With so much low-cost natural gas production discovered in unconventional resource plays, many industry insiders see great potential for large exports of liquefied natural gas (LNG).

One of them is Dominion Resources Inc., now leading the way with its Cove Point LNG development. As a first mover, the company is well-positioned to be a market-maker and bring the U.S. gas industry into global markets in a big way.

From its formation in 1909, and through its headquarters in Richmond, Virginia, the company has grown into three distinct segments: Dominion Virginia Power (DVP), Dominion Generation, and Dominion Energy.

Dominion's assets include more than 28,000 megawatts of power generation; 6,300 miles of electric transmission lines; 56,800 miles of electric distribution lines; 11,000 miles of natural gas transmission, gathering, and storage pipeline; and almost 22,000 miles of gas distribution pipeline. It also owns more than 940 billion cubic feet (Bcf) of natural gas storage capacity, and serves retail energy customers in 15 states.

Donald R. Raikes, vice president of Transmission Marketing and Customer Services, is responsible for the commercial activities at both Dominion Transmission Inc. and Dominion Cove Point LNG LP, the company's liquefied natural gas facility in Maryland now under construction.

“We will see billions of dollars of additional royalty revenues for the private sector and governmental agencies, and tax revenues at the local, state and federal levels.”

Since joining the company in 1985, he has held various positions in the interstate gas pipeline business unit. Raikes was part of the commercial team that implemented the wholesale restructuring as a result of Federal Energy Regulatory Commission (FERC) Order Nos. 436 and 636. Also, he led the commercial team that reactivated the Cove Point LNG terminal, which recently announced the expansion and doubling of its capacity. Raikes earned his bachelor's degree in Business Administration from Fairmont State University. He and his wife, Gail, have three children and live in Ashland, Virginia.

MIDSTREAM How did you first become interested in working in the energy industry?

RAIKES When I was in college, some 26 years ago, a friend called me about a job at CNG Transmission Corp. I was familiar with CNG and knew it was a solid company. I interviewed and was offered a position. Ironically, regarding the person that hired me then, and for whom I have worked on and off several times and work in his organization today, is the chief executive of Dominion Energy, Gary Sypolt.

MIDSTREAM Have you always worked in this industry?

RAIKES Yes. I was blessed to start in the gas industry in the 1980s. It was an opportune time, because that was the beginning of some dramatic changes in the industry. I was fortunate to work through the Natural Gas Policy Act of 1978, the deregulation of natural gas, the FERC orders 436 and 636, and now, what we are calling the shale revolution.

MIDSTREAM You are very involved in the Cove Point liquefied natural gas export facility. How is that going?

RAIKES We are now in the development phase of the project to export gas from Cove Point. We are evaluating exports of up to 1 Bcf per day. We have completed our pre-FEED (front end engineering and design) studies and our FEED studies are underway. We have filed and received our Department of Energy (DOE) export license for free-trade countries, and have filed for DOE export license for non-free-trade countries.

MIDSTREAM What's the next step?

RAIKES Our plan is to begin the pre-filing process at FERC during the second quarter of 2012. We already have significant customer interest in Europe and Asia, and are in negotiations with potential customers. The timing for the in-service of this facility is 2016 to 2017.

MIDSTREAM We've seen many other permits filed for exporting LNG.

RAIKES There have been many permits filed. But, if you remember, only five or six years ago, when companies were filing for imports, we had over 40 applications filed, but only a few were actually built. We strongly believe there will be exports from America. It'll take big companies, because we are dealing with international players.

MIDSTREAM What are the challenges to exporting gas from North America?

RAIKES That's a great question, because the idea of exporting out of the U.S. is a new concept. As a result, there is more scrutiny from many sectors. Political, environmental and industrial groups have voiced concerns. And we think that is to be expected. The key to overcoming these challenges is the clear overall benefits that occur as a result of exports.

MIDSTREAM What are some of the environmental concerns?

RAIKES The environmental community is concerned that Cove Point and other projects will lead to additional shale drilling. They believe that might be harmful to the environment. We feel, as the producing community believes, that the drilling of these shale assets can be done very responsibly without harm to the environment. In June 2011, the INGAA Foundation released a natural gas infrastructure study through 2035. The study projects a significant increase in supply from the existing shale plays. However, the study did not include any marine natural gas export from the U.S. We also believe that, regardless of export projects, these shale plays will be developed.

MIDSTREAM And the industrial concerns?

