Jackson County

Where are talks of an $8B investment in a Jackson County LNG plant?

One of the two liquefied natural gas storage tanks dwarfs guests at the Gulf LNG Energy ribbon-cutting ceremony in 2011 in Pascagoula. Gulf LNG has been waiting for federal permits to convert the plant from import to export.
One of the two liquefied natural gas storage tanks dwarfs guests at the Gulf LNG Energy ribbon-cutting ceremony in 2011 in Pascagoula. Gulf LNG has been waiting for federal permits to convert the plant from import to export. amccoy@sunherald.com File

Where is Gulf LNG — the two huge storage tanks and terminal that dominate the horizon southeast of Pascagoula — with its plans for an $8 billion revamp?

The plant was built for $1.1 billion six years ago to import super-chilled natural gas, store it, warm it from its liquid state back to a gas and distribute it around the nation.

However, it has done no importing since the two christening shipments in 2011. Why? U.S. natural gas production jumped and exporting became the thing to do.

I don’t know how strongly to express this: No investment decisions have been made by Kinder Morgan.

George Freeland, Jackson County Economic Development director

So Gulf LNG, which is 50 percent owned by Kinder Morgan of Texas, sought federal permission four years ago to export to the lucrative Asian markets. It is the cost of building this export capability that’s estimated at $8 billion, an investment Jackson County has touted as the biggest potential economic-development project in the state.

Excitement about the $8 billion has died down in Jackson County, however.

It rated a mention in the Board of Supervisors’ State of the County address in January, but there was no progress report.

“It still could be the big new industry for the county,” Jackson County Economic Development Director George Freeland told the Sun Herald last week. “But I don’t know how strongly to express this: They are still a long way from a final investment decision. Kinder Morgan has not made a final decision to construct.”

Gulf LNG filed for broader export consideration with the Department of Energy in 2012 to allow it to export to non-Free Trade Agreement countries. It has filed for a permit with the Federal Energy Regulatory Commission for the conversion. It is the oldest application still awaiting approval, according to FERC, and not very far along in the process.

Freeland describes the project as preliminary, “still very much in the development phase,” and there is at least one LNG in the Gulf region that is already approved, nearly through its conversion and only a year or two away from exporting.

About Pascagoula’s Gulf LNG, he said, “Right now, the business model has not been well defined and it lacks front-end engineering. It’s important that we manage expectations.”

Still a player

Richard N. Wheatley, director of corporate communication with Kinder Morgan, however, pointed out the terminal is still very much in the federal permitting process.

A filing with FERC in January followed four others the company made last year in response to data requests from FERC as the company moves toward developing an Environmental Impact Statement, a basic part of the process.

It also filed with the Pipeline and Hazardous Materials Safety Administration and the Mississippi Department of Environmental Quality in 2016.

It is also “engaged in commercial discussions with potential customers” to export to, Wheatley said.

Meanwhile, he pointed out, Gulf LNG is staffed to maintain the current terminal in a state of operational readiness and comply with all regulations.

It is sustained as an import terminal by two customers, one from Angola and one from Italy, that have 20-year contracts. They pay whether they send product or not. Gulf LNG, in turn, pays the Port of Pascagoula $1 million a year in rent, half of which goes to the state Tidelands fund.

The plant employs almost 50, including contract security staff, and has shifts around the clock. State officials have touted it as a major part of Mississippi’s economic future, and it is considered an example of the state’s open-mindedness toward this type of industry.

U.S. Sen. Roger Wicker, R-Miss., said it helped the state earn a ranking in 2011 as a “top place for oil and gas investment.”

Paying taxes for 8 years

Even without adding export capability, Gulf LNG is a big industrial contributor to the county.

Building it took three years and created hundreds of jobs. It received a 10-year tax exemption, but pays hefty county and school taxes — $6.76 million in 2016.

The fact that it is not bringing in tankers put a damper on port expectations. The port originally projected $3 million to $4 million a year in rent and cargo fees. But it has since dropped such projections from the budget. However, just the two christening tankers the LNG served in June 2011 boosted the port’s third-quarter cargo tonnage that year by 27 percent over 2010.

County Tax Assessor Nick Elmore placed the current value of the plant at $662.4 million.

“The value does change,” he said, “especially with non-use. It loses about 3.5 percent per year on average.”

Obligations go both ways. The port must keep the tanker berth dredged to the proper depth.

But if it did

The conversion to exporting would involve billions of dollars in facilities to bring in, chill and store natural gas.

It would be able to send out 11.5 million tons of liquefied natural gas per year, loaded onto vessels via the terminal’s marine jetty, all while retaining its ability to receive and store shipments as well.

The expenditure would be unrivaled in the state, Freeland said. The company would spend $5 billion on the first phase and $3 billion for a second phase.

Tankers coming and going would generate in the range of $4 million a year for the port, in addition to employing tug boats, pilots and other maritime services.

There would be construction jobs by the hundreds. The tax base would multiply.

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