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Manufacturers, Industry Both Leery of Action by Federal Government

The oil and gas industry recognizes that it is in its best interest to assure the public that hydraulic fracturing (fracking) is being done safely, but it is wary of the federal government enacting its own regulations on the practice. Meanwhile, manufacturers are concerned about the feds allowing too much liquefied natural gas (LNG) to be exported.

At an oversight hearing held Tuesday by the House Committee on Natural Resources' Subcommittee on Energy and Mineral Resources, Rep. Doug Lamborn (R-CO) asked if the industry was concerned about a proposed rulemaking by the U.S. Environmental Protection Agency over what chemicals and mixtures used in fracking should be disclosed (see Shale DailyMay 9).

"The industry is strongly vested in conducting economically sound practices," said Toby Mack, CEO of the Energy Equipment and Infrastructure Alliance. "They understand that anything that might be contrary to that is definitely going to create a negative force in their ability to operate.

"The industry has done a great deal to disclose the fluid contents that they're using in the fracking process with the FracFocus website (see Shale Daily, April 6, 2011). They're also making significant strides in finding organic chemicals that are not considered toxic to use in the fracking process. There's a lot of research and development going on in that area."

According to the U.S. Department of Energy (DOE), as of April 18 the department has approved seven requests -- filed by six companies -- to export domestically produced LNG to countries that do not have a free trade agreement (FTA) with the United States. Collectively, those DOE authorizations would allow the export of 9.27 Bcf/d to non-FTA countries.

The most recent non-FTA application, filed by Jordan Cove Energy Project LP, was approved by DOE in March (see Daily GPI, March 24). To date, only Cheniere Energy Inc.'s Sabine Pass project has also received final non-FTA export approval from DOE.

In response to a question by Rep. Rush Holt (D-NJ), Carol Williams, special adviser to Dow Chemical Co., said the impact manufacturers would feel from LNG exports "has not gotten enough press. We have seen this movie before. We've seen that when [the price of] natural gas goes high and becomes very volatile, investment stops.

"An analysis that we have done -- and several other studies -- says that anything greater than 6 Bcf/d can be an interesting challenge, driving more pricing increases and significant volatility. From our position, 9 Bcf/d is a very significant number that will have an impact."

Mack said that despite the debate and moves toward eventual LNG exports, the renaissance of manufacturing jobs in the U.S. is likely here to stay.

"The number that supports this is the fact that we have developed only a tiny fraction of the known recoverable reserves of natural gas in this country, throughout the major shale plays," Mack said. "I don't see any scenario [through 2035] where the supply of natural gas is going to be restrictive. Additional demand will stimulate additional supply."

Josh Lowrey, senior vice president for business development and industry affairs at Forge USA, told lawmakers that the federal government had created "a less than favorable environment" for service companies to operate in.

"There is obviously a lot of red tape, whether you're a small business or you're Baker Hughes, Schlumberger or Halliburton," Lowrey said. "They all have to deal with it. But the environment I feel is that the understanding of what we're trying to accomplish is becoming so apparent that you can't scare anyone anymore with scare tactics.

"The reality is that there is safe drilling going on. You don't go to any oil meeting without the first thing being about safety."

Rep. Markwayne Mullin (R-OK) said Republicans and Democrats, as well as fracking supporters and opponents, were both interested in helping to create jobs.

"One thing you'll hear on both sides is that we all want to create jobs," Mullin said. "But we're not the ones creating those jobs. We have to create the atmosphere for that opportunity to exist, and I feel like sometimes we're not. But we're listening, we're at the table and we're trying to make that happen."

Rep. Jeff Duncan (R-SC) concurred. "Good paying energy jobs could be had in this country if we would just continue to pursue good policies," he said.

But Democrats on the subcommittee took a different tack on the subject matter.

"We are all grateful that America currently enjoys some of the lowest natural gas prices in the world," said Matt Cartwright (D-PA). "Our manufacturing sector specifically has taken advantage of these low prices and the competitive advantage they provide. We all agree that more ought to be done to promote manufacturing jobs in this country. But it would be foolish to take anything for granted. We can't count on lower energy costs than our competitors forever."

Cartwright said figures from the U.S. Bureau of Labor Statistics show the manufacturing sector will lose 550,000 jobs by 2022.

"That's nearly a complete reversal of the recent resurgence," Cartwright said. "Moreover, to continue with business as usual would mean that by 2020 the entire industrial sector would consume approximately 50% of the energy in the United States.

"In addition to the jobs that energy production creates and low energy prices helped foster, we need to look to the benefits and job creation potential in energy efficiency improvements. Investments in energy efficiency have the potential to spur economic growth, create jobs and strengthen American competitiveness while at the same time lower energy costs and protecting our environment."

HR 6, a bill that would force DOE to expedite the review of proposals to export LNG, passed the House Energy and Commerce Committee on April 30, but it has not been scheduled for a vote on the House floor (see Daily GPIMay 1). Two related bills -- S 2083 and HR 4139, also known as the "American Job Creation and Strategic Alliances LNG Act" -- are still in committee.

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