RAIKES The industrial associations are concerned that an export project will lead to dramatic increases in natural gas prices, which could be bad for their industry. We understand the questions that they have, but when we look at the numbers, we believe that the increases in gas prices that will result from these projects will be minimal. Earlier this year, the DOE completed a study to predict the impact on natural gas prices from exporting anywhere from 6 Bcf to 12 Bcf per day. The study concludes that the impact on natural gas prices on the reference case was only 3% to 9%, which is fairly insignificant. Furthermore, many in our industry have questioned whether the U.S. can secure contracts for 6 Bcf to 12 Bcf per day in an international LNG market of 31 Bcf per day. Also, as part of DOE's evaluation, they are in the middle of a second study that will consider the overall economic impact on the U.S. That study is due to be out sometime in April.

MIDSTREAM What might be the result of that?

RAIKES Although the DOE has stated that they will not issue further licenses to non-free-trade agreement countries until that study is completed, we are confident that their evaluation should lead to releasing additional licenses. In fact, look at what Secretary of Energy Steven Chu recently stated in a town hall meeting at a community college in Houston. He said that exporting natural gas means wealth comes into the U.S. And that's a quote.

MIDSTREAM Is competition from other countries' LNG exports a concern for the U.S.?

RAIKES The LNG business is very competitive. There are other countries that have export capability and have no domestic market for that gas. However, those countries can't meet the entire world's need for LNG. The contracts that Dominion will enter into with our perspective customers are going to be long-term, firm contracts, and those customers are very aware of world pricing scenarios. One of the benefits they see with the U.S. is an estimated 100 years of natural gas available, so they see us as a diversity play and as a reliable play. Both of those factors bode well for us.

MIDSTREAM What are the major benefits to exporting U.S. LNG?

RAIKES Specific to Cove Point, the export project will create somewhere in the neighborhood of 14,000 permanent jobs. We will see billions of dollars of additional royalty revenues for the private sector and governmental agencies, and tax revenues at the local, state and federal levels. In fact, the Cove Point project alone is projected to generate about a billion dollars annually in tax revenues. These numbers come from an independent study provided as part of our DOE export application to non-free-trade-countries. Another key point of the economic benefit is that the Cove Point project can have a significant impact in helping to balance the trade deficit. It can improve the trade deficit by somewhere between 0.6% and 1.4% by itself. In the current economy, which has been struggling for the past three years, these types of projects will have significant benefits for the U.S.

MIDSTREAM Those are some amazing numbers.

RAIKES They are. Each proposed export project is required to do this analysis, and we've seen other independent studies that confirm these benefits. While the numbers may be different, all of them support the idea of significant economic benefits for the U.S.

MIDSTREAM What are some other new projects slated for Dominion?

RAIKES We are in various projects to move Marcellus and Utica gas. 2012 will be a record year for construction for us. In the Utica, we have some strategically located existing assets within the footprint. Our affiliate, Dominion East Ohio, has under-utilized existing assets, including 18- to 30-inch diameter pipelines, which are being converted from dry-gas service to wet-gas service. They move all the existing Utica production today, and will become the premier gathering provider in Ohio. East Ohio's long-term plan is to enhance that existing network to eventually move up to 2 Bcf per day of wet gas.

MIDSTREAM Where will it go?

RAIKES East Ohio's network of pipes connects to various pipeline interconnects. One of those interconnects is Dominion's new Natrium processing and fractionation facility. Phase one of Natrium will be capable of processing and fractionating some 200,000 dekatherms per day of gas. It's under construction, it will be in service in December of this year, and it is fully contracted. We are now in negotiations with customers to build a second train that will be approximately the same size.

MIDSTREAM What are your long-term plans for the Utica?

RAIKES Our long-term view is the Utica is a very promising shale, so we have also acquired property rights to two separate strategic locations in Ohio where we have the potential to develop additional processing and fractionation, as real producer needs evolve for these services. While several players have announced Utica proposals, I'm confident that our existing asset base and our proven track record will enable Dominion to compete very effectively to serve Utica producers for the long term. In fact, Dominion East Ohio and Dominion Transmission together are the only companies that are gathering and processing Utica shale today.

MIDSTREAM In general, what are the other major challenges for the U.S. energy industry?

RAIKES Well, the good news is we have the gas supply. We've proven that. And it is of tremendous benefit to the economy of the U.S. But one challenge is the U.S. is struggling a bit on the market side. One of the keys for the future will be the development of additional markets. Power generators and the conversion of coal plants are some of the options to increase natural gas usage. We also see some industrials converting over to natural gas. Export projects like Cove Point will help to steady gas prices and give producers continued incentives to drill.

MIDSTREAM And a second challenge?

RAIKES We need to continue to educate the public about the benefits of natural gas. As an industry, we've stepped it up during the past few years, but we need to continue. Much of the public still seems to be unaware of the vast availability of this resource and what it can mean. For the U.S. economy, we also need to continue to educate the public with regard to their environmental concerns. We have the answers, but we need to make sure the public is aware. We have an exciting story to tell about the benefits and economics of natural gas.

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