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Transcript of Bureau of Economic Geology, The University of Texas at Austin Defining Community and Economic...
Bureau of Economic Geology, The University of Texas at Austin
Defining Community and Economic Benefits Associated with Energy Infrastructure
Projects: LNG Case Study
©CEE-UT, 2
Overview and Major Themes, I
• “Perception is reality” with regard to public acceptance of or rejection of major projects– Variations across different stakeholder groups
on different issue dimensions
• Certain issues dimensions are “emotive”– Wetlands, fisheries as “irreplaceable natural
endowments” imbued with tradition
©CEE-UT, 3
Overview and Major Themes, II
• Perceptions of safety and security are complex– Tend to follow other concerns or come into play
if net benefits are not perceived
• Larger jurisdictions can clearly perceive energy supply benefits– Relationships to other stakeholder groups can
be complex
©CEE-UT, 4
Overview and Major Themes, III
• “Psychology” of energy security– Complexity of commodity markets and basis
differentials– Diffuse benefits (concentrated costs)
• Benefits discerned relative to emissions– Both local/regional air quality and broader,
GHG strategies
©CEE-UT, 5
Overview and Major Themes, IV
• Implications for cost-benefit analysis– Valuing intangible goods, heuristic valuations,
subjective scorings, future generations
• Implications for other critical infrastructure projects– Regulatory process, public intervention, public
acceptance, issue domains
• Considerations not discerned– Broader energy security themes
©CEE-UT, 6
Natural Gas Industry Performance
-60%
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1Q05
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Residential Price
Commercial Price
Industrial Price
Electric Power Price
©CEE-UT, 7
Natural Gas Industry Performance
-60%
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Residential Price
Commercial Price
Industrial Price
Electric Power Price
Dry Production
©CEE-UT, 8
Natural Gas Industry Performance
-60%
-40%
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0%
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Residential Price
Commercial Price
Industrial Price
Electric Power Price
Dry Production
Pipeline Imports
©CEE-UT, 9
Natural Gas Industry Performance
-60%
-40%
-20%
0%
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80%
100%
1Q05
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3Q07
4Q07
Residential Price
Commercial Price
Industrial Price
Electric Power Price
Dry Production
Pipeline Imports
LNG Imports
Total Natural Gas inStorage
©CEE-UT, 10
Natural Gas Industry Performance
-60%
-40%
-20%
0%
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40%
60%
80%
100%
1Q05
2Q05
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4Q07
Residential Price
Commercial Price
Industrial Price
Electric Power Price
Dry Production
Pipeline Imports
LNG Imports
Total Natural Gas inStorage
Total Consumption
©CEE-UT, 11
LNG Case Study Outline
• Objectives
• Outcomes
• Conclusions
• Approach
• Findings and implications for new projects
• Path forward
©CEE-UT, 12
Study Objectives
• Increase clarity on local benefits for host communities, investors as well as larger market areas and national needs
• Identify host community “costs”• Incorporate practical considerations stemming
from LNG safety and perceptions of risk• Improve the knowledge base for presenting long
term net benefits associated with international LNG trade well beyond the development project and for both new and existing facilities
©CEE-UT, 13
Study Outcomes
• A tool for identifying net benefits from LNG and other facilities– Specific goal: develop an approach flexible
enough for use on other large energy infrastructure projects, US and abroad
– Tool kit includes: “check list” for assessment of net benefits for use by stakeholders for both external and internal analysis and communication
©CEE-UT, 14
Key Conclusions• Infrastructure siting process is dominated by actions to
address stakeholder concerns and tradeoffs• Local and waterway community benefits are key for project
success as these stakeholder groups face unique tradeoffs• Clear, early identification of benefits that target specific
