Natural gas hearing to expose divisions

Although the Obama administration is taking the lead in considering whether to allow U.S. companies to sell more of America’s natural gas bounty overseas, Congress also is getting in the act.

The newly refashioned Senate Energy and Natural Resources Committee is set to hold its inaugural hearing on the issue Tuesday.

It’s no accident; the topic is a top priority for Chairman Ron Wyden, D-Ore., who is skeptical of existing laws allowing essentially automatic exports of domestic natural gas to countries that have free-trade agreements with the United States, much less the prospect of wider imports to other nations.

Wyden also has been critical of a government-backed study’s conclusion that greater natural gas exports — even unlimited foreign sales — would have a net economic benefit for the U.S.

A major fear is that widespread exports could drive up domestic prices, raising consumers’ energy bills and paring the competitive advantage enjoyed by some U.S. manufacturers and chemical companies.

But Kenneth Medlock, senior director of the Center for Energy Studies at Rice University, is expected to tell the panel that ultimately, the price impacts will be slim, and the long-term volume of natural gas exports from the United States probably won’t be large. He stressed in a paper last year that regulators deciding whether to grant more than a dozen natural gas export licenses aren’t locking in a fixed export volume. And no matter what happens with U.S. export policy, the international market for natural gas will shift dramatically in coming years, particularly as other countries develop their own shale gas resources.

“The bottom line is that certification of LNG exports likely will not produce a large domestic price impact, although the entities involved may be exposed to significant commercial risk,” Medlock said at the time. “As the story plays out, the international gas market will evolve into something dramatically different from what it is today.”

The Energy Department has stalled reviews of more than a dozen applications for licenses to sell liquefied natural gas to Japan, Taiwan and European nations, while it reviews the economic study issued in December.

Although the Energy Department has already approved one LNG export license, for Houston-based Cheniere Energy, analysts generally do not expect any more decisions on pending permit applications until the second half of this year.

In the meantime, the issue has opened up major rifts among the manufacturing and chemical sectors. Tuesday’s Senate hearing — dubbed an examination of “opportunities and challenges for natural gas” — will shine a spotlight on those clashes.

For instance, the panel is slated to hear from Ross Eisenberg, vice president of energy and resources policy with the National Association of Manufacturers, which has come out against limiting free trade of the fossil fuel.

Dow Chemical CEO Andrew Liveris, is likely to present a counter view when he testifies before the committee. Dow Chemical is the founding member of a coalition arguing against “unfettered exports” that the group says jeopardize some $90 billion in planned capital spending by the chemical and manufacturing industry.

Dow’s involvement in the proposed Freeport export facility — which just inked a deal with BP to liquefy its natural gas — is likely to draw scrutiny during the hearing. The Energy Department is expected to consider export applications on a first-come, first-served basis, making Freeport LNG next in line to secure a license. If just a few export licenses are granted, that facility would have an advantage over potential rivals further down on the Energy Department’s application list.

Dow owns 15 percent of the Freeport LNG receiving terminal, but executives said the company has no involvement or interest in the export venture.

“We don’t have an ownership stake in the export facility,” said George Biltz, Dow’s vice president of energy and climate change, in January. “We’re not part of the financing or the structure going forward.” While Dow owns 15 percent of the import facility, “we don’t intend to own any part of the export facility,” he added.

Other witnesses on Tuesday include Colorado Gov. (and former oil geologist) John Hickenlooper, who has supported natural gas development in his state; Frances Beinecke, president of the Natural Resources Defense Council; and Jack Gerard, president of the American Petroleum Institute.

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Read ongoing FuelFix coverage of the debate over exporting U.S. fuel:

Energy exports boosting US trade position (Feb. 10)
Gas exports won’t hurt US edge, expert says (Feb. 7)
Lawmakers propose making LNG exports automatic (Feb. 1)
Shell, El Paso plan LNG export facility (Jan. 28)
US will cap LNG shipments to boost economy (Jan. 25)
Dow Chemical disavows Texas LNG export project it co-owns (Jan. 25)
Lawmakers urge exports of US natural gas (Jan. 24)
Dow Chemical fights ally Exxon’s natural gas export push (Jan. 24)
Huntsman joins campaign against US natural gas exports (Jan. 22)
Oil industry battles back on natural gas exports (Jan. 17)
Global refining boom could challenge U.S. exports (Jan. 17)
Deloitte report boosts natural gas exports (Jan. 8)
Pennsylvania lawmakers make case for LNG exports (Jan. 8)
Officials say wider canal can boost natural gas exports (Dec. 19)
Government report predicts big economic boost from natural gas exports (Dec. 5)