ship to customers in Asia, helping fulfill the Kremlin’s goal of finding new markets.

Two sources with direct knowledge of the project said the 2018 target was no longer realistic.

A source at Rosneft, who declined to be named because he was not authorized to speak to the media, said the plant would most probably “be postponed for three to five years because of lack of funds and low fuel prices”.

A second source said it could be delayed for two years.

“This is not a surprise,” the source said. “The year 2018 had never been seen as the final deadline. All the stuff that’s happening – a decline in LNG prices, a slump in demand, the economic crisis – only confirms that.”

A Rosneft company spokesman said there had been no change to the project’s timeline: “Rosneft has not revised the terms for the implementation of the far east LNG project.”

Exxon’s Moscow office declined to comment. A spokesman at Exxon’s headquarters in Texas also declined to comment.

In May 2014, Rosneft and Exxon signed a deal to continue work on the LNG plant, which will be partly fed from gas produced at Sakhalin-1, an oil and gas project in which Exxon is a major investor. […]”<

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Woodfibre LNG Plant: Old Technology, Design Flaws and Environmental Issues

Speakers at a presentation in West Vancouver on the risks associated with the proposed LNG project in Howe Sound voiced concerns, Wednesday, over everything from environmental contamination to the risk of explosions from transporting natural gas.

Source: www.nsnews.com

>”[…] “Canada doesn’t have a whole pile of rules about LNG because it doesn’t have a whole pile of plants,” said Eoin Finn a seasonal resident of Bowyer Island in Howe Sound, and speaker at the event. Finn holds a PhD in physical chemistry and is a close follower of the LNG project.

He said an LNG plant of this size has never before existed in Canada. He has concerns over the country’s lack of environmental regulations in place against this particular resource.

“There are no plants on the West Coast of Canada nor on the U.S. except a tiny one in Alaska but that’s 100 miles from anywhere and it’s about one-tenth (the size of) Woodfibre.”

When it comes to the risks associated with the proposed development, Finn said there are many, including emissions output, the risk of shipping accidents and the plant’s cooling system, which would use seawater.

“One of the big issues is that the plant will be cooled by seawater from the sound. This is pretty old technology that’s been dismissed and refused and abandoned in California and Europe.”

He said that the current proposed cooling system for the plant would suck in 17,000 tonnes of seawater (3.7 million gallons) per hour, and chlorinate it while it circulates through the system, before releasing it back into Howe Sound.

Finn explained that any such practice would be “extremely damaging” to marine life and that similar systems down the coast in California have been banned.

Although the plant will be powered by electricity, Finn said it will still produce emissions, including 140,000 tons of carbon dioxide a year.

Among Finn’s other concerns was tanker traffic associated with the project, which would see between six and eight tankers navigating through the sound per month.

He cited a risk of explosions associated with the ships, which could have potential negative effects on area property values. Large waves generated from those vessels could also be a problem for the area, something Finn compared to the BC Ferries Fast Cat situation years before.  […]

Wade Davis, Bowen Island resident and professor of anthropology, said the issue of whether or not the plant will go in place holds a deeper meaning than simply a local environmental danger.

“This is not simply about a local issue in Howe Sound, this is a metaphor for who we are to be as a people,” he explained to the audience. “If we are actually prepared to invest our lives in this way, the most glorious fjord in the world, what else in our country will be immune to such violations?” he asked.  […]”<

 

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BC LNG Project Final Decision Stalled to June

Malaysia’s Petronas expects to make a final investment decision on an US $11-billion liquefied natural gas (LNG) export terminal in British Columbia by the end of June, after postponing the decision…

Source: business.financialpost.com

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Potential of liquefied natural gas use as a railroad fuel

Source: www.eia.gov

>” […]  Continued growth in domestic natural gas production, along with substantially lower natural gas spot prices compared to crude oil, is reshaping the U.S. energy economy and attracting considerable interest in the potential for fueling freight locomotives with liquefied natural gas (LNG). While there is significant appeal for major U.S. railroads to use LNG as a fuel for locomotives because of its potentially favorable economics compared with diesel fuel, there are also key uncertainties as to whether, and to what extent, the railroads can take advantage of this relatively cheap and abundant fuel.