needs, concerns of stakeholders facilitate progress and dialogue
• Successful infrastructure siting requires dialogue and consideration of multiple dimensions among multiple groups
• No one dimension dominates stakeholder perceptions• Sharing in the benefits of an infrastructure project is
paramount to project progress• A stakeholder group cannot perceive itself as a loser in the
process
©CEE-UT, 15
Tool Kit – Check List
• Sources of and types of information
• Issues of interest (issue dimensions)
• Stakeholder group identification based on common interests and participation
• Methods to capture, measure intensity of stakeholder postures towards proposed infrastructure project
©CEE-UT, 16
Sources of Information
• Data collection from sample of projects using the federal regulatory process as framework– US Federal Energy Regulatory Commission
(FERC) for onshore licenses and US Maritime Administration/US Coast Guard (MARAD/USCG) for offshore licenses
• Approach allows for data collection from “observable” and active stakeholders– Bias– Measuring, scoring intensities
©CEE-UT, 17
Issue Dimensions
Information was collected for key issue dimensions identified from the regulatory process and based on pre-study surveys and analysis, including input from direct observation and outside sources
©CEE-UT, 18
Stakeholders
• Stakeholders groups:– Are affected by LNG import facilities and
activities in different ways– Have prescribed roles in the infrastructure
siting/regulatory process
• Stakeholders were disaggregated into distinct groupings based on combination of the two factors above
©CEE-UT, 19
Immediate Site Community
Immediate Site-Host Community
• Usually adjacent to the site and a sub group of the local or greater communities
• Key concerns: emissions, safety, displacement
©CEE-UT, 20
Waterway Community
Waterway Community
• Usually adjacent to or near the waterway or have interests in the waterway designated for LNG tanker traffic and related marine operations
• Includes offshore facilities for marine projects and coastal crossings for pipelines
• Distinguished from immediate site-host community to capture waterway related issues such as: waterway traffic and security, endangered species protection and fisheries and wetlands
• CZMA considerations
©CEE-UT, 21
Local Community
Local Community (City/County)
• Can be influenced by perceptions of safety and security risk associated with potential consequences from large scale incidents
• More prominent issues include: surface traffic, tax revenues (related to the project or potential changes in real property values), local emergency response preparedness, access to natural gas (or perceptions that intention is to “export”)
• Political jurisdictions may have decision making power on site leases and local permits
©CEE-UT, 22
Greater Community
Greater Community
• Encompasses other local stakeholders but distinct influence associated with political jurisdiction
• Receives some direct and indirect revenues (tax base, industrial activity – jobs, local purchases, tax revenues)
• Can be affected by changes in energy prices
• Has regulatory or permit authority such as governor veto power on offshore terminal licenses and CZMA
©CEE-UT, 23
Immediate Site Community
Waterway Community
Local CommunityGreater Community
©CEE-UT, 24
Immediate Site Community
Local Community
Waterway Community
Greater Community
©CEE-UT, 26
Key Results and Findings
• Findings, conclusions derived from comparative analysis for sample of 20 projects
• Summary hypotheses tested once data collection was complete
• Project groupings– Licensed/Non-licensed– Onshore/offshore– By region:
• Pacific Northwest, California, Gulf Coast, Florida Northeast
©CEE-UT, 27
Local CommunityConsiderable positive impact on
job creation and tax revenueMinor perceived benefit on
energy costsConcerns about increased
congestion during construction
Waterway CommunityConcern about the impacts on
fisheries and related jobs; property value; safety and
securityMinor perceived benefit on
energy costs and tax revenue
Immediate Site CommunityConcern about the loss of
property value and safety and security
No detectable perceived benefit.
External Interest GroupActive with regard to coastal
environmental issues, safety and security.
