Coming on the heels of the departure of chemical giant Dow Chemical Co. from the National Association of Manufacturers (NAM) over a dispute involving liquefied natural gas (LNG) exports and a decision by chemical firm Huntsman Corp. to join a coalition opposing gas exports, associations representing interstate natural gas pipelines and gas distribution lines expressed their unwavering support for U.S. sales of domestically produced gas to foreign countries.
The American Gas Association (AGA), a group of gas distributors, “does not oppose the exportation of natural gas as LNG,” wrote Andrew K. Soto, AGA senior managing counsel, in comments submitted on the second Department of Energy (DOE) report released in December, which found the U.S. would gain “net economic benefits” from allowing LNG exports (see Daily GPI, Dec. 6, 2012). The DOE commissioned NERA Economic Consulting to conduct the second study. Comments were due Thursday. The first report came in January 2012, and concluded that LNG exports could increase domestic gas prices paid by residential, commercial and industrial customers by a range of 3-9% (see Daily GPI, Jan. 20, 2012).
An opponent of LNG exports, Midland, MI-based Dow, said it opted to leave NAM when the association placed the interests of oil and gas producers above the interests of its manufacturer members (see Daily GPI, Jan. 24).
“AGA acknowledges that there are concerns about the impact of exportation on domestic energy consumers [whether they be residential or companies like Dow]. Those concerns have largely been answered by the DOE studies, which find that on balance LNG exportation will produce an overall net economic benefit for Americans. To the extent changes in the current abundant supply outlook, through unreasonable constraints on access to the domestic resource base or unforeseen market transformation, result in significant negative impacts on natural gas consumers, AGA believes that DOE should revisit its policies supporting LNG export authorization, and take suitable corrective action as necessary,” he said. Dow roundly criticized the December study.
“For most of the past 30 years, messaging around natural gas supply has often been negative with outlooks reflecting shortages and domestic production reductions. That view has changed dramatically. Natural gas is abundant in North America…Reservoirs of natural gas today are found offshore and onshore, in sandstones, fractured tight sands, carbonate rocks, coal seams and, of course, low-permeability shales. It is this diversity that has enable the United States to become the largest producer of natural gas in the world.”
The combination of horizontal drilling and hydraulic fracturing have made the economic development of the abundant shale gas resources possible, Soto said.
Given this abundant supply picture, AGA envisions “relative price stability” in the natural gas marketplace over the next decade and beyond. Soto noted that U.S. production capacity is sufficient to satisfy “significant new demand at affordable prices well into the future.” In AGA’s estimation, “a broad range of natural gas demand scenarios representing estimates of potential natural gas consumption from 66-85 Bcf/d can be supported by a natural gas acquisition price in the range of $4-$6.50 /MMBtu as measured at the Henry Hub pricing point.”
In light of this outlook, Soto said the AGA does not believe that U.S. export of natural gas as LNG will have a material impact on natural gas consumers for the foreseeable future.
The Interstate Natural Gas Association of America (INGAA), which represents interstate gas pipelines, expressed “strong support” for the findings of the December study on LNG exports. “These are critical findings for you [DOE] to consider as your department reviews both the overall U.S. policy on LNG exports as well as the specific applications for export facilities now pending before your agency.”
The NERA report found LNG exports could attract overseas capital to support investments in domestic energy infrastructure. “Liquefaction facilities were singled out by the NERA report as likely investments for foreign capital. However, it is clear that overseas buyers also would be interested in a robust and reliable U.S. natural gas industry at all levels,” wrote INGAA President Donald Santa..
“That interest easily could lead to additional capital for strengthening gathering, transmission, storage and processing facilities — all critical links in the supply chain needed to get domestic gas to overseas buyers.”
Sen. Ron Wyden (D-OR), chairman of the Senate Energy and Natural Resource Committee, said the NERA report was “seriously flawed” in a letter to DOE Secretary Steven Chu earlier this month. “The shortcomings of the NERA study are numerous and render this study insufficient for the department to use in any export determination. The NERA study would need to be updated with new EIA [Energy Information Administration] projections, more realistic market assumptions, regional impacts of the proposed actual export terminals, and evaluations of the actual impacts on consumers and businesses of exporting LNG.”
NERA’s study of LNG exports understates mean price impacts because it “uses out-of-date natural gas demand assumptions for the industrial, power and transportation sectors,” according to the Industrial Energy Consumers of America (IECA). And even with its use of understated domestic demand and price impacts, “the study says that there is only about a $20 billion net benefit to the economy in 2020, a trivial amount given that the U.S. is a $14 trillion economy,” IECA said.
As of early January, there were 20 applications pending at the DOE for authorizations to export LNG to countries without free trade agreements with the United States, totaling 22.6 Bcf/d.
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