The Department of Energy (DOE) is carrying out two studies to determine what, if any, impact exports of liquefied natural gas (LNG) would have on domestic gas prices, a department official told a Senate panel Tuesday.

The DOE is studying the potential increase in prices that would come about from an incremental hike in demand that could be induced by LNG exports, said Chris Smith, deputy assistant secretary for oil and gas in the DOE’s Office of Fossil Energy, during a hearing of the Senate Energy and Natural Resources Committee.

The DOE also has commissioned a study by an external contractor that, based on the potential price increase, will examine the overall net impact to the economy of LNG exports, he said.

Committee Chairman Jeff Bingaman (D-NM) said a recent Congressional Research Service report found that a “rise in U.S. natural gas exports would likely put upward pressure on domestic prices, but the magnitude of any rise is currently unclear.”

The two DOE studies, which will examine the cumulative impact of export permits and whether the DOE should continue to grant them, are expected to be completed in the first quarter of 2012.

The DOE has granted authorizations to five facilities to export a total 6.6 Bcf of LNG from the Lower 48 states, according to Smith. This represents about 10% of current daily U.S. natural gas production.

Utility groups and other end-users have protested applications to export LNG, especially to countries with which the United States does not have a free trade agreement. They argue that it would be wrong-headed to approve such proposals based on the discoveries of domestic shale gas deposits (see Daily GPI, Aug. 12).

In deciding whether to grant an export license, Smith said the DOE considers a wide range of factors, including the impact on domestic gas prices, impact on the local economy, energy security, job creation and impact on the gross domestic product.

Lower domestic gas prices and prolific shale development have piqued companies’ interest in exporting LNG to international markets where gas can fetch much higher prices.

Industry is to be credited for the natural gas bonanza, said Sen. Lisa Murkowski (R-AK). Some “bit of credit” goes to DOE’s fossil fuel research and development program, “but I don’t think we should fool ourselves. The government did not make this happen. The natural gas resource is proving up under existing conditions without any mandate, without any tariff or moratorium, without so much as a tweak on any laws or regions.

“While Congress has largely talked about fixing a problem, the private sector was taking a huge step toward actually fixing it. Now Americans are faced with a great problem. And this is a great problem to have. What do we do with all of our natural gas? My own opinion is that we [should] not try and make those decisions from behind this dais up here, but instead let the market work as much as possible.”

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