National CommunityContributor to energy security
Source of fuel of choice
Greater CommunityConsiderable positive impact on
energy costs and employmentConcerns on impacts on
fisheries
Licensed Projects
Immediate Site Community
Greater Community (State)
Waterway Community
National Community (Federal)
Local Community (City)
External Interest Group
Immediate Site CommunityImmediate Site Community
Greater Community (State) Greater Community (State)
Waterway CommunityWaterway Community
National Community (Federal)National Community (Federal)
Local Community (City)Local Community (City)
External Interest GroupExternal Interest Group
1 – Perceived Benefit3 – Indifferent5 – Perceived Cost
1
2
3
4
5Safety/Security
Wetlands
Fisheries
Energy Costs
Roads
Taxes
Employment
Air Emissions
Property Value
Other/Intangibles
©CEE-UT, 28
All Projects
Immediate Site Community
Greater Community (State)
Waterway Community
National Community (Federal)
Local Community (City)
External Interest Group
Immediate Site CommunityImmediate Site Community
Greater Community (State) Greater Community (State)
Waterway CommunityWaterway Community
National Community (Federal)National Community (Federal)
Local Community (City)Local Community (City)
External Interest GroupExternal Interest Group
1 – Perceived Benefit3 – Indifferent5 – Perceived Cost
Main Concerns: Fisheries, Safety/Security, Property Value, Air EmissionsMain Benefits: Energy Costs, Taxes, Air Emissions
Maximum over all Projects
Minimum over all Projects
1
2
3
4
5Safety/Security
Wetlands
Fisheries
Energy Costs
Roads
Taxes
Employment
Air Emissions
Property Value
Other/Intangibles
1
2
3
4
5Safety/Security
Wetlands
Fisheries
Energy Costs
Roads
Taxes
Employment
Air Emissions
Property Value
Other/Intangibles
1
2
3
4
5Safety/Security
Wetlands
Fisheries
Energy Costs
Roads
Taxes
Employment
Air Emissions
Property Value
Other/Intangibles
©CEE-UT, 29
Immediate Site CommunityConcern about the loss of jobs,
property value and safety and security
No detectable perceived benefit.
External Interest GroupMore active with regard to
coastal environmental issues, safety and security.
National CommunityContributor to energy security
Source of fuel of choiceRising environmental impact
concerns on coastal areas and marine habitat
Greater CommunityConsiderable positive impact on
energy costs and minor on employment
Rising concerns on impacts on fisheries, wetlands and loss of
property value. Safety and security concerns are present.
Local CommunityPositive impact on job creation,
tax revenue and air emissionsMinor perceived benefit on
energy costsConcerns about safety and security and property value
Waterway CommunityRising concern about the
impacts on fisheries and related jobs; property value; safety and
security during transit; Diminishing perceived benefits
Non-Licensed Projects
Immediate Site Community
Greater Community (State)
Waterway Community
National Community (Federal)
Local Community (City)
External Interest Group
Immediate Site CommunityImmediate Site Community
Greater Community (State) Greater Community (State)
Waterway CommunityWaterway Community
National Community (Federal)National Community (Federal)
Local Community (City)Local Community (City)
External Interest GroupExternal Interest Group
1 – Perceived Benefit3 – Indifferent5 – Perceived Cost
1
2
3
4
5Safety/Security
Wetlands
Fisheries
Energy Costs
Roads
Taxes
Employment
Air Emissions
Property Value
Other/Intangibles
©CEE-UT, 30
Onshore vs Offshore
Immediate Site Community
Greater Community (State)
Waterway Community
National Community (Federal)
Local Community (City)
External Interest Group
Immediate Site CommunityImmediate Site Community
Greater Community (State) Greater Community (State)
Waterway CommunityWaterway Community
National Community (Federal)National Community (Federal)
Local Community (City)Local Community (City)
External Interest GroupExternal Interest Group
1 – Perceived Benefit3 – Indifferent5 – Perceived Cost
1
2
3
4
5Safety/Security
Wetlands
Fisheries
Energy Costs
Roads
Taxes
Employment
Air Emissions
Property Value
Other/Intangibles
1
2
3
4
5Safety/Security
Wetlands
Fisheries
Energy Costs
Roads
Taxes
Employment
Air Emissions
Property Value
Other/Intangibles
©CEE-UT, 31
Local CommunityPositive impact on job creation
and tax revenue.Clear recognition of benefit on energy costs and fuel choice.
