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Obama Called on to Cap LNG Exports

Rep. Edward Markey of Massachusetts, the leading Democrat on the House Natural Resources Committee, and Sen. Ron Wyden of Oregon, a senior Democrat on the Senate Energy and Natural Resources Committee, on Thursday urged President Obama to use his power under the Energy Policy and Conservation Act of 1975 to restrict the export of natural gas, coal, petroleum products and petrochemical feedstocks. Markey earlier in the year introduced two bills to block liquefied natural gas (LNG) exports.

"U.S. fossil fuel markets are experiencing a period of significant change. New technologies and drilling practices are enabling the development of significant new domestic supplies of oil and natural gas. These additional supplies are shifting energy usage patterns in the United States and have the potential to significantly impact global trade flows, domestic energy prices, American manufacturing competitiveness and human and environmental health.

"We are concerned that many of the current and potentially additional future public benefits of these developments in domestic energy markets could be undermined by unrestricted export of American resources to foreign markets," the lawmakers wrote in their letter to the president.

They noted that it was just a few years ago that the United States was heading toward a "natural gas crisis" caused by low domestic supplies and soaring prices. This lead companies to invest in terminals to import LNG, a number of which remain idle now. Due to the proliferation of shale gas supplies in recent years, the companies are moving to either convert their existing LNG facilities to export gas or build new facilities.

"Already, 13 companies have filed applications with the Department of Energy [DOE] to export more than 17 Bcf/d of natural gas. This amounts to 26% of current daily domestic consumption. We are concerned that the price increases expected if natural gas is allowed to be exported in the amounts proposed would severely harm the recovery of key industrial sectors," specifically power generation and chemical manufacturing, Markey and Wyden said.

"A recent Energy Information Administration report found that natural gas exports of 12 Bcf/d -- a significantly lower volumes than what companies have already applied to export -- could raise U.S. natural gas prices by as much [as] 54%," they noted.

In April DOE approved the first application for a company -- Cheniere units Sabine Pass LNG and Sabine Pass Liquefaction -- to export LNG to countries with which the United States does not have a free trade agreement. Since then it has put the permitting process on hold while it awaits the completion of the second half of a two-part study to assess the impact of LNG exports on the economy, including domestic gas prices, job creation, gross domestic product and the balance of trade.

The results of the study are due out by late summer, according to a DOE spokesman. Contrary to press reports, this has always been the department's deadline for the second study, not spring. DOE "inadvertently said the end of spring [at one point], but [it] should always have been the end of summer." There will be no delay in DOE's consideration of company applications for LNG export permits as a result, he said.

In March DOE Deputy Assistant Secretary Christopher Smith said he expected the latter report to be issued in the spring (see NGI, March 5).

The DOE spokesman dismissed reports that DOE is placing LNG export permitting on the back-burner, saying that is "absolutely not the case."

The first half of the study, which was conducted by the Energy Information Administration and released earlier this year, found that LNG exports could increase domestic gas prices paid by residential, commercial and industrial customers by a range of 3-9% (see NGI, Jan. 23).

"We want the analysis [in the export study] to drive the decisions" on individual applications, said Heather Zichal, deputy assistant to the president for energy and climate change at a recent event on shale energy sponsored by the American Petroleum Institute. "As a general rule of thumb we are certainly not opposed to LNG exports."

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