LNG developers in the Northeast meet resistance

It's an unlikely spot to provoke an international dispute: a scraggly, unpaved lot on the Pleasant Point Indian Reservation with a striking view of Passamaquoddy Bay and the forested Canadian islands on the far shore. But that's just what has happened here as US energy developers clash with Canada's efforts to protect tourism, fisheries, and wildlife on the bay.

A few years from now, this could be the site of a sprawling industrial facility where liquefied natural gas (LNG) is unloaded from tankers, reheated into gaseous form, and pumped via pipeline to Boston, 325 miles to the southwest. Two more terminals have been proposed further up the bay, one of the last places in the Northeast where undeveloped rural land abuts protected, deep-water anchorages.

One proposed facility has stirred up a hornet's nest in St. Andrews, New Brunswick, a genteel resort across the mile-wide bay from where the tankers would tie up. The Canadian government, which controls the deep-water passage into the bay, has said it won't allow the LNG tankers through at all, citing environmental and safety concerns. The US maintains it has undisputed right of passage to its ports, and the conflict could wind up in international court.

"This is one of the last natural areas in our country," says Linda Godfrey of Save Passamaquoddy Bay, an umbrella group for LNG opponents on both sides of the border. "It is just totally incompatible with industrialization."

The dispute highlights a challenge for LNG developers seeking to fulfill US energy needs: finding places to build safe facilities without meeting resistance from local – and sometimes not-so-local – groups.

"You start looking up the coast and the first place that meets all the criteria is Passamaquoddy Bay," says Brian Smith of Quoddy LNG, the firm that wants to build a terminal here. "You want to be as close as you can to the big markets but in an area remote enough to make it an unattractive target" for terrorists.

But even here, in an impoverished region with an industrial heritage and high unemployment, developers are meeting stiff resistance to land-based LNG terminals, raising questions about whether they can be sited in the Northeast at all.

Fueling the nation

Nationally, the need is clear: US demand for natural gas is expected to grow by 40 percent by 2025, while North American supplies dwindle. Experts say there's lots of gas elsewhere in the world that can be chilled into liquid form and shipped to the US on special tankers.

But the US has only five LNG terminals – in Massachusetts, Maryland, Georgia, Louisiana, and the Gulf of Mexico. The National Petroleum Council, a federal advisory body, says the US needs to expand three of these and build six to eight more to meet future demand.

In response, more than 50 terminals have been proposed to serve the US, including two in the Bahamas, three in Mexico, three in Canada, and 10 offshore terminals in the US. All told, five facilities are under construction and 24 more have received approval, leading some analysts wondering how many more will really get built.

"Developers are racing to get to the market first and hoping the others will fall by the wayside," says Susan Reid of the Conservation Law Foundation, an environmental advocacy group in Boston.

But the Northeast has proven particularly thorny for LNG developers. While the region's gas supply is tight, its coastal population is relatively dense, environmentally aware, and politically astute. A proposed terminal in Fall River, Mass., is opposed by state officials, who passed a law restricting the passage of tankers under state bridges, including one en route to the proposed site. Local opposition nixed an LNG plan for the islands of Boston Harbor and pushed other developers further Down East, into ever remoter, poorer, and emptier parts of Maine: first Harpswell, Searsport, and Gouldsboro, now Perry, Robbinston, and Calais on the country's easternmost fringe.

The 'path of least resistance'

"The process has become like water: It's trying to seek the path of least resistance on its way to the bottom," says George Finch, city manager of Eastport, Maine, which borders the Pleasant Point site.

Developers targeting easternmost Maine – one of New England's poorest areas – received support from the Passamaquoddy tribal government (which would host the Pleasant Point terminal) and the voters of Robbinston (who voted 227-to-83 in support of siting a terminal there).

"We found the most supportive communities in this part of Maine," says Dean Girdis, president of Downeast LNG, the company behind the Robbinston proposal.

But even here, proposals have met resistance. Lobstermen, scallop fishermen, and salmon farmers all fear that the security zones around LNG tankers will displace them. Authorities in Eastport are concerned about disruptions at their port or on Route 190, the only road to and from their island city, which runs through the Quoddy LNG site.

"We're told that there really isn't anything that can go wrong," says Mr. Finch. "If that's the case, why isn't it being built in Portland or Boston where the customers ... are?"

Critics question whether any of the local terminals are needed, given that a LNG terminal is already under construction in Saint John, New Brunswick, to serve the New England market. Two proposed offshore terminals near Gloucester, Mass., have been permitted, and one is expected to deliver gas within the year.

But building excess capacity helps respond to unexpected demand, says Mariano Gurfinkel of the Center for Energy Economics at the University of Texas, Austin. "Terminals can cost upwards of $500 million. I doubt that their proponents are going to do this if they don't think they would make money."