In a letter to U.S. Department of Energy (DOE) secretary Steven Chu, Sen. Ron Wyden (D-Oregon) rejected the findings of a study conducted by NERA Economic Consulting on liquefied natural gas (LNG) exports. The study determined that the “macroeconomic impacts of LNG exports are positive in all cases.” The study was performed on behalf of the DOE and could prove critical in the department’s decisions regarding LNG export permits.
The chairman of the U.S. Senate Committee on Energy and Natural Resources has been a longtime foe of LNG exports (see Daily GPI, Nov. 21, 2012; Oct. 25, 2012)
The senator’s chief complaint was the study’s reliance on the Energy Information Administration’s Annual Energy Outlook 2011, which was released in 2010. The differences between the 2011 report and the EIA’s latest 2013 outlook are drastic, he wrote. The EIA now thinks U.S. natural gas consumption will be 8% higher in 2035 than it did in 2011.
“The NERA study evaluates dozens of scenarios representing different market conditions, but it does not consider the significant domestic demand growth that outside experts and private industry expect to occur over the next decade. By excluding these sources of demand, NERA, like the EIA’s Annual Energy Outlooks, is significantly understating demand from emerging segments of the natural gas market,” Wyden wrote.
The new sources of demand for natural gas include transportation fuel and industrial growth. “The growth in natural gas production and low prices have attracted 100 proposed industrial projects, representing $90 billion in investment and tens of thousands of new jobs, according to Dow Chemical,” Wyden wrote.
Another shortcoming of the study, according to Wyden is, that it ignores the potential of Canadian LNG exports, which he says could reach 9 Bcf/d in 2014 (see Daily GPI, Feb. 10, 2012). “Although the NERA study acknowledges that some sectors of the economy will be hurt by exports, the NERA study fails to fully assess the impacts of rising natural gas prices on homeowners and businesses,” he wrote. It recognizes negative consequences of LNG exports but spends only a few paragraphs of its 230-pages actually examining them in detail, he wrote.
But consulting firm Deloitte also released a study that found that U.S. LNG exports will increase domestic natural gas prices by a small amount, but could cause international prices to fall if they de-link natural gas contracts from the price of oil (see Daily GPI, Jan. 10).
The debate over exporting LNG is becoming increasingly contentious as stakeholders fight to win the battle for public opinion. Major industrial companies including Dow Chemical, Alcoa Inc. and Celanese recently launched a website discouraging exports of LNG called America’s Energy Advantage. The website includes a page from which users can send a pre-written letter to the DOE attacking the NERA study.
The DOE may make decisions about LNG export permits as early as February. It is currently reviewing public comments in response to the study. There are petitions for 20 export permits to non-free trade agreement countries awaiting a decision.
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