Bureau of Economic Geology, The University of Texas at Austin
Defining Community and Economic Benefits
Associated with Energy Infrastructure
Projects: LNG Case Study
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, 2
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, 3
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, 4
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, 5
Natural Gas Industry Performance
100%
80%
Residential Price
60%
40%
Commercial Price
20%
Industrial Price
4Q
07
3Q
07
2Q
07
1Q
07
4Q
06
3Q
06
2Q
06
1Q
06
4Q
05
3Q
05
-20%
2Q
05
1Q
05
0%
Electric Power Price
-40%
-60%
©CEE-UT, 6
Natural Gas Industry Performance
100%
80%
Residential Price
60%
Commercial Price
40%
Industrial Price
20%
-40%
4Q
07
3Q
07
2Q
07
1Q
07
4Q
06
3Q
06
2Q
06
1Q
06
4Q
05
3Q
05
-20%
2Q
05
1Q
05
0%
Electric Power Price
Dry Production
-60%
©CEE-UT, 7
Natural Gas Industry Performance
100%
Residential Price
80%
60%
Commercial Price
40%
Industrial Price
20%
Electric Power Price
-40%
4Q
07
3Q
07
2Q
07
1Q
07
4Q
06
3Q
06
2Q
06
1Q
06
4Q
05
3Q
05
-20%
2Q
05
1Q
05
0%
Dry Production
Pipeline Imports
-60%
©CEE-UT, 8
Natural Gas Industry Performance
100%
Residential Price
80%
Commercial Price
60%
Industrial Price
40%
Electric Power Price
20%
Dry Production
-40%
4Q
07
3Q
07
2Q
07
1Q
07
4Q
06
3Q
06
2Q
06
1Q
06
4Q
05
3Q
05
-20%
Pipeline Imports
2Q
05
1Q
05
0%
LNG Imports
Total Natural Gas in
Storage
-60%
©CEE-UT, 9
Natural Gas Industry Performance
100%
Residential Price
80%
Commercial Price
60%
Industrial Price
40%
Electric Power Price
Dry Production
20%
Pipeline Imports
-40%
4Q
07
3Q
07
2Q
07
1Q
07
4Q
06
3Q
06
2Q
06
1Q
06
4Q
05
3Q
05
-20%
2Q
05
1Q
05
0%
LNG Imports
Total Natural Gas in
Storage
Total Consumption
-60%
©CEE-UT, 10
LNG Case Study Outline
•
•
•
•
•
•
Objectives
Outcomes
Conclusions
Approach
Findings and implications for new projects
Path forward
©CEE-UT, 11
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, 12
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, 13
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, 14
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, 15
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, 16
Issue Dimensions
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
Imm
C
Safety/Security
Wetlands
Fisheries
Energy Costs
Roads
Taxes
Employment
Air Emissions
Property Value
©CEE-UT, 17
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, 18
Immediate Site-Host
Community
Immediate Site
Community
• Usually adjacent to the
site and a sub group of
the local or greater
communities
• Key concerns: emissions,
safety, displacement
©CEE-UT, 19
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
Waterway Community
©CEE-UT, 20
Local Community
(City/County)
Local Community
• 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, 21
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
Greater Community
©CEE-UT, 22
Immediate Site
Community
Waterway Community
Greater Community
Local Community
©CEE-UT, 23
Immediate Site
Community
Local Community
Waterway Community
Greater Community
©CEE-UT, 24
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, 26
Licensed Projects
Safety/Security
5
Other/Intangibles
Wetlands
4
3
Property Value
2
Fisheries
1
Air Emissions
1 – Perceived Benefit
3 – Indifferent
5 – Perceived Cost
Immediate Site Community
Waterway Community
Local Community (City)
Greater Community (State)
National Community (Federal)
External Interest Group
Energy Costs
Employment
Taxes
Immediate
External
Waterway
National
Greater
Local
Site
Interest
Community
Group
Considerable
Concern
Contributor
Active
Concern
with
about
positive
toregard
about
energy
the impacts
the
impact
tosecurity
coastal
losson
of
environmental
energy
property
jobfisheries
creation
Source
costs
value
issues,
and
and
ofand
fuel
employment
related
tax
safety
ofrevenue
choice
jobs;
and
Roads Concerns
Minor
property
on perceived
impacts
value;on
safety
benefit
fisheries
security.
