News Column

Natural Gas Export Project OK'd

August 8, 2013
natural gas well
Natural gas well (file photo)

The Obama administration on Wednesday licensed a third company to sell U.S. natural gas broadly overseas, renewing fears that widespread exports of America's bounty could spike domestic prices for the fossil fuel.

In conditionally approving exports from a planned $2 billion facility in Lake Charles, La., the Energy Department now has authorized sales of up to 5.6 billion cubic feet of gas per day to countries that aren't free trade partners with the U.S.

And 19 other export applications are still pending at the Energy Department, propelled by U.S. natural gas producers' zeal to capitalize on growing demand in Europe and Asia.

Critics say the rush to export domestically harvested natural gas could cause U.S. prices to climb, hiking household energy bills and thwarting a resurgence of U.S. manufacturing.

"Each permit approval brings us closer to the point that would begin to harm the manufacturing renaissance," warned America's Energy Advantage, an alliance of industrial natural gas users, including Dow Chemical Co., that is fighting unfettered exports.

Sen. Ron Wyden, D-Ore., who heads the Energy and Natural Resources Committee, suggested the government should be more skeptical as it weighs future export proposals.

"With each new permit to send natural gas overseas, the Energy Department has a higher bar to prove these exports are in the best interests of American consumers and employers," Wyden said.

Under Wednesday's decision, Lake Charles Exports could sell as much as 2 billion cubic feet of natural gas a day to non-free-trade partners, if the project wins other required permits. Partners in the $2 billion project, including Southern Union Co. and BG Group, hope to build a natural gas liquefaction plant at the site of an existing LNG import terminal in Lake Charles.

Other approvals

Previously, the Energy Department has given approvals to the Freeport LNG project on Quintana Island in Brazoria County and Houston-based Cheniere Energy's Sabine Pass facility in southwest Louisiana. Next in line for review is a proposal to export 1 billion cubic feet of gas daily from Dominion's $3.4 billion Cove Point project in Maryland.

Even after companies have government approvals and secure financing for the massive multi-billion-dollar liquefaction facilities, it can take years to build them. At least 63 such LNG export pro-jects have been proposed worldwide, including in Canada and Australia.

But Sen. Lisa Murkowski, R-Alaska, warned that amid stiff global competition, "the window for building out our LNG capacity is not open-ended."

"It could close if we don't seize this opportunity to have America's natural gas play a major role in the growing global gas market," she said.

Murkowski and other export boosters say the administration is moving too slowly, potentially imperiling a rare opportunity for the U.S. to shift its trade balance while bolstering allies abroad.

A federal law dictates that the Energy Department must affirm proposed exports are in the public interest before granting licenses to sell natural gas to countries that don't have free trade agreements with the United States, a benchmark that tilts in favor of the foreign sales.

"The law presumes that all exports are in the public interest, and the Department of Energy has every reason to expedite approvals," said Erik Milito, upstream director for the American Petroleum Institute. "There are still thousands of jobs and billions in investments waiting on the sidelines for federal approval."

A market-based limit?

The Energy Department's reviews are being guided by a 2012 NERA Economic Consulting study that concluded the United States would score big economic benefits by broadly authorizing natural gas exports, with only modest domestic price increases for the fossil fuel.

Some economists argue that the costs of exports ensure a market-based limit on how much gas the U.S. ends up selling overseas. The process involves liquefying natural gas by chilling it to 256 degrees below zero, shipping it by tanker across the globe, and regasifying it.

In the Lake Charles order, the Energy Department said it will "continue to assess authorization on the public interest with due regard to the effect on domestic natural gas supply and demand fundamentals."


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