Monday, March 13, 2006

Sound Future?

Opposition to the proposed local LNG terminal has taken an interesting turn, as described in Sunday's New York Times. Previously, a variety of groups had argued against the Broadwater project primarily on the grounds of its environmental impact on Long Island Sound. Now, several of the organizations fighting Broadwater have commissioned a market study from a regulatory and litigation-support consultancy, Synapse Energy Economics of Cambridge, MA. The report suggests that the Greater New York City market (including Connecticut) can be served at least as well by Canadian LNG terminals, and that Broadwater's demand estimates are exaggerated. My detailed comments on the Synapse report appeared on Sphere, a blog devoted to issues affecting the Sound. Rather than rehashing what I said there, I'll step out on a limb with a prediction.

I usually prefer to weigh all risks and consider multiple scenarios, but this situation is beginning to look predictable. Opponents have lined up the Senators of the two (blue) states affected, at a moment when Republicans who might be more inclined to see it built seem in disarray. They have astutely put forward an apparently credible study that shifts the argument away from issues that could be labeled as NIMBY, and focuses on supply and demand projections that can only be validated after the years in question have passed. Broadwater was fighting an uphill battle from the start, and they may struggle on, but I will be greatly surprised if this project is actually built.

Unfortunately, the only two reliable data points I have, my monthly gas bill and my monthly electricity bill, tell me that this area desperately needs its own supply of gas from international sources, to bring its disproportionate energy costs back into line with the rest of the country. Although Broadwater might not be exactly the right project and couldn't help for at least 3 years, I take scant comfort in the alternatives proposed by Synapse, including large-scale efficiency projects and power plant re-powering.

I also wonder if either side has sufficiently accounted for the likely consequences of years of sustained high gas and electricity prices in the area. Synapse's projections could eventually appear to have been validated--and Broadwater's proved wrong--not because the former was more thorough, but because the uncertainties about gas supply without Broadwater will limit the growth of the regional economy and create a self-fulfilling prophesy. At the same time, inertia and the flip side of the same uncertainties will probably suppress the alternatives suggested by Synapse. The region will thus end up even more reliant on gas imports from Canada and the US Gulf Coast, without any recourse other than austerity.

Paradoxically, if Broadwater were built and turned out to be as unnecessary as its opponents now argue, it could be very beneficial for the region, while its a impact on Long Island Sound would be much less than feared. Residents and businesses would benefit from Broadwater's ability to deflate price spikes with a few well-timed cargoes, but its overall under-utilization would minimize its effect on the environment and shipping in the Sound. That might not be very good for Broadwater's parent companies, but that's their risk to worry about. The bottom line is that opponents can't have it both ways: either the terminal will be fully employed and bring dozens of LNG cargoes a year into the Sound--with whatever environmental consequences that entails--or it will be mostly idle, and thus have little impact beyond the visual.

Although this situation may seem of interest only to readers in the Long Island Sound region, it raises much broader concerns. Any large energy project can be torpedoed by arguing that we could do all sorts of things to reduce demand, instead. However, unless there is an organized, sustained and well-funded effort to bring that about, demand will merely fluctuate in line with price, and consumers will continue struggling to pay energy bills and industries will move offshore, because our energy supplies failed to keep pace with demand.

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