Not in my back yard – part one

With a demand that is expected to double by 2030, Europe’s LNG industry is currently experiencing rapid growth. Import facilities are now cropping up throughout Europe as LNG creates opportunities for energy security outside of the traditional bounds of pipelines. However, despite the industry’s rapid growth, safety and environmental concerns are driving local opposition forces in communities to take a ‘Not In My Backyard’ (NIMBY) stance against LNG projects. Europe is all too familiar with NIMBY opposition, and while European countries seek to expand their capacities, local activists who oppose LNG seek to exaggerate the negatives to put a stop to LNG proposals in their communities. Industry leaders will need to consider the costly effects of ‘NIMBY-ism’ in Europe during the project planning stages, as they assess the risks associated with an LNG proposal. Failure to do so could cause companies to miss out on the numerous opportunities LNG will offer throughout Europe.

A perfect alternative

For the past decade, Europe has developed a concentrated focus on reducing its dependence on oil due to mandates for cleaner sources, rising costs and supply shortages. LNG serves as the perfect alternative in Europe for a variety of reasons. Environmentally, natural gas is the cleanest burning fossil fuel, as it produces 30% less greenhouse gas emissions than gasoline, in terms of vehicle fuel. Economically, the number of LNG projects proposed throughout Europe bears the potential to alleviate the economic woes that plague many countries. For example, one such proposal in Cyprus brings great potential to a recovering economy, given the country’s current unemployment rate of over 15%. The discovery of over seven trillion ft3 of gas off Cyprus’s shores offers an opportunity to harness the vast profitability of the market. Finally, due to Europe’s close proximity to a multitude of current LNG suppliers, which include Qatar, Algeria, Australia, Egypt, Oman, Libya, and the UAE, LNG imports also offer Europe protection from potential fluctuation of market price and supply that could be caused by internal conflicts or natural disasters. Despite these positive economic, environmental, and security aspects of the LNG industry in Europe, not all communities are welcome to industry expansion locally.

Susceptible to NIMBY

European countries are not unfamiliar with ‘NIMBY-ism’, especially when it comes to the natural gas industry. Unconventional gas drilling is the subject of heated debate in many parts of the world, particularly throughout Europe. France and Bulgaria have banned unconventional gas drilling altogether, and Poland is finally starting to make progress with a proposal for several gas extraction sites after years of debate. Still, many farmers in Poland are inclined to make the case against Chevron’s unconventional gas drilling projects as they protest fiercely against exaggerated negative environmental and safety impacts. Given the forceful resistance with which unconventional gas drilling is met in Europe, there is no doubt the LNG industry remains susceptible to ‘NIMBY’ activism as well.

Case study: Estonia

To date, many of the delays that Europe’s LNG industry has experienced with respect to project development have been due to issues unrelated to ‘NIMBY-ism’, such as tariffs. However, as more LNG terminals are proposed, residents will inevitably join together to oppose import facilities in their own communities. Such is the case with an LNG project, which proposes to construct two 160 000 m3 storage containers and a gas-powered power station on the Paki peninsula near Paldiski, Estonia. This project would ease foreign dependence upon the Russian giant Gazprom, which is the single natural gas supplier for all of Finland, Estonia, Latvia, and Lithuania, by supplying many Baltic Sea countries with LNG. However, the project could be significantly delayed or even halted altogether if arising concerns are not alleviated, or at least addressed by companies.

The concerns regarding this particular LNG project in Estonia are emphasised by the Estonian Nature Foundation and the Ornithology Society. These groups are reportedly prepared to dispute the plan in court for as long as it takes to cancel the project, because the site is near the protected nesting area of Estonia’s black guillemot bird population. Despite the company’s plans to build this LNG site 2 km away from the nesting area, no agreement is in sight. The opposition groups have already been granted initial legal protection by the court, so terminal development cannot begin until a solution is reached legally. Given the fact that the opposition groups and companies could not reach an agreement outside of court within the period allotted, it is reasonable to expect that legal proceedings will be drawn out, making the project far more costly than previously envisioned.

Additional opposition to this Estonia LNG project comes from people living near the water, who would see the tankers floating through their backyards. In his presentation at the Tight and Shale Gas Summit, Rudolf Huber, CEO of NeXtLNG, Ltd reflected on his seven years of experience in the LNG industry, noting how common opposition was. In Natural Gas Europe, Huber explained that “people opposed LNG tankers travelling through waterways near their houses, thinking they might blow up and felt perfectly safe with chemical tankers nearby.”1 This captures the essence of ‘NIMBY-ism’ perfectly in that members of a community will exaggerate the negative effects of the changes that a proposal will bring to the area, despite existing risks to which they voice little objection. Huber continues: “It is a matter of perception. People overestimate the dangers of what is new and underestimate those of what they are used to.”1

Estonia’s contingency of ‘NIMBY’ opposition groups puts a great deal at risk for the country should this LNG facility be cancelled. The shale gas boom in the US has created thousands of jobs in places such as Texas, Pennsylvania, and Louisiana. These jobs would be vital to boosting Estonia’s economy as well as those of other European countries. Additionally, Estonia’s LNG project will not be possible without the EU’s financial support despite the large investment made by the company proposing the project. Lengthy court proceedings could jeopardise the EU’s assistance altogether if, for example, another European country proposes a project that needs the EU’s financial support in the meantime. Estonia is just one case of ‘NIMBY-ism’ within the LNG industry that illustrates why companies need to have the foresight to include the effects of ‘NIMBY’ opposition in initial risk assessments of an LNG proposal.

Reference

  1. ‘LNG for Europe: Locking in on the Target’, Natural Gas Europe,  31 October 2011.

Written by Al Maiorino, Public Strategy Group Inc., USA

Edited by Ted Monroe

This is part one of a two part article. Read the second part here: Not in my back yard - part two

Published on 30/12/2013

 

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