Rep. Garamendi Pushes Amendment for U.S. Flagged LNG Carriers

Shorebased Shipbuilding
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Image: Gazprom

By Rob Almeida

While President Obama met with India last week to discuss clean energy and climate change mitigation initiatives, Russian energy giant Gazprom was signing commercial contracts to supply the subcontinent with natural gas (LNG).

Gazprom says 2.9 million tons of LNG per year will originate from the Yamal LNG project and be delivered to the Asia-Pacific markets, mostly to India over a 20-year period.

Yamal LNG is projected to come on line in 2017 and will have an annual production capacity of 16.5 million tons of LNG.

This week, the U.S. House of Representatives will consider H.R. 351, a bill to expedite the export of LNG from the United States.

Congressman John Garamendi wrote a letter to President Obama before his trip to India to highlighting a tender India submitted last August for the charter of nine LNG vessels to support their domestic energy import needs. India’s caveat however, was that the winning bidder would build one of every three ships in India.

With 2.3 million tons per year of liquefied natural gas from Dominion Energy’s Cove Point export terminal destined for India, Garamendi offered an Amendment today to H.R. 351 that would require American-produced LNG be exported on United States-flagged LNG carriers until 2020 and on United States-built and flagged LNG vessels thereafter.

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I’ve said it before and I will say it again…GOD BLESS A MAN LIKE JOHN GARAMENDI!

Before this year is out, I hope to shake his hand…in fact, if I get the chance, I may even kiss the man!

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A dirty rumor from a friend was that the Lng/c Matthew is ripe to be re-flagged. From Norway, no less.

I think with a substantial interest in domestic trade too.

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I would love to see US LNG getting exported from Cove Point in US flagged and built hulls. I bet they could even build them at Aker Philly less than 100 miles (or so) away.

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[QUOTE=c.captain;152903]I’ve said it before and I will say it again…GOD BLESS A MAN LIKE JOHN GARAMENDI!

Before this year is out, I hope to shake his hand…in fact, if I get the chance, I may even kiss the man![/QUOTE]

He sounds like the type of guy that might get pissed about American mariners being denied jobs on the American OSC because the USCG is handing out waviers to allow cheap foreign workers.

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[QUOTE=rob;152890]India’s caveat however, was that the winning bidder would build one of every three ships in India.[/QUOTE]

Good luck with that. I’ve seen one ship, a small ice-strengthened geared bulk carrier designed by a Swedish company, built in India couple of years ago. When it was finally delivered after having been delayed for three years, the quality was so poor that the ship went directly to a repair yard after arriving to the home port in Northern Europe. While you shouldn’t judge the book by its covers, the ship looked like it had been built in the 80s with its buckled sides…

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Exactly. Good luck with that …

PS - MEBA had legislation passed that would have required a large amount of US oil IMPORTS to be carried on US flag ships, and Pres Ford gave it the pocket veto at request of Kissinger. Oh well, that cost a fair bit to get passed.

And those car carriers… why do you think there are ANY under US flag? Hopefully there are still some people old enough to remember how that happened. Unions.

Think about that next time you have a go at the unions.

Well, at least the unions that are unions for the members and serving the national interest, not just being low bidder labor scams

U&F my friend.

U & F

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I would like to know why all the major tanker and ATB owners never ever screamed about all the foreign flagged shuttle tankers coming into US ports out there. All that work should be reserved for US flag even if it would not require coastwise trade since it would be lifted off a foreign vessel.

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[QUOTE=c.captain;152923]I would like to know why all the major tanker and ATB owners never ever screamed about all the foreign flagged shuttle tankers coming into US ports out there. All that work should be reserved for US flag even if it would not require coastwise trade since it would be lifted off a foreign vessel.[/QUOTE]

Absolutely. I’ve been saying this for 20 years. If it happens in the US exclusive economic zome (within 200 miles of shore) it should be US flag only, with rare waivers for true emergencies.

Americans are among the worlds largest shipowners. The US should be one of the largest flag states. This FOC insanity has gone on to far for too long.

