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U.S. Leaders Call for Expedited LNG Exports; Moniz Indicates Revamp Possible

The Obama administration may consider revamping an economic case-by-case analysis of projects to export U.S. natural gas to determine if a specific destination might benefit overseas allies, Energy Secretary Ernest Moniz suggested Wednesday.

The comments came during a luncheon address to a Houston audience at IHS CERAWeek. The week-long industry event has been dominated by talk among keynote speakers, panelists and participants about the Russian incursion into Ukraine and whether U.S. officials should more quickly permit domestic liquefied natural gas (LNG) exports and allow exceptions to crude oil and condensates bans.

Ukraine receives about 60% of its natural gas from Russia, which also is the lead exporter to Europe. On Wednesday House Speaker John Boehner (R-OH) said on the House floor that the administration should allow more LNG exports to weaken Russia's influence.

"We can supplant Russia's influence, but we won't so long as we have to contend with the Energy Department's achingly slow approval process," Boehner said. He said the Department of Energy (DOE) had received 24 export proposals but had approved only six.

"This amounts to a de facto ban that only emboldens Vladimir Putin, allowing him to sell large quantities of natural gas to our allies," Boehner said of Russia's leader. “President Obama should do the right thing here and end this de facto ban so we can strengthen our economy here and our security here and abroad."

Boehner said a bill regarding Ukraine, expected to be provided soon, could have language regarding natural gas. Rep. Ted Poe (R-TX) also said on the House floor he would propose legislation to require DOE to expedite all gas export permits to Ukraine, former Soviet Union nations and the European Union. Republican Sens. John Barrasso of Wyoming and Oklahoma's Jim Inhofe, as well as Rep. Paul Ryan (R-WI), also are calling for expedited gas exports.

"If President Obama is serious about helping the people of Ukraine, he will immediately expedite the approval process for liquefied natural gas exports," Barrasso said.

The federal government today doesn't determine where LNG export cargoes go, but "I would certainly welcome consultation," Moniz told the luncheon delegates in Houston.

DOE has authorized one permit to export LNG to countries without U.S. free-trade agreements (FTA); five other proposals have received conditional approval. Altogether, the export queue could allow up to 8.5 Bcf/d to be carried to countries without FTAs, or around 13% of current daily output. Including FTA countries, sponsors want to export up to 35 Bcf/d overseas.

Growing domestic gas supplies and the rapidly transforming global energy market may require a rethink on the economic assessment of those plans, said Moniz.

"It may be at some point we will need to refresh studies of economic benefit...At some point, it may look as though a bunch of factors would suggest a new review, tuning up the review, updating the review, updating the data, etc."

Federal officials "are continuously evaluating, and if we have to update data, we will," Moniz said. However, even if new data might support more/redirected gas exports, the United States may not revise the current plans. For example, the Energy Information Administration (EIA) already has projected, and analysts have confirmed, that the United States is producing more gas than consumer demand. That reality doesn't mean gas exports should be fast-tracked, nor does it mean there would be additional reviews.

"We will just be doing our job, continuously evaluating the national interest determination," he said.

The Obama administration has a cap on how much gas could be exported, Moniz said. "It's no secret that we have something like 35 Bcf/d in the queue" for project approval. "It's also no secret that right or wrong, I have never seen any economic analysis that expects the market to support that level of exports."

Regarding U.S. oil exports, Moniz said the energy industry needs to make a better argument for why the ban should be lifted. The United States imports around 5 million b/d, numbers that have been falling steadily. Proponents were challenged to explain the implications of selling U.S. crude to overseas markets and why they should be done while the country still is importing oil.

"I don't think the industry has done a very good job of clearly and concisely stating the case," he said. Most of the imported crude is heavy, while many U.S. tight oil formations are producing light, sweet crude.

Exceptions to the export ban in place since the 1970s have been made for California and Alaska. Sen. Lisa Murkowski (R-AK), who spoke to delegates Monday, is urging the ban be lifted slowly and wants the EIA to review the issue (see Daily GPI, March 4).

However, Moniz said there are "a lot of questions that have not been answered in a clear way" by supporters.

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