security
and
on
No detectable perceived
energy
security
benefit.
costs
Minor
Concerns
perceived
about benefit
increased
on
congestion
energy costs
during
and construction
tax revenue
©CEE-UT, 27
Non-Licensed Projects
Safety/Security
5
Other/Intangibles
4
Wetlands
3
Property Value
2
Fisheries
1
Air Emissions
1 – Perceived Benefit
3 – Indifferent
5 – Perceived Cost
Immediate Site Community
Waterway Community
Local Community (City)
Greater Community (State)
National Community (Federal)
External Interest Group
Energy Costs
Employment
Taxes
Immediate
External
Waterway
National
Greater
Local
Site
Interest
Community
Group
Rising
Considerable
Positive
Concern
Contributor
concern
More
impact
about
active
positive
about
to the
on
energy
with
job
loss
the
impact
regard
creation,
impacts
security
of jobs,
on
to
tax
property
coastal
onenergy
revenue
fisheries
Source
environmental
value
costs
and
and
ofand
fuel
air
and
related
safety
emissions
of
minor
issues,
choice
jobs;
and
on
Roads
Rising
Minor
property
environmental
perceived
safety
value;
and
employment
safety
benefit
security.
security
impact
and
on
No
concerns
Rising
detectable
concerns
security
on perceived
coastal
on
during
energy
impacts
areas
benefit.
transit;
costs
and
on
Diminishing
fisheries,
Concerns
wetlands
perceived
about
marine
and
safety
benefits
habitat
loss
and
of
security
propertyand
value.
property
Safetyvalue
and
security concerns are present.
©CEE-UT, 28
Onshore vs
Offshore
Safety/Security
5
Other/Intangibles
4
Wetlands
3
Property Value
Fisheries
2
1
Air Emissions
Energy Costs
Other/Intangibles
Employment
Safety/Security
5
4
Wetlands
3
Roads
Property Value
Fisheries
2
Taxes
1
1 – Perceived Benefit
3 – Indifferent
5 – Perceived Cost
Immediate Site Community
Waterway Community
Local Community (City)
Greater Community (State)
National Community (Federal)
External Interest Group
Air Emissions
Energy Costs
Employment
Roads
Taxes
©CEE-UT, 29
Northeast Projects
Safety/Security
5
Other/Intangibles
4
Wetlands
3
Property Value
Fisheries
2
1
Air Emissions
1 – Perceived Benefit
3 – Indifferent
5 – Perceived Cost
Immediate Site Community
Waterway Community
Local Community (City)
Greater Community (State)
National Community (Federal)
External Interest Group
Energy Costs
Employment
Roads
Taxes
Immediate
External
Waterway
National
Greater
Local
Site
Interest
Community
Group
Recognition
Positive
Concern
Contributor
Active
Concern
impact
with
about
of to
impact
regard
about
energy
on
thejob
impacts
safety
on
tocreation
security
coastal
energy
and
on
security
environmental
costsfisheries
and
Source
andneed
impact
issues,
and
offor
fuel
tax
related
on
natural
of
but
fisheries.
revenue.
choice.
highly
jobs;
gas.
mobilized
No
property
Rising
Clear
detectable
Concerns
recognition
concerns
value;
on safety
perceived
about
tanker
onand
ofimpacts
benefit
traffic
security.
benefit.
and
on
energy
fisheries,
costs
safety
related
and
marine
and
fueljobs
security
habitat.
choice.
and
propertyConcerns
value.