Concerns about coastal environment and safety and
security and road congestion
Waterway CommunityConcern about the impacts on
fisheries and related jobs; property value; tanker traffic and
safety and securityNo perceived benefits.
Immediate Site CommunityConcern about safety and
security and impact on fisheries.No detectable perceived benefit.
External Interest GroupActive with regard to coastal
environmental issues, but highly mobilized on safety and security.
National CommunityContributor to energy security
Source of fuel of choice.Concerns about impacts on
marine habitat.
Greater CommunityRecognition of impact on energy
costs and need for natural gas.Rising concerns on impacts on
fisheries, related jobs and property value. Concerns at the
regional and state level about safety and security issues.
Northeast Projects
Immediate Site Community
Greater Community (State)
Waterway Community
National Community (Federal)
Local Community (City)
External Interest Group
Immediate Site CommunityImmediate Site Community
Greater Community (State) Greater Community (State)
Waterway CommunityWaterway Community
National Community (Federal)National Community (Federal)
Local Community (City)Local Community (City)
External Interest GroupExternal Interest Group
1 – Perceived Benefit3 – Indifferent5 – Perceived Cost
1
2
3
4
5Safety/Security
Wetlands
Fisheries
Energy Costs
Roads
Taxes
Employment
Air Emissions
Property Value
Other/Intangibles
©CEE-UT, 32
Northeast Projects
• Offshore projects that use considerable already existing local distributed storage
• A permanent FSRU could face opposition unless remote but a seasonal FSRU for continuous supply during peak seasons will likely not
• Use of inland waterways can become problematic
©CEE-UT, 33
Immediate Site CommunityConcern about property value
and safety and security.No detectable perceived benefit.
External Interest GroupSupportive due to
decommissioning of dams, active on safety and security
National CommunityContributor to energy security.
Greater CommunityPositive impact on energy costs and concerns on the impact on
fisheries.
Local CommunityPositive impact on job creation,
and tax revenue.Transit community concerns.
Waterway CommunityRising concern about the
impacts on fisheries and related jobs; property value; safety and
security during transit.
Pacific Northwest Projects
Immediate Site Community
Greater Community (State)
Waterway Community
National Community (Federal)
Local Community (City)
External Interest Group
Immediate Site CommunityImmediate Site Community
Greater Community (State) Greater Community (State)
Waterway CommunityWaterway Community
National Community (Federal)National Community (Federal)
Local Community (City)Local Community (City)
External Interest GroupExternal Interest Group
1 – Perceived Benefit3 – Indifferent5 – Perceived Cost
1
2
3
4
5Safety/Security
Wetlands
Fisheries
Energy Costs
Roads
Taxes
Employment
Air Emissions
Property Value
Other/Intangibles
©CEE-UT, 34
Pacific Northwest Projects
• Small storage and regasification facilities
• Serve local markets in areas where electricity will need to be generated thermally due to dam decommissioning
• Excess volumes could eventually target other markets (via pipeline or wire)
©CEE-UT, 35
Gulf Coast Projects
Immediate Site Community
Greater Community (State)
Waterway Community
National Community (Federal)
Local Community (City)
External Interest Group
Immediate Site CommunityImmediate Site Community
Greater Community (State) Greater Community (State)
Waterway CommunityWaterway Community
National Community (Federal)National Community (Federal)
Local Community (City)Local Community (City)
External Interest GroupExternal Interest Group
1 – Perceived Benefit3 – Indifferent5 – Perceived Cost
1
2
3
4
5Safety/Security
Wetlands
Fisheries
Energy Costs
Roads
Taxes
Employment
Air Emissions
Property Value
Other/Intangibles
©CEE-UT, 36
Central/Western Gulf Coast Projects
• Large regasification facilities with associated storage (LNG or underground natural gas) near existing pipeline takeaway infrastructure
