Lockheed Martin tanks to be built at Michoud tap into growing fracking industry

03 13, 2013 by The Times-Picayune

Lockheed Martin Corp. announced Tuesday it will build two massive liquefied natural gas tanks at the Michoud Assembly Facility in eastern New Orleans in an attempt to capitalize on the state's rapidly expanding fracking industry while adding 400 new jobs to the struggling plant.

The tanks, each 88 feet long and designed to carry 295,000 cubic meters of liquid gas, will serve as the fuel tanks for propulsion engines built by the Finnish company Wartsila, Lockheed President Gerry Fasano said. Those engines are built to power commercial transport ships, some of which are used in Louisiana.

Fasano added that the two companies are already discussing contracts to build another six tanks of various sizes at Michoud that could serve as storage tanks to transport gas overseas.

Lockheed, a major contractor for NASA and defense department projects, plans to invest $3 million in new equipment at the site starting in December and create 166 direct jobs and 236 support positions, Gov. Bobby Jindal said. The company will convert a building at Michoud once used to build tanks for space shuttles.

"I think this is a great example of taking technology for our space program and other purposes and transforming it to private sector use," Jindal said.

The governor made some concessions to encourage the deal. For its efforts, the company will get an industrial tax exemption, the state's economic development arm will help screen and train future employees, and the state will rebate $7.6 million over the next 10 years through the Competitive Projects Payroll Incentive Program, Jindal said.

Turning Michoud back into a manufacturing hub has been a slow, tortuous process as boosters have lured just a handful of private contractors to the 43-acre site after the federal government shuttered its space shuttle program in 2010.

At its height in the early 1980s, Michoud was employing more than 5,500 workers. That number quickly dwindled to fewer than 600 after the last of 136 shuttle fuel tanks rolled off Michoud's lot three years ago.

Fasano and Jindal, at the very least, see the burgeoning natural gas industry as a helpful stopgap.

Louisiana has become one of the largest producers of natural gas thanks to a relatively new technique that allows companies to extract the fuel from shale deposits as far as three miles below the surface. Known as hydraulic fracturing, or "fracking," companies use pressurized liquid to shatter underground rock, exposing oil and natural gas deposits that otherwise couldn't be accessed by conventional wells.

Fracking has allowed almost 2,200 wells to tap into the Haynesville Shale formation in northwestern Louisiana. Another 13 wells are pulling oil and gas from the Tuscaloosa Marine Shale formation in central Louisiana and the Florida parishes. That level of production has enticed shipbuilders and other transport manufacturers to look to natural gas as an alternative to diesel.

But to turn the gas from its airy form into a compact, usable liquid, it must be cooled to -260 below zero Fahrenheit. Royal Dutch Shell PLC announced March 5 that it would be building a chilling facility in Geismar, south of Baton Rouge. When complete, that plant will be able to produce 250,000 tons of liquefied natural gas each year.

Shell has business arrangements with Martin Energy Services and Martin Midstream Partners to serve liquefied natural gas customers in Texas and Louisiana. It also has an agreement with shipyard giant Edison Chouest Offshore to transport the fuel from Geismar to Port Fourchon.

Shell has chartered three vessels from Harvey Gulf International Marine to support its operations in the Gulf of Mexico. Those vessels use dual-fuel propulsion engines built by Wartsila.

The Wartsila-Lockheed arrangement won't be the only manufacturing activity at Michoud. A British company, Blade Dynamics Ltd., announced in 2010 that it would build wind turbine blades at the site, adding about 600 jobs by 2015. The first one rolled off the lot in December 2011.

The design and engineering firm Sierra Nevada Corp. also partnered with Lockheed earlier this year to build the frames for the "Dream Chaser," a newly developed commercial space shuttle expected to cart crews and cargo to the International Space Station.

The agreement on the new gas tanks signify diversity for Lockheed, a government contractor whose business can be susceptible to budget fights in Congress.

"There's no doubt these are challenging times," Fasano said. "Our leaders in Congress really have a tough job that not many of us would like, to try and balance that budget. It's the reality we live in, and so, as a business, we look for resiliency. This is a perfect opportunity for us to gain resiliency."