Freight railroads and the basic economics of fuel choice  Major U.S. railroads, known commonly as Class 1 railroads, are defined as line-haul freight railroads with certain minimum annual operating revenue. Currently, that classification is based on 2011 operating revenue of $433.2 million or more [1]. While there are 561 freight railroads operating in the United States, only seven are defined as Class 1 railroads. The Class 1 railroads account for 94% of total freight rail revenue [2]. They haul large amounts of tonnage over long distances, and in the process they consume significant quantities of diesel fuel. In 2012, the seven Class 1 railroads consumed more than 3.6 billion gallons (gal) of diesel fuel [3], amounting to 10 million gal/day and representing 7% of all diesel fuel consumed in the United States. […]

The large differential between crude oil and natural gas commodity prices translates directly into a significant disparity between projected LNG and diesel fuel prices, even after accounting for natural gas liquefaction costs that exceed refining costs. […]

Given the difference between LNG and diesel fuel prices in the Reference case, railroads that switch locomotive fuels could accrue significant fuel cost savings. Locomotives are used intensively, consume large amounts of fuel, and are kept in service for relatively long periods of time. The net present value of future fuel savings across the Reference case projection for an LNG locomotive compared to a diesel counterpart is well above the roughly $1 million higher cost of the LNG locomotive and tender (Figure IF3-3).  […]

Relatively large changes in assumptions used to evaluate investments in LNG locomotives (such as a significantly shorter payback period or much higher discount rate) or in fuel prices would be required to change LNG fuel economics for railroad use from favorable to unfavorable. […] “<

 

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Cove Point LNG Project Obtains Federal Approval and Opposition

Initially, Cove Point helped the United States overcome what was then an energy shortage. Now that our nation is developing a burgeoning surplus of natural gas, Cove Point can help send a small portion of that surplus to allied nation’s looking for stable supplies of clean energy, supporting economic development and replacing coal as a fuel.

Source: www.fierceenergy.com

>” […] The project offers significant economic, environmental and geopolitical benefits. The construction of the approximately $3.8 billion export project will create thousands of skilled construction jobs, an additional $40 million in annual tax revenue to Calvert County, and millions of dollars in new revenues for Maryland and the federal government, as well as a reduction in the nation’s trade deficit by billions of dollars annually.

Dominion’s project has faced and will continue to face significant and widespread grassroots opposition. Despite these benefits, environmental and community groups are denouncing FERC’s approval of the controversial project, claiming that the facility will incentivize environmental damage from fracking across the mid-Atlantic region and, according to federal data, would likely contribute more to global warming over the next two decades than if Asian countries burned their own coal.

Environmental groups, including the Chesapeake Climate Action Network, Earthjustice, and the Sierra Club are poised to petition FERC and potentially to sue the agency to challenge on the basis of an inadequate environmental review. These groups are assessing the issue upon which to file a motion for a rehearing, which needs to occur before an appeal can happen.

The groups claim that in its Environmental Assessment, which was limited at best, FERC omitted credible analysis of the project’s lifecycle global warming pollution, including all the pollution associated with driving demand for upstream fracking and fracked gas infrastructure.

The Dominion Cove Point project would be the first LNG export facility to be sited so close to a residential area and in such close proximity to Marcellus Shale fracking operations, and could trigger more global warming pollution than all seven of Maryland’s existing coal-fired power plants combined, the groups contend.

“FERC’s decision to approve Cove Point is the result of a biased review process rigged in favor of approving gas industry projects no matter how great the environmental and safety concerns,” said Mike Tidwell, director of the Chesapeake Climate Action Network, in a statement. “FERC refused to even require an environmental impact statement for this $3.8 billion facility right on the Bay. We intend to challenge this ruling all the way to court if necessary…we will continue to fight this project until it is stopped.”

Dominion must now review and accept the order. Upon completion, Dominion will file an implementation plan describing how it plans to comply with the conditions set forth in the order. Dominion expects to ask the FERC for a “Notice to Proceed” at that time and plans to begin construction when the notice is received. This process – from Dominion review through FERC’s notice – is expected to take several weeks.

Cove Point is the fourth liquefied natural gas export project to receive approval to site, construct and operate and is the first LNG export project on the East Coast. “<

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Fracking linked to BC’s liquefied natural gas gambit

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A surplus of natural gas in North America explains why the B.C. government is so desperate to launch a new industry

Duane Tilden‘s insight:

>“The prices that the [B.C.] government is looking at in paving the roads with gold is basically based on these short-term factors that are not likely to persist,” Lee said.

