Overview and Major Themes, I

1. Defining Community and Economic Benefits Associated with Energy Infrastructure Projects: LNG Case Study

2. Overview and Major Themes, I • “Perception is reality” with regard to public acceptance of or rejection of major projects • Variations across different stakeholder groups on different issue dimensions • Certain issues dimensions are “emotive” • Wetlands, fisheries as “irreplaceable natural endowments” imbued with tradition

3. Overview and Major Themes, II • Perceptions of safety and security are complex • Tend to follow other concerns or come into play if net benefits are not perceived • Larger jurisdictions can clearly perceive energy supply benefits • Relationships to other stakeholder groups can be complex

4. Overview and Major Themes, III • “Psychology” of energy security • Complexity of commodity markets and basis differentials • Diffuse benefits (concentrated costs) • Benefits discerned relative to emissions • Both local/regional air quality and broader, GHG strategies

5. Overview and Major Themes, IV • Implications for cost-benefit analysis • Valuing intangible goods, heuristic valuations, subjective scorings, future generations • Implications for other critical infrastructure projects • Regulatory process, public intervention, public acceptance, issue domains • Considerations not discerned • Broader energy security themes

6. Natural Gas Industry Performance

7. Natural Gas Industry Performance

8. Natural Gas Industry Performance

9. Natural Gas Industry Performance

10. Natural Gas Industry Performance

11. LNG Case Study Outline • Objectives • Outcomes • Conclusions • Approach • Findings and implications for new projects • Path forward

12. Study Objectives • Increase clarity on local benefits for host communities, investors as well as larger market areas and national needs • Identify host community “costs” • Incorporate practical considerations stemming from LNG safety and perceptions of risk • Improve the knowledge base for presenting long term net benefits associated with international LNG trade well beyond the development project and for both new and existing facilities

13. Study Outcomes • A tool for identifying net benefits from LNG and other facilities • Specific goal: develop an approach flexible enough for use on other large energy infrastructure projects, US and abroad • Tool kit includes: “check list” for assessment of net benefits for use by stakeholders for both external and internal analysis and communication

14. Key Conclusions • Infrastructure siting process is dominated by actions to address stakeholder concerns and tradeoffs • Local and waterway community benefits are key for project success as these stakeholder groups face unique tradeoffs • Clear, early identification of benefits that target specific needs, concerns of stakeholders facilitate progress and dialogue • Successful infrastructure siting requires dialogue and consideration of multiple dimensions among multiple groups • No one dimension dominates stakeholder perceptions • Sharing in the benefits of an infrastructure project is paramount to project progress • A stakeholder group cannot perceive itself as a loser in the process

15. Tool Kit – Check List • Sources of and types of information • Issues of interest (issue dimensions) • Stakeholder group identification based on common interests and participation • Methods to capture, measure intensity of stakeholder postures towards proposed infrastructure project

16. Sources of Information • Data collection from sample of projects using the federal regulatory process as framework • US Federal Energy Regulatory Commission (FERC) for onshore licenses and US Maritime Administration/US Coast Guard (MARAD/USCG) for offshore licenses • Approach allows for data collection from “observable” and active stakeholders • Bias • Measuring, scoring intensities

17. Issue Dimensions Information was collected for key issue dimensions identified from the regulatory process and based on pre-study surveys and analysis, including input from direct observation and outside sources

18. Stakeholders • Stakeholders groups: • Are affected by LNG import facilities and activities in different ways • Have prescribed roles in the infrastructure siting/regulatory process • Stakeholders were disaggregated into distinct groupings based on combination of the two factors above

19. Immediate Site-Host Community • Usually adjacent to the site and a sub group of the local or greater communities • Key concerns: emissions, safety, displacement Immediate Site Community

20. Waterway Community • Usually adjacent to or near the waterway or have interests in the waterway designated for LNG tanker traffic and related marine operations • Includes offshore facilities for marine projects and coastal crossings for pipelines • Distinguished from immediate site-host community to capture waterway related issues such as: waterway traffic and security, endangered species protection and fisheries and wetlands • CZMA considerations Waterway Community

