A group of municipal natural gas utilities has protested Lake Charles Exports LLC’s (LCE) request to broaden its authority to export liquefied natural gas (LNG) to countries with which the United States does not have a free trade agreement (FTA). The municipals argue that it would be wrong-headed to approve the proposal and others like it based on the discoveries of domestic shale gas deposits.
In late July the Department of Energy’s Office of Fossil Energy (DOE/FE) approved LCE’s application to export for 25 years 2 Bcf/d of domestically produced LNG from a terminal in Lake Charles, LA, owned by Trunkline Co. to any country with which the United States has, or will have in the future, a FTA, making it the third U.S. terminal (after Cheniere Energy Partners’ Sabine Pass Liquefaction LLC and Freeport LNG) to be cleared to export LNG (see Daily GPI, Aug. 8). However, the DOE/FE set aside LCE’s request to export LNG to non-FTA countries, saying it would address the issue in a separate decision. LCE is a venture formed by Houston-based Southern Union and BG LNG Services LLC, a subsidiary of BG Group plc.
The American Public Gas Association (APGA) “is against the export of LNG whether it’s with countries with which the U.S. has a free trade agreement or not,” said Dave Schryver, APGA executive vice president. “We don’t think it’s in the best interest of the country in terms of reducing our dependence on foreign sources of energy.” Efforts to contact LCE representatives for a comment were unsuccessful. Companies like LCE that are seeking to export LNG contend that exports would not leave U.S. consumers high and dry, or negatively impact gas prices.
“Doubtlessly, more such LNG export applications will be filed in the near future. The quantity of domestic natural gas at issue in this and related proceedings is substantial by any measure, and hence the policy implications for our nation are very significant,” the APGA told the DOE/FE in its motion to protest [FE Docket No. 11-59-LNG].
“The linchpin of LCE’s application is its ‘view that recoverable natural gas resources in the U.S. are abundant, cheap and sufficient to meet demand for domestic consumption and LCE’s proposed export over the long-term. LCE proceeds to discuss domestic natural gas supply, with the clear focus being that shale gas is the game-changer that now warrants converting the United States from an LNG import nation to an LNG exporting nation.”
To justify its request for broader LNG export authority, LCE cited figures from the Energy Information Administration (EIA), which projects that “the share of shale production will double by 46% by 2035,” the APGA said. Moreover, LCE pointed to the EIA Annual Energy Outlook 2011, which put the technically recoverable natural gas resource base in the Lower 48 at 2,251 Tcf, or nearly double the EIA’s 2005 estimate.
“While APGA certainly hopes that the prospects for shale gas in this country are as bright as painted by LCE (and other like LNG export applicants), serious policy decisions such as those now facing DOE/FE must be made on the basis of sober judgments, not wishful thinking. The same EIA reports referenced by LCE also contain important warning signs, observing that there is ‘considerable uncertainty about the ultimate size of the technically and economically recoverable shale gas resource base in the onshore Lower 48 states and about the amount of gas that can be recovered by well, on average, over the full extent of a shale gas formation,” APGA said.
“EIA notes that some of the uncertainties associated with shale gas formations include the fact that ‘most shale gas wells are only a few years old, and their long-term productivity is untested’ and that ‘in emerging shale formations, gas production has been confined largely in sweet spots that have the highest known production rates for the formations,’ which means that ‘when the production rates for the sweet spot are used to infer the productive potential of an entire formation, its resource potential may be overestimated,'” the municipal group said, referring to recent news articles that the Securities and Exchange Commission has begun to probe claims that producers may be “overbooking” their shale reserves (see Shale Daily, Aug. 3).
If shale reserves are not as plentiful as many believe, APGA says it would not be the first time that the industry has miscalculated. “The history of the fossil fuels industry is replete with miscalculations regarding supplies. For instance, not too long ago LCE’s corporate parents predicted that the U.S. natural gas market would benefit significantly from the import of LNG. Not to pick on LCE, but the last time it speculated on the future of the country’s natural gas supply, things did not pan out (as most vividly illustrated by the subject application),” it said.
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