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With most of the LNG’s built in the us 30+ years ago still in service and in many cases in good shape due to the high standards LNG demands, it wouldn’t be any issue in my mind to come fully under the US flag for a while until new ones could be built.

http://shipbuildinghistory.com/history/merchantships/postwwii/lngcs.htm

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[QUOTE=z-drive;152929]With most of the LNG’s built in the us 30+ years ago still in service and in many cases in good shape due to the high standards LNG demands, it wouldn’t be any issue in my mind to come fully under the US flag for a while until new ones could be built.

http://shipbuildinghistory.com/history/merchantships/postwwii/lngcs.htm[/QUOTE]

If it’s just a temporary solution until the first US-built hulls are delivered, why not just allow modern foreign-built LNG carriers under the American flag with a temporary Jones Act waiver instead of hiring 30±year-old ships just because they were once built in the US? For example, it could be done on one-for-one basis against new orders of replacement ships from American shipyards. While gas tankers are built to higher standards than some other ship types, that doesn’t change the fact the youngest of those ships turns 35 years old this year and some have already been scrapped. I don’t think that would increase the average age of US-flagged oceangoing fleet. Please tell me it wouldn’t…

Of course, hiring old ships would bring additional work to American repair yards… :smiley:

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I agree, but it’s just food for thought to beat back any uneducated arguments against it, as their are US built lng ships around. Honestly they’re not in bad shape in my opinion, especially as they’re still working for majors and get tons of PSC scrutiny compared to other ship classes.

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We are talking about exporting LNG, not shipping it domestically. There is no demand for the domestic shipment of LNG by water, but if there were such a demand, it would be done by ATB for the same reasons that oil is shipped that way now.

Foreign built ships can be reflagged US and used for foreign trade under existing law. The additional cost of shipping LNG on US flag ships would be trivial at the downstream point of consumption. The much higher international price of LNG (about double domestic prices) makes up for the added cost many times over.

I support the temporary (20 years) export of US produced LNG as long as all of it is exported on US flag ships.

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[QUOTE=z-drive;152935]I agree, but it’s just food for thought to beat back any uneducated arguments against it, as their are US built lng ships around. Honestly they’re not in bad shape in my opinion, especially as they’re still working for majors and get tons of PSC scrutiny compared to other ship classes.[/QUOTE]

There are three I know Congress would allow to come back to US flag with coastwise trade privileges restored.

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[QUOTE=tugsailor;152938]We are talking about exporting LNG, not shipping it domestically. There is no demand for the domestic shipment of LNG by water, but if there were such a demand, it would be done by ATB for the same reasons that oil is shipped that way now.
[/QUOTE]

Then why is LNG still imported from foreign sources? It should be shipped domestically before foreign. Like I said, there’s a dirty rumor one big gas company has discussed re-flagging one of their ships US, one that was built here originally, to move gas domestically for this very reason.

Greenies fighting increased pipeline capacity in New England will be seeing more gas come in via ship. Benefits to shipping it vs pipelines are that in certain markets its more economical; peak demand you can bring in a few ships, rather than build a pipeline that will rarely run at peak capacity that you have to maintain indefinitely.

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Oil Plunge Boosts U.S. Natural Gas Imports to 7-Year High
By Naureen S. Malik Jan 9, 2015 3:16 PM ET 5 Comments Email Print

The plunge in global crude oil prices has helped boost U.S. natural gas imports to the most in at least seven years, even as the country prepares to start exporting cargoes.

Deliveries to onshore pipelines from liquefied natural gas terminals in Massachusetts and Maryland on Jan. 8 were the most in data going back to December 2007, according to Ventyx data compiled by Bloomberg. Volumes in January are more than six times higher than a year ago, when the polar vortex spurred record consumption.

Crude oil, used as a benchmark for LNG around the world, fell by almost 50 percent last year, making imports competitive in the eastern U.S., where a lack of adequate pipeline capacity keeps local prices high. LNG was driven from U.S. shores in the middle of the past decade as surging output from shale formations sent natural gas prices tumbling.

“This has caught a lot of market participants, including us, by surprise,” Rick Margolin, senior analyst at Genscape Inc. in Boulder, Colorado, said Jan. 7 by telephone. “If you are an LNG supplier looking at the futures market for this winter, the best price you were seeing was in the U.S. relative to Japan and Europe. You need a rebound in oil prices to revert back to the trend.”