21. Can be influenced by perceptions of safety and security risk associated with potential consequences from large scale incidents More prominent issues include: surface traffic, tax revenues (related to the project or potential changes in real property values), local emergency response preparedness, access to natural gas (or perceptions that intention is to “export”) Political jurisdictions may have decision making power on site leases and local permits Local Community (City/County) Local Community

22. Greater Community • Encompasses other local stakeholders but distinct influence associated with political jurisdiction • Receives some direct and indirect revenues (tax base, industrial activity – jobs, local purchases, tax revenues) • Can be affected by changes in energy prices • Has regulatory or permit authority such as governor veto power on offshore terminal licenses and CZMA Greater Community

23. Waterway Community Immediate Site Community Greater Community Local Community

24. Waterway Community Immediate Site Community Greater Community Local Community

25. Key Results and Findings • Findings, conclusions derived from comparative analysis for sample of 20 projects • Summary hypotheses tested once data collection was complete • Project groupings • Licensed/Non-licensed • Onshore/offshore • By region: • Pacific Northwest, California, Gulf Coast, Florida Northeast

26. Licensed Projects Safety/Security 5 Other/Intangibles Wetlands 4 3 Property Value Fisheries 2 1 Air Emissions Energy Costs National Community Contributor to energy security Source of fuel of choice External Interest Group Active with regard to coastal environmental issues, safety and security. Immediate Site Community Concern about the loss of property value and safety and security No detectable perceived benefit. Waterway Community Concern about the impacts on fisheries and related jobs; property value; safety and security Minor perceived benefit on energy costs and tax revenue Greater Community Considerable positive impact on energy costs and employment Concerns on impacts on fisheries Local Community Considerable positive impact on job creation and tax revenue Minor perceived benefit on energy costs Concerns about increased congestion during construction Employment Roads Taxes

27. Non-Licensed Projects Safety/Security 5 Other/Intangibles Wetlands 4 3 Property Value Fisheries 2 1 Air Emissions Energy Costs Local Community Positive impact on job creation, tax revenue and air emissions Minor perceived benefit on energy costs Concerns about safety and security and property value Greater Community Considerable positive impact on energy costs and minor on employment Rising concerns on impacts on fisheries, wetlands and loss of property value. Safety and security concerns are present. National Community Contributor to energy security Source of fuel of choice Rising environmental impact concerns on coastal areas and marine habitat External Interest Group More active with regard to coastal environmental issues, safety and security. Waterway Community Rising concern about the impacts on fisheries and related jobs; property value; safety and security during transit; Diminishing perceived benefits Immediate Site Community Concern about the loss of jobs, property value and safety and security No detectable perceived benefit. Employment Roads Taxes

28. Onshore vs Offshore Safety/Security 5 Other/Intangibles Wetlands 4 3 Property Value Fisheries 2 1 Safety/Security 5 Air Emissions Energy Costs Other/Intangibles Wetlands 4 3 Employment Roads Property Value Fisheries 2 Taxes 1 Air Emissions Energy Costs Employment Roads Taxes

29. Northeast Projects Safety/Security 5 Other/Intangibles Wetlands 4 3 Property Value Fisheries 2 1 Air Emissions Energy Costs National Community Contributor to energy security Source of fuel of choice. Concerns about impacts on marine habitat. External Interest Group Active with regard to coastal environmental issues, but highly mobilized on safety and security. Immediate Site Community Concern about safety and security and impact on fisheries. No detectable perceived benefit. Waterway Community Concern about the impacts on fisheries and related jobs; property value; tanker traffic and safety and security No perceived benefits. Greater Community Recognition of impact on energy costs and need for natural gas. Rising concerns on impacts on fisheries, related jobs and property value. Concerns at the regional and state level about safety and security issues. Local Community Positive impact on job creation and tax revenue. Clear recognition of benefit on energy costs and fuel choice. Concerns about coastal environment and safety and security and road congestion Employment Roads Taxes

