An insider speaks out
Matthew Simmons is both the ultimate insider and a challenging iconoclast. An investment banker to the energy industry, Simmons has become renowned as an analyst of the international energy business and, depending on perspective, has simultaneously been regarded as a bear or a bull.
An advisor to the Bush campaign from the early days of the 2000 race, Simmons has had a significant influence on the administration's approach to energy policy.
A hardened skeptic in regard to worldwide energy supply, Simmons has argued for greater transparency in the industry, and most recently caused rumbles in the energy markets and provoked the ire of the Saudi Oil Ministry by questioning its reserve estimates.
A longtime summer resident of the Midcoast, Simmons has watched the liquefied natural gas debate develop in Maine. As an experienced player in the natural gas field over the last 30 years, he has some definite opinions on the subject. He isn't by any means a general opponent of LNG, but he is in regard to the Maine he knows and loves.
Simmons, who regards natural gas as the world's single best source of energy, classifies the U.S. natural gas supply as in "serious shape" with declining production throughout the country.
"It's not at all clear that we're going to basically be even able to stabilize our gas supply," he says, "let alone grow it. It might be basically in just permanent decline, from all the areas we're now in."
In the meantime, with an economy hugely dependent on natural gas - with more than half of all buildings in the country using natural gas for heat, with the overwhelming majority of new electric generation coming from gas-fired plants, and with industry looking to gas for a greater percentage of its fuel - something has to be done to increase supply.
"Most people," Simmons says, "assume the something ought to be LNG, because there's hopefully a lot of gas around the world, and we know LNG can work as a technology, etc., etc. I happen to believe, with some degree of passion, that LNG isn't basically a terrible thing to do, but it also is a complicated thing to do, if you have any other choices."
The aggressive proponent of natural gas is not entirely at ease with it in its liquefied form, particularly in Penobscot Bay.
As debates in Harpswell and Searsport heated up this spring, Simmons was reflecting on a recent trip to Qatar, one of the world's principal LNG exporters, and the implications of his experience there.
"I saw, for the first time in my life," he says, "two of the large-scale LNG vessels that were there - one of the very few times that there have been two there at the same time - and these things are aircraft carriers. And I thought, 'Wow, to even think about sending one of those up to the top of Penobscot Bay.' That should be the last, last thing we should we do before we just, y'know, dismantle our economy.'"
On a tour of Qatar's LNG liquefaction facility, one of the world's most modern and sophisticated, Simmons was impressed with the stringent safety procedures and redundancies built into the system.
Complimenting the plant superintendent, Simmons was taken aback by his frank reply. "He said, 'Well, you know, we understand what's at stake; one small human error and there is no Qatar Gas, and there's probably no Qatar.' He wasn't being facetious."
In the wake of the January explosion at an Algerian LNG liquefaction facility, where 27 were killed and 56 wounded, safety has become a chief argument against LNG importation.
The Algerian facility's technology was antiquated, LNG has been transported for decades without incident, and a similar accident in the U.S. is highly unlikely, but Simmons asserts there is always the possibility for someone to upset the equation.
"Human error could end up basically being the catastrophe on LNG. If it were really 'safe,' then they'd continue to send LNG vessels into Boston, to the Everett terminal, during the Democratic National Convention ... and they're not."
An alternative option to land-based LNG terminals has been the creation of offshore terminals, much like drilling rigs, linked to the mainland by pipelines. Significantly more expensive to manufacture than land-based facilities, they would remove the possibility of accident in a populated area.
"I say, wait a second," says Simmons, "if we can do that, why in the world don't we actually try and explore and see if we can actually find some of our own natural gas? You can't say one is good and the other is terrible."
"In my opinion," says Simmons, "one of the possible solutions to this whole problem is basically to come back, as a society, and readdress the rigid drilling bans on our outer continental shelf."
The 30-year ban on exploration along the Atlantic coast, in Simmons' view, is no longer realistic. "You could actually debate, if you found oil, whether we should go ahead and develop it, even though it is about a thousand times safer than sending product tankers up to Searsport."
In the decades since the bans were enacted, says Simmons, the offshore industry has developed significant safety standards and established a record of environmental responsibility. The industry has evolved, he thinks, to the point where drilling off the coast makes significantly more sense than importing LNG.
An area such as Georges Bank, with its fish stocks depleted and the grounds largely off-limits, is ripe for exploration, says Simmons, and could be of enormous economic benefit to the Northeast.
"Take a look at what it's done [in the Canadian Maritimes]. They haven't found, actually, an awful lot in the Maritimes, but it's been an enormous boon to the economy. I haven't heard anyone say, 'Oh, have you seen how ugly Newfoundland and Nova Scotia are now?' I hear a lot of people say,'Boy, that's the first kind of breath of prosperity that they've had since the shipbuilding days.'"
Whether there are reserves of oil and gas off the Eastern Seaboard is a question, however, and Simmons says studies need to be done before it can be considered a viable alternative.
Nevertheless, he says, "If you found it and you built the pipeline - the environmental risk you'd pursue in doing that is so minimal compared to about 98,000 other things we do, that we should just basically get real and [explore the OCS]. ... If LNG were the very last thing we could do, [OK], but I think if we actually found some domestic supply of oil and gas, we should produce both of them. We're talking about the long-term survival of our economy."
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