No perceived
Concerns
aboutbenefits.
coastal
at the
regional
environment
and state
and level
safety
about
and
security
safetyand
androad
security
congestion
issues.
©CEE-UT, 30
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, 31
Pacific Northwest Projects
Safety/Security
5
Other/Intangibles
4
Wetlands
3
Property Value
2
Fisheries
1
Air Emissions
1 – Perceived Benefit
3 – Indifferent
5 – Perceived Cost
Immediate Site Community
Waterway Community
Local Community (City)
Greater Community (State)
National Community (Federal)
External Interest Group
Energy Costs
Immediate
External
Waterway
National
Greater
Local
Site
Interest
Community
Group
Rising
Positive
Positive
Contributor
Concern
concern
impact
impact
about
to
about
Supportive
on
energy
on
property
energy
job
thecreation,
security.
impacts
due
value
costs
to
decommissioning
and
onconcerns
fisheries
and safety
and
onofthe
dams,
and
tax
related
impact
revenue.
security.
active
jobs;
on
Roads No detectable
Transit
property
on
community
safety
perceived
value;
and
safety
concerns.
fisheries.
security
benefit.
and
security during transit.
Employment
Taxes
©CEE-UT, 32
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, 33
Gulf Coast Projects
Safety/Security
5
Other/Intangibles
4
Wetlands
3
Property Value
Fisheries
2
1
Air Emissions
1 – Perceived Benefit
3 – Indifferent
5 – Perceived Cost
Immediate Site Community
Waterway Community
Local Community (City)
Greater Community (State)
National Community (Federal)
External Interest Group
Energy Costs
Employment
Roads
Taxes
©CEE-UT, 34
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, 35
Florida Projects
Safety/Security
5
Other/Intangibles
4
Wetlands
3
Property Value
Fisheries
2
1
Air Emissions
1 – Perceived Benefit
3 – Indifferent
5 – Perceived Cost
Immediate Site Community
Waterway Community
Local Community (City)
Greater Community (State)
National Community (Federal)
External Interest Group
Energy Costs
Employment
Roads
Taxes
©CEE-UT, 36
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, 37
California Projects
Safety/Security
5
Other/Intangibles
4
Wetlands
3
Property Value
Fisheries
2
1
Air Emissions
1 – Perceived Benefit
3 – Indifferent
5 – Perceived Cost
Immediate Site Community
Waterway Community
Local Community (City)
Greater Community (State)
National Community (Federal)
External Interest Group
Energy Costs
Employment
Roads
Taxes
©CEE-UT, 38
Hypothesis Tests
• Refer to separate handout
©CEE-UT, 39
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, 40
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, 41
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, 42
35
Gas Prices for Major US and European Hubs,
Winter 2005- Winter 2007
30
US LNG
Cargo
Receipts
$/MMBtu
25
20
15
10
5
NBP
Zeebrugge
100,000
07
Fe
b-
-0
7
Ja
n
ec
-0
6
N
D
ov
-0
6
-0
6
ct
O
Se
p
-0
6
120,000
Dutch TTF
80,000
60,000
40,000
20,000
Fe
b06
A
pr
-0
6
Ju
n06
A
ug
-0
6
O
ct
-0
6
D
ec
-0
6
Fe
b07
A
pr
-0
7
Ju
n07
A
ug
-0
7
O
ct
-0
7
ec
-0
5
D
ct
-0
5
0
O
MMcf
AECO
Ju
l-0
6
Au
g06
-0
6
06
Ju
n
-0
6
ay
M
6
Henry Hub
Ap
r
06
ar
-0
M
-0
6
Fe
b-
Ja
n
ec
-0
5
D
N
ov
-0
5
0
Sources: U.S. EIA, World Gas Intelligence
©CEE-UT, 43
©CEE-UT, 44
For More Information:
www.beg.utexas.edu/energyecon/lng
Houston forum: March 27, 2008
©CEE-UT, 45