Challenges for LNG Expansion
The projections listed in Figures 1 and 2 above show a dramatic increase in LNG capacity, especially between 2008 and 2010. However, the proposed LNG projects will face a variety of legal, economic, and engineering challenges prior to and during construction. These challenges could potentially delay the startup date for some projects, and may lead to cancellation of others.

Legal and Jurisdiction Issues

Some LNG projects are being challenged despite FERC approval. For example, the proposed Weaver’s Cove LNG project in Fall River, Massachusetts was approved by the FERC in June 2005, over vigorous objection by many State and Local officials and by citizens’ groups. Opponents claimed that the densely-populated Fall River area is not safe for an LNG terminal, and that the project could disrupt tourism and sea life. Opponents have plans to petition the FERC for a re-evaluation of the project, and may eventually file lawsuits with the U.S. Court of Appeals to challenge FERC’s authority in this matter. [3, 4]

In addition, the California Public Utilities Commission (CPUC) is challenging FERC’s jurisdiction over approving on-shore LNG projects. CPUC’s case regarding Sound Energy Solutions Long Beach project is currently pending in the U.S. Court of Appeals. Contention over such projects is challenging the very basis for federal approval of LNG projects, which could impact the approval of LNG projects across the country. [5, 6]

Engineering and Environmental Issues

Some projects are facing opposition or cost overruns due to engineering and environmental issues. For example, ExxonMobil recently withdrew the Maritime Administration (MARAD) application for their proposed Pearl Crossing deepwater LNG port (originally number 37 on the project list in Appendix B). This facility was planned with baseload capacity of 2.8 bcfd, and was among the larger LNG facilities originally planned. Like many offshore LNG ports, Pearl Crossing was designed to use sea water to regasify LNG in an open loop process. However, a coalition of environmental groups, sport-fishing groups, and commercial fishing industry groups claimed that the open-loop water intake would kill large quantities of fish eggs and sea life. Public pressure from these groups likely contributed to ExxonMobil’s decision to withdraw their MARAD application on October 19, 2005. [7, 8]

Supply-Side Bottlenecks

Once the feasible projects are ultimately built, their average sendout will likely be much less than 100% of capacity. For one thing, LNG terminals are batch processes, and can only deliver gas as ships are unloaded, or out of on-site storage from previous shipments. Thus, the ultimate sendout from each terminal is dependent on how many (and how often) LNG tankers can be docked. In this respect, the number of tankers available at any given time is a key variable. In addition, the proposed terminals will tie-in to existing pipeline networks. Some observers point to additional bottlenecks in the existing U.S. pipeline system which could further limit the average sendout of these terminals [9]. For reference, the existing U.S. LNG terminals imported about 652 BCF in 2004, averaging about 1.78 BCF/day. The nominal capacity for these terminals is about 4.22 BCF/day, for an average usage factor of 42% of capacity.

International Competition for Available Supplies

Even though LNG has played a minor role in North American energy markets, the global LNG market is mature. Significant quantities of LNG have been shipped for about forty years, with most of the LNG shipped to Asia, and almost half of current global supply being shipped to Japan [10]. See Figure 3 below showing 2004 LNG imports by region [11].