U.S. LNG imports plunged 80 percent from 2007 to 2013, according to Poten & Partners, a global energy broker. Cheniere Energy Inc., the developer of the first U.S. LNG export terminal in decades, expects to begin overseas shipments later this year.

Global Prices

Northeast Asia spot LNG is going for about $10 per million British thermal units while the price in Europe “has fallen quickly” to about $6.80, Trevor Sikorski, head of natural gas, coal and carbon analysis at Energy Aspects Ltd. In London, said in an e-mail yesterday. It costs about 40 cents per million Btu to ship LNG from Trinidad to New England, 80 cents to Europe and $2.80 to Japan, he said.

Spot gas at Algonquin City Gates, which includes delivery to Boston, reached $15 per million Btu Jan. 6 on the Intercontinental Exchange. Prices settled at $9.81 today.

Northeast gas is trading at a premium to the rest of the U.S. as limited pipeline capacity keep it from taking advantage of record shale-gas production from the Marcellus fields in Pennsylvania and West Virginia.

“New England sees higher prices, especially during peak demand times, not because of lack of supply nearby but the lack of ability to get that supply to market,” Phil West, a spokesman for Spectra Energy Corp., which owns the Algonquin pipeline system, said by phone from Houston yesterday. “We have planned expansions to help relieve that strain.”

LNG Tanker

GDF Suez Gas NA was unloading an LNG tanker at its Everett terminal in Massachusetts yesterday, the third since late October, “to help meet the cold-weather demand,” Julie Vitek, a spokeswoman for the company in Houston, said in an e-mail. To supplement scheduled ship deliveries, which each hold about 3 billion cubic feet of gas, GDF contracted another 1 bcf of LNG to be delivered by truck this winter from Montreal, Vitek said.

Dominion Resources Inc.’s Cove Point terminal in Maryland delivered 3.4 million dekatherms Jan. 6 to Jan. 9, according to Ventyx, which is owned by the Swiss power transmission equipment maker ABB Ltd. Last January, volumes totaled 1.1 million. One billion cubic feet, or 1 million dekatherms, is enough to heat about 13,660 New England homes for a year, according to the American Gas Association.

Excelerate Energy LP delivered gas from its Northeast Gateway port into New England for the first time since March 2010, Denise Madera, a spokeswoman for the company in The Woodlands, Texas, said in a Jan. 6 e-mail.

Deliveries started Jan. 6 and have totaled 565,976 dekatherms over four days, according to Ventyx. The Excelerate port, about 13 miles offshore in Massachusetts Bay, delivers gas to the Algonquin line.

“New England futures were trading in the $19 to $22 range for this winter,” Margolin said. “In the global market, that appears to be the best LNG supplies can get.”

To contact the reporter on this story: Naureen S. Malik in New York at nmalik28@bloomberg.net

To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Bill Banker, Stephen Cunningham]

Just some market climate info there.

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The Green NIMBYs went all out to kill the proposed domestic propane terminal at Searsport. The same NIMBYs among others fought off the proposed East/West Highway from Calais to Montreal by insisting that it was really a pipeline route for oil sands syncrude disguised as a road. Now the same NIMBYS are holding up much needed dredging at Searsport. They also are fighting to block the reversal of the Portland to Montreal pipeline so that oil sands crude could be exported through it.

A second Nova Scotia to Massachusetts pipeline was under construction to import LNG, but last I heard they were talking about reversing the flow to send Pennsylvania land drilled gas to Nova Scotia because it is so much cheaper than Nova Scotia’s offshore gas.

High cost foreign LNG is still imported because US buyers are locked into long term contracts that predate the US shale gas bonanza.

Gas pipeline are relatively easy to get permitted compared to an LNG terminal.

      • Updated - - -

Interesting article. Obviously you are much more up to date on this than I am.

