An official with the U.S. Department of Energy (DOE) said the department will not withdraw or modify any previously approved proposals for exporting liquefied natural gas (LNG) as a way to control domestic natural gas prices.
In a letter to U.S. Rep. Edward Markey (D-MA), Deputy Assistant Secretary Christopher Smith said the DOE has the authority to issue supplemental orders modifying previous authorizations -- after a hearing and only with good cause -- but it has never used that authority.
"DOE does not, however, intend to use this authority as a price maintenance mechanism," Smith said. "Moreover, DOE takes very seriously the good faith investment-backed expectations of private parties subject to its regulatory jurisdiction. Accordingly, DOE would be reluctant to withdraw or modify a previously granted authorization, except in the event of extraordinary circumstances."
Smith's correspondence to Markey comes in response to the lawmaker's letter to DOE Secretary Steven Chu in which he outlined several concerns about the United States exporting LNG, including higher natural gas prices for U.S. consumers (see Daily GPI, Jan. 6).
"The potential impact of most of these authorizations would not be imminent because the proposed exports are not planned to commence for a number of years," Smith said. "Also, not all authorized exports will necessarily occur because it takes years to build LNG export facilities and numerous regulatory and financial obstacles must be cleared before a project is completed."
DOE has already approved plans for Cheniere Energy unit Sabine Pass Liquefaction LLC to export 2.2 Bcf/d to countries that have a free trade agreement (FTA) with the United States and also to non-FTA countries (see Daily GPI, Nov. 22, 2011).
Smith said DOE is considering another seven applications to export LNG produced in the Lower 48 to non-FTA countries, which combined total an additional 10.31 Bcf/d. The most recent request to export LNG was made by Gulf Coast LNG Export LLC on Dec. 21 (see Daily GPI, Jan. 3). That company wishes to export 2.8 Bcf/d.
Smith added that a private contractor had been hired by DOE to study the macroeconomic impact of LNG exports on domestic natural gas prices. He said that report should be completed this spring. This follows a report by the Energy Information Administration that concluded increased natural gas exports would lead to higher domestic natural gas prices, increased domestic production, reduced domestic consumption and more imports from Canada by pipeline.
"Until the [private contractor] study is completed, reviewed and evaluated, it would be premature for DOE to speculate on what actions we might take or the potential impacts and effects of the pending applications [for LNG exports]," Smith said.
On Feb. 16 Chu told a Senate panel that requests for future exports of LNG have been placed on hold while the department determines what impact exports would have on domestic natural gas prices. Chu's testimony came two days after Markey introduced two bills in the House designed to block LNG exports (see Daily GPI, Feb. 17; Feb. 15).
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