Sen Ron Wyden (D-OR), chairman of the Senate Energy and Natural Resources Committee, Tuesday called on the Department of Energy (DOE) to update its application process for exports of liquefied natural gas (LNG) to reflect the country’s shale revolution, and to ensure that the United States obtains the “greatest benefit” from this national asset.

Wyden, who also chairs the Senate Finance Committee on International Trade and supports expanding U.S. trade opportunities, said he wants a natural gas policy that allows exports but also prioritizes national security and protects against price shocks for domestic consumers.

“The reality is we are dealing from a position of strength with respect to energy,” Wyden said. “Our county should not be wedded to this either/or choice between no exports and no limits on exports. Done right, there ought to be a way to get the trade benefits to exporters and trading partners while maintaining the domestic, economic and energy security benefits to our country.”

The current natural gas export policy is based on the 1938 Natural Gas Act, which was passed long before the current revolution in natural gas unlocked newly accessible reserves of shale gas.

“We’ve got this natural gas advantage; the rest of the world wants it,” Wyden said. “So much of the legal architecture that we’re using today, really is, to a great extent, years and years old. I’m looking at how this country can have it all. I want to see how we find a path, working in a bipartisan way…that we can really reap the fruits of a policy where we are in the advantage.”

At the gas export forum held by the Senate energy panel, concerns were raised about provisions in DOE orders that would allow the department to revoke orders allowing exports to non-free trade agreement (non-FTA) countries if fundamental changes in market prices and domestic supply take place after-the-fact. The Obama administration gave no indication of when it would approve its next export project. Gas companies warned that the United States could miss out on the economic opportunities associated with LNG if the administration does not move quickly.

“When our order came out and this [potential revocation]…was reiterated in the order, there were definitely questions from overseas investors on this particular point,” said Patricia Outtrim, vice president of governmental and regulatory affairs for Cheniere Energy Inc. “I think the DOE has made it clear that this [revoking of an order] is something that would not be arbitrary…that there would be a process to this. I believe that the international community understands the risks and has come to be alright with that risk,” she said.

Cheniere Energy’s Sabine Pass liquefied natural gas (LNG) export project in Louisiana was the first to receive DOE approval to export LNG to non-FTA countries. It has contracts to supply LNG to units of BG Group, Spain’s Gas Natural Fenosa, Korea Gas Corp. and Gail (India) Ltd (see Daily GPI, May 23, 2011).

Last Friday, DOE conditionally authorized the export of up to 1.4 Bcf/d of LNG from the Freeport LNG Terminal on Quintana Island, TX, to non-FTA countries for 20 years (see Daily GPI, May 20). Final approval remains contingent upon a successful approval by the Federal Energy Regulatory Commission, and DOE reserves the option to review the application again before issuing a final license and allowing exports to proceed.

The Sabine Pass and Freeport applications are the only two non-FTA permits that DOE has approved. There are 22 applications pending before the department, which would amount to 20 Bcf/d of natural gas exports, if realized, said Christopher Smith, acting assistant secretary of the DOE’s Office of Fossil Energy.

“Anytime DOE perceives that the public interest is no longer being served, it would give notice to the company holding the application” that a trial-like proceeding would be held to reconsider the application, said Bill Cooper, president for the Center for Liquefied Natural Gas, following a conference call with reporters Monday. The decision to revoke a permit cannot be a “knee-jerk reaction” on the part of DOE.

A “fundamental shift in the market” would have to occur before DOE could take this action, he said. For instance, natural gas prices, which have been averaging $3-4/Mcf, would have to start “popping [up] around $12-14.”

DOE’s Smith declined to say when the department would release its next next order on a non-FTA permit. But he did say that the DOE first would move on projects that have started spending “serious sums of money” on the pre-filing process at FERC. The next non-FTA LNG export projects in the DOE queue for consideration are Lake Charles Exports LLC and Dominion Cove Point LNG LP.

“It’s my hope that last week’s decision on Freeport is the first of many projects that will be approved in the coming weeks and months, not years. The decision clearly shows that the department’s review process is deliberative, impartial and thorough, though greater [regulatory] certainty should be provided so we can press our advantage in world markets,” said Sen. Lisa Murkowski of Alaska, the ranking Republican on the Senate Energy Committee.

“We simply cannot afford to needlessly drag our feet on exports, or we’re going to let real economic development opportunities, and the chance to provide our allies access to an abundant, affordable and clean source of energy, slip through our fingers,” she said.

The United States has a “narrow window of opportunity” to compete with Russia and Australia in the LNG export market, said Octavia Simoes, senior vice president of Sempra International and president of Sempra LNG. “The United States has the chance to exert global leadership as the world’s top producer of natural gas and must not squander the opportunity to capture the net economic benefits of LNG exports to the economy,” he said.

The U.S. will face “considerable competition for LNG sales abroad, with at least 63 international LNG export projects planned or under construction, with combined LNG export capacity of 50.5 Bcf/d,” said Harry Vidas, vice president of ICF International. But not all of the facilities will be built. Companies proposed the construction of 40 LNG import terminals, but only eight were ever realized, he said.

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