30. Northeast Projects • Offshore projects that use considerable already existing local distributed storage • A permanent FSRU could face opposition unless remote but a seasonal FSRU for continuous supply during peak seasons will likely not • Use of inland waterways can become problematic

31. Pacific Northwest Projects Safety/Security 5 Other/Intangibles Wetlands 4 3 Property Value Fisheries 2 1 Air Emissions Energy Costs Local Community Positive impact on job creation, and tax revenue. Transit community concerns. Greater Community Positive impact on energy costs and concerns on the impact on fisheries. National Community Contributor to energy security. External Interest Group Supportive due to decommissioning of dams, active on safety and security Waterway Community Rising concern about the impacts on fisheries and related jobs; property value; safety and security during transit. Immediate Site Community Concern about property value and safety and security. No detectable perceived benefit. Employment Roads Taxes

32. Pacific Northwest Projects • Small storage and regasification facilities • Serve local markets in areas where electricity will need to be generated thermally due to dam decommissioning • Excess volumes could eventually target other markets (via pipeline or wire)

33. Gulf Coast Projects Safety/Security 5 Other/Intangibles Wetlands 4 3 Property Value Fisheries 2 1 Air Emissions Energy Costs Employment Roads Taxes

34. Central/Western Gulf Coast Projects • Large regasification facilities with associated storage (LNG or underground natural gas) near existing pipeline takeaway infrastructure • Preference for onshore projects to achieve economies of scale; potential overbuilding in the region • Possible constraint associated with limits to tolerance for further, intense coastal industrial development

35. Florida Projects Safety/Security 5 Other/Intangibles Wetlands 4 3 Property Value Fisheries 2 1 Air Emissions Energy Costs Employment Roads Taxes

36. Florida Projects • Offshore projects face environmental challenges due to pipeline construction • Novel construction techniques, if economically viable, may help with mitigation • Onshore projects near busy and congested ports could be supported as State shifts toward natural gas • Extension to greater Southeast as mid-term coal projects are displaced by natural gas

37. California Projects Safety/Security 5 Other/Intangibles Wetlands 4 3 Property Value Fisheries 2 1 Air Emissions Energy Costs Employment Roads Taxes

38. Hypothesis Tests • Refer to separate handout

39. Targeted Benefits Offered • Offer to receive option to purchase natural gas at market rates • Regional promotion of “energy hub” and basic industries associated with LNG project • Commitment to invest in social development plan with local stakeholder groups • Commitment to invest in social development plan with local stakeholder groups • Financial aid and sponsorship (restoration and maintenance) to local lighthouse listed on National Register of Historic Places • Closing bonus to local government at groundbreaking • Direct discount to local community • Reductions in energy costs to local/state/regional economies

40. Cost-to-Benefit Conversion • Commitment to use US crews on LNG ships • Grants to offset fisheries impacts and for regional marine studies • Availability of natural gas to displace other fossil fuels and associated air emissions • Natural gas combustion to revaporize LNG avoiding ORV • Use air vaporizers to reduce both air emissions and avoid seawater associated impacts • Build LNG terminals at existing industrial facilities where waste heat can be used for revaporization • Use tunnels or other conduits for offtake natural gas pipelines to avoid impacts • Natural gas for power generation to displace dams • Net wetlands additions including donations for preserves • Residential property compensation and replacement

41. Going Forward: Discussion • Application to other large energy infrastructure projects • NEPA and the regulatory process • Canada project comparisons • Perceptions of risk and risk communication • Public/constituent views on energy, energy supply, energy infrastructure

42. US LNG Cargo Receipts Sources: U.S. EIA, World Gas Intelligence

44. For More Information: www.beg.utexas.edu/energyecon/lng Houston forum: March 27, 2008