The opening of a liquefied natural gas (LNG) export terminal in southern Maryland normally wouldn’t draw much attention. But in the minds of politicians, Dominion Energy’s Cove Point LNG facility has one huge advantage that outweighs any potential problems: It was built on time and within budget.
The Cove Point facility, built in three years at an estimated cost of $3.8 billion, is expected to begin operating this month. There is nothing more important for the future of energy development in the United States than the issue of whether, in the wake of price overruns for nuclear power plants and other energy facilities not seen since the 1970s, our industries can stick to their word. The Cove Point project, a joint venture of the IHI E&C International Corp. and Kiewit Corp., has shown it can be done.
It sends a strong signal to our allies and trading partners that the United States is committed to its role as a global energy leader. Cove Point will be the second U.S. export terminal for LNG produced from shale gas. Cheniere Energy’s Sabine Pass LNG terminal in Louisiana opened last year as the country's first such facility.
Several other LNG facilities in the U.S. are under construction, and another dozen have proposals pending before energy regulators. But if the U.S. expects to compete in the global LNG market, Congress should pass legislation to create a more certain regulatory process for processing and issuing LNG export permits. A bill to speed up LNG licensing is now under consideration in the House.
There are arguably few energy issues that are more important today than U.S. exports of LNG, a low-carbon fuel, to countries concerned about energy security and global warming. Natural gas has half the carbon content of coal per unit of energy output. America has a bonanza of natural gas, with new discoveries taking place almost daily. Those who are concerned the U.S. might run out of natural gas in the years ahead ignore estimates made by government and industry experts that this country has enough shale gas to meet domestic needs as well as export opportunities through the rest of this century and beyond.
Once the Cove Point LNG terminal opens, natural gas will be supplied by pipeline from the Marcellus Shale in Pennsylvania and the Utica Shale in Ohio, two of the most prolific sources of natural gas in the U.S. The Marcellus Shale is expected to produce more than 20 billion cubic feet of natural gas this month and the Utica Shale’s output will exceed 5.5 billion cubic feet, both setting all-time monthly production records. The growth in natural gas production in those two adjoining shale fields account for more than two-thirds of the growth in US shale-gas production since 2013, which has lowered energy costs, boosted manufacturing output and provided some important environmental benefits as well. For a drilling and extraction technology whose prospects have been written off so many times, fracking is doing surprisingly well.
Thanks to America’s abundance of shale gas, Cove Point will be able to process 750 million cubic feet of natural gas daily, supplying cargoes destined for Japan and India under 20-year contracts. As additional LNG terminals open, China and other countries could become major consumers of American LNG, as long as regulatory problems don’t impede production.
We must, and we can, adopt more sensible energy policies that would enable the U.S. to compete more effectively internationally against other LNG-exporting countries for contracts around the world. Increased production of shale gas for export purposes would help to grow our economy, create more jobs and reduce global CO2 emissions.
The opening of the Cove Point terminal to export LNG around the world is another important energy milestone that further establishes America as a global energy superpower. Thanks to the shale revolution, the U.S. has moved from generations of concern about energy scarcity and growing dependence on imports to a new era of energy abundance and expanding LNG exports. It’s more critical than ever that our energy policies support America’s emerging role as a global energy powerhouse.
Mark J. Perry (@Mark_J_Perry) is a contributor to the Washington Examiner's Beltway Confidential blog. He is a scholar at the American Enterprise Institute and a professor of economics and finance at the University of Michigan's Flint campus.
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