• Preference for onshore projects to achieve economies of scale; potential overbuilding in the region
• Possible constraint associated with limits to tolerance for further, intense coastal industrial development
©CEE-UT, 37
Florida Projects
Immediate Site Community
Greater Community (State)
Waterway Community
National Community (Federal)
Local Community (City)
External Interest Group
Immediate Site CommunityImmediate Site Community
Greater Community (State) Greater Community (State)
Waterway CommunityWaterway Community
National Community (Federal)National Community (Federal)
Local Community (City)Local Community (City)
External Interest GroupExternal Interest Group
1 – Perceived Benefit3 – Indifferent5 – Perceived Cost
1
2
3
4
5Safety/Security
Wetlands
Fisheries
Energy Costs
Roads
Taxes
Employment
Air Emissions
Property Value
Other/Intangibles
©CEE-UT, 38
Florida Projects
• Offshore projects face environmental challenges due to pipeline construction
• Novel construction techniques, if economically viable, may help with mitigation
• Onshore projects near busy and congested ports could be supported as State shifts toward natural gas
• Extension to greater Southeast as mid-term coal projects are displaced by natural gas
©CEE-UT, 39
California Projects
Immediate Site Community
Greater Community (State)
Waterway Community
National Community (Federal)
Local Community (City)
External Interest Group
Immediate Site CommunityImmediate Site Community
Greater Community (State) Greater Community (State)
Waterway CommunityWaterway Community
National Community (Federal)National Community (Federal)
Local Community (City)Local Community (City)
External Interest GroupExternal Interest Group
1 – Perceived Benefit3 – Indifferent5 – Perceived Cost
1
2
3
4
5Safety/Security
Wetlands
Fisheries
Energy Costs
Roads
Taxes
Employment
Air Emissions
Property Value
Other/Intangibles
©CEE-UT, 40
Hypothesis Tests
• Refer to separate handout
©CEE-UT, 41
Targeted Benefits Offered• Offer to receive option to purchase natural gas at market
rates• Regional promotion of “energy hub” and basic industries
associated with LNG project• Commitment to invest in social development plan with local
stakeholder groups• Commitment to invest in social development plan with local
stakeholder groups• Financial aid and sponsorship (restoration and maintenance)
to local lighthouse listed on National Register of Historic Places
• Closing bonus to local government at groundbreaking• Direct discount to local community• Reductions in energy costs to local/state/regional economies
©CEE-UT, 42
Cost-to-Benefit Conversion• Commitment to use US crews on LNG ships• Grants to offset fisheries impacts and for regional marine
studies• Availability of natural gas to displace other fossil fuels and
associated air emissions• Natural gas combustion to revaporize LNG avoiding ORV• Use air vaporizers to reduce both air emissions and avoid
seawater associated impacts• Build LNG terminals at existing industrial facilities where
waste heat can be used for revaporization• Use tunnels or other conduits for offtake natural gas
pipelines to avoid impacts• Natural gas for power generation to displace dams• Net wetlands additions including donations for preserves• Residential property compensation and replacement
©CEE-UT, 43
Going Forward: Discussion
• Application to other large energy infrastructure projects
• NEPA and the regulatory process– Canada project comparisons
• Perceptions of risk and risk communication
• Public/constituent views on energy, energy supply, energy infrastructure
©CEE-UT, 44
US LNG Cargo
Receipts
0
20,000
40,000
60,000
80,000
100,000
120,000M
Mcf
Sources: U.S. EIA, World Gas Intelligence
Gas Prices for Major US and European Hubs,Winter 2005- Winter 2007
0
5
10
15
20
25
30
35
Nov-0
5
Dec-0
5
Jan-
06
Feb-0
6
Mar
-06
Apr-0
6
May
-06
Jun-
06
Jul-0
6
Aug-0
6
Sep-0
6
Oct-06
Nov-0
6
Dec-0
6
Jan-
07
Feb-0
7
$/M
MB
tu
Henry Hub AECO NBP Zeebrugge Dutch TTF
©CEE-UT, 45
©CEE-UT, 46
For More Information:
www.beg.utexas.edu/energyecon/lng
Houston forum: March 27, 2008