Producers lined up on one side and large consumers on the other in the political countdown to an Obama administration decision on whether to allow unrestricted exports of liquefied natural gas (LNG) to the world market.
ExxonMobil Corp. thinks it’s a good idea; Dow Chemical Co. doesn’t. The American Gas Association (AGA) thinks there will be net economic benefits to exports, but the American Public Gas Association (munis) objects to “squandering” a large domestic resource that could instead be used to further U.S. energy independence.
And there is the question of what the repercussions would be if the United States, a member of the World Trade Organization, went against its longstanding free trade principles and chose to restrict exports of its natural gas. The Department of Energy (DOE) already has automatically approved (as it must) exports to the limited number of countries that are signatories to the North American Free Trade Agreement. That isn’t a large market, however, and there are at least 20 applications pending for U.S. export facilities aimed at the rest of the world.
The lobbying campaign, for and against, has been going on for months. The various arguments were officially filed with DOE at the close of the comment period last week on the NERA Economic Consulting study, conducted at the behest of DOE, which found that the U.S. would gain “net economic benefits” from allowing LNG exports (see NGI, Dec. 10, 2012).
ExxonMobil officials said, “Although the NERA study is very thorough, we believe it is somewhat conservative in its findings. In our view, the U.S. natural gas resource base is likely even more productive than assumed, and there are added benefits of LNG exports for increasing employment and capital investment during a weak economic recovery in the U.S…[B]y exporting LNG, the U.S. economy can reach full employment faster than it can without exports.”
Just for starters the biggest natural gas producer in the United States points out that based on “the NERA scenarios of 6 Bcf/d and 12 Bcf/d of exports,” new investments for export facilities could total $30-60 billion or more. “These facilities will stimulate manufacturing demand because they require equipment, specialty piping and other goods produced in the U.S.”
Manufacturers, like Dow, are expanding and profiting from the shale gas boom and low gas prices. They claim that their industrial expansion plans could be threatened by LNG exports because they would reduce the availability of domestically produced natural gas and increase its price. “Dow supports a balanced export policy; one that incentivizes sustainable natural gas production, maintains a competitive advantage for U.S. manufacturers and allows oil and gas producers to enter foreign natural gas markets,” the company stated. “The unfettered export of natural gas is widely understood to have serious implications for the cost and volatility of manufacturing feedstock prices.
Dow opted out of the National Association of Manufacturers (NAM) earlier this month after “NAM adopted a new position on this issue which places the interest of oil and gas producers above the interests of its manufacturer members.” Another chemical firm, Huntsman Corp. last week joined America’s Energy Advantage, a coalition of U.S. manufacturers and others opposed to unrestricted exports.
“Completely unfettered U.S. exports may enrich a few LNG exporters in the short-term, but real, sustained and broad-based growth in the U.S. economy will come from a balanced approach that considers the needs of American manufacturers and consumers, and ensures that natural gas can be exported without undermining this emerging sunrise for American manufacturing and all the supporting industries and services,” said CEO Peter Huntsman. “Our nation must not squander this opportunity.”
Also, on the anti-export side the American Public Gas Association (APGA) blasted the DOE’s study, saying it “exaggerates the benefits, downplays the potential harms, and fails to consider the foregone opportunities entailed by LNG exports,”
The DOE “should, in the exercise of its public interest discretion, look beyond these studies to consider the profound tradeoffs that will result from a policy that permits the aggressive export of a valuable fuel source in the U.S. rather than supporting its expanded use domestically.” APGA has protested each export application pending at DOE. “Those protests point out…that the United States is at a crossroads; it can take the path toward energy independence and a manufacturing renaissance or it can reflexively approve LNG exports, with the associated greater profits for the affected companies, but it cannot have it both ways.”
But AGA cited the DOE studies, which found that on balance LNG exports would 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.
“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.”
Given this abundant supply picture, AGA envisions “relative price stability” in the natural gas marketplace over the next decade and beyond. 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.”
Lawmakers weighed in. More than 100 members of the House of Representatives called on Energy Secretary Steven Chu to approve LNG export projects.
“The growth of the natural gas industry drives job creation, increases tax revenue, royalties and supports domestic manufacturing. However, the continued growth of this industry is reliant on steady demand…which we believe can responsibly include the export of LNG,” wrote the coalition of 110 House members, both Democrats and Republicans, in a letter to Chu Thursday.
And America’s Natural Gas Alliance said export opponents are basing estimates for natural gas demand than 50% higher than DOE estimates.
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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