Natural Gas Development Minister Rich Coleman did not make himself available for an interview to respond to Lee’s comments.

B.C. misread U.S. energy revolution

The B.C. government missed the mark with its earlier forecasts on royalties because it failed to predict an explosion in U.S. energy production.

This largely came about through hydraulic fracturing, otherwise known as “fracking”, and horizontal drilling. Technological innovations in fracking generated huge new supplies, causing North American natural-gas prices to plummet.

The falling prices resulted in fewer royalties flowing into the B.C. government treasury.

Fracking involves pumping huge amounts of water along with sand and chemicals into shale-rock formations to free trapped gas.

Horizontal drilling enables companies to retrieve locked supplies by moving the drill bit across a deposit rather than going straight down.

A single platform can send horizontal drills in a multitude of directions, enhancing efficiency and saving money.

In his 2013 book, The Frackers: The Outrageous Inside Story of the New Billionaire Wildcatters (Penguin), Gregory Zuckerman chronicled how a handful of U.S. energy-industry outcasts refined these techniques and caused an American energy revolution.

“To me, it’s fascinating that this resurgence started in 2007 and 2008, which is right when America was sort of on its back,” he told the Straight by phone.

Zuckerman, a Wall Street Journal reporter, said that the United States is now producing about eight million barrels of oil per day, up from five million barrels per day in 2008.

In addition, U.S. natural-gas production rose more than 21 percent between 2008 and 2013.

ExxonMobil CEO Rex Tillerson has predicted that the U.S. will be energy self-sufficient by 2020.

The Frackers reveals that the people who spearheaded this sharp increase in energy production were not working for major oil companies like ExxonMobil, Shell, BP, or Chevron.

Rather, they were an assortment of little-known wildcatters from Texas and Oklahoma—George Mitchell, Aubrey McClendon, Tom Ward, and Harold Hamm—who became billionaires as a result.

They crisscrossed areas with shale reserves, buying drilling rights from property owners. Although there has been a lot of howling from environmentalists about the contamination of water supplies with fracking chemicals, the industry continues to grow.

“Everyone focuses on fracking—and fracking is key, as is horizontal drilling—but the most important thing is that innovators like Mitchell got it to work in shale, which everyone kind of ignored, especially the big guys and the experts,” Zuckerman said.

By targeting shale, Zuckerman maintained, Mitchell changed the country and the world.

That’s because manufacturers with high natural-gas input costs—such as makers of chemicals, tires, cement, and aluminum—are basing operations in the United States because of the low natural-gas prices. And Zuckerman said that this will give the U.S. a competitive advantage against other countries for years to come.

“Some economists say as many as two million jobs are going to be created,” he stated.<

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Japan to Switch Off Nuclear Power, With No Firm Date for Re-Start: Sci Am

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Japan is set to be nuclear power-free, for just the third time in more than four decades, and with no firm date for re-starting an energy source that has provided about 30 percent of electricity to the world’s third-largest economy.

Duane Tilden‘s insight:

>Kansai Electric Power Co’s 1,180 MW Ohi No.4 reactor is scheduled to be disconnected from the power grid late on Sunday and then shut for planned maintenance. It is the only one of Japan’s 50 reactors in operation after the nuclear industry came to a virtual halt following the March 2011 Fukushima disaster.

Japan last went without nuclear power in May-June 2012 – the first shutdown since 1970 – a year after a massive earthquake and tsunami triggered reactor meltdowns and radiation leaks at the Fukushima facility. The country’s nuclear reactors provided close to a third of the electricity to keep the $5 trillion economy going before the Fukushima disaster, and utilities have had to spend billions of dollars importing oil, gas and coal to make up for the shortfall. […]

 

IMPORT BILL

Japan consumes about a third of the world’s liquefied natural gas (LNG) production, and will likely boost LNG demand to record levels over the next couple of years. LNG imports rose 4.4 percent in volume to a record 86.87 million tonnes, and 14.9 percent in value to a record 6.21 trillion yen ($62.1 billion) in the year through March.

Imports are likely to rise to around 88 million tonnes this year and around 90 million tonnes in the year to March 2015, according to projections by the Institute of Energy Economics Japan based on a mid-scenario that 16 reactors will be back on-line by March 2015.<

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