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[QUOTE=c.captain;152939]There are three I know Congress would allow to come back to US flag with coastwise trade privileges restored.[/QUOTE]

I’m aware of three as well (so far–MATTEW could always be next, not her 2 sisters, though, they’re scrapped). From the CG appropriations act in 2012-2013:

[B]Sec 608.[/B][B]Documentation of LNG tankers[/B]
(a)[LEFT]In General[/LEFT]Notwithstanding sections 12112 and 12132 and chapter 551 of title 46, United States Code, the Secretary of the department in which the Coast Guard is operating may issue a certificate of documentation with a coastwise endorsement for each of the following vessels:(1)LNG GEMINI (United States official number 595752).(2)LNG LEO (United States official number 595753).(3)LNG VIRGO (United States official number 595755).(b)[LEFT]Limitation on Operation[/LEFT]Coastwise trade authorized under subsection (a) shall be limited to carriage of natural gas, as that term is defined in section 3(13) of the Deepwater Port Act of 1974 (33 U.S.C. 1502(13)).©[LEFT]Termination of Effectiveness of Endorsements[/LEFT]The coastwise endorsement issued under subsection (a) for a vessel shall expire on the date of the sale of the vessel by the owner of the vessel on the date of enactment of this Act to a person who is not related by ownership or control to such owner."

But this really makes one question the sincerity of the Representative’s ‘gesture’. It’s easy to get on a box and say, ‘US ships’, but in reality, if that’s just a pre-text for bringing back old tonnage (who have received a special dispensation in the pay-to-play Congress) vice investing in the actual maritime infrastructure of the US by asking for new ships, it rings hollow and only means a pittance of mariner jobs (which probably sounds fine in this forum).

I’d rather have shipyards working. None of these vessels will ever see a shipyard in the US for anything, everyone will beg off–specialized repairs, no in-country skills to repair specialized LNG containment… As if they need such argument, the price of labor and steel alone guarantees that most if not all deep draft vessels (even the newer Jones Act hulls) seek overseas drydocking.

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well this is all for naught…Garamendi’s amendment is kaboshed by our most wise and sage members of the House of Representatives (the same that are ready to sign the US away with the TPP)

[B]House Votes on Garamendi Jobs & Security Amendment[/B]

By MarEx 2015-01-28 17:36:01

On Wednesday, the House of Representatives voted on an amendment from Congressman John Garamendi (D-CA-03), Ranking Member of the Coast Guard and Maritime Transportation Subcommittee of the Transportation and Infrastructure Committee, that would create tens of thousands of American jobs in our nation’s shipyards, put thousands of American Mariners back on U.S. ships while strengthening U.S. national security. The U.S. will soon begin exporting natural gas in a liquefied state (LNG). The amendment would ensure that United States-flagged and built ships are used for this business. It would also make sure that this energy resource wouldn’t go to nations that sponsor terrorism or to any nation or corporation that steals America’s military technology or intellectual property through cyber-attacks.

“Any export of American energy, a strategic national asset, must serve America’s interest. We should not allow it to benefit our enemies. We must also use this opportunity to bolster another strategic national asset – our maritime sector. America’s national security and maritime commerce, which is crucial for our prosperity, both depend on the vibrancy of our maritime sector. The ships for the energy export business should be US-built and flagged. By requiring this in law, we can put thousands of Americans back to work at our shipyards and as merchant mariners on our ships. While this particular amendment did not pass today, I am encouraged by the bipartisan support for the concept. I will continue to push this job-creating legislation,” said Congressman Garamendi.

The amendment was offered to improve H.R. 351, a flawed bill that would cut short the review period for evaluating the public interest for LNG export applications. Unfortunately, the Republican-led House of Representatives passed H.R. 351 and failed to adopt Garamendi’s commonsense measure to create jobs and strengthen our national security.

Click here for text of Garamendi’s amendment. The Congressman offered a similar amendment before a House Rules Committee hearing on the bill earlier this week. While not approved in its current form, Republicans and Democrats held a productive discussion and expressed support for the idea behind the amendment.

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Probably just as well since it appears full of BS:

"House Votes on Garamendi Jobs & Security Amendment

By MarEx 2015-01-28 17:36:01

On Wednesday, the House of Representatives voted on an amendment from Congressman John Garamendi (D-CA-03), Ranking Member of the Coast Guard and Maritime Transportation Subcommittee of the Transportation and Infrastructure Committee, that would create tens of thousands of American jobs in our nation’s shipyards, put thousands of American Mariners back on U.S. ships while strengthening U.S. national security. "

“Tens of thousands of American jobs”? Anyone want to provide a workbook on that or the thousands of US mariners? Does it include the jobs that the previous workbook on Keystone was to provide?