The Obama administration licensed a third company to broadly sell U.S. natural gas overseas on Wednesday, renewing fears that widespread exports of America’s bounty could spike domestic prices for the fossil fuel.
In conditionally approving exports from a $2 billion facility in Lake Charles, La., the Energy Department has now put U.S. companies on track to eventually export as much as 5.6 billion cubic feet of gas per day to Japan and other 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, a group of industrial natural gas users, including Dow Chemical, 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 LLC 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 PLC, hope to build a natural gas liquefaction plant at the site of an existing LNG import terminal in Lake Charles, La.
Previously, the Energy Department has given approvals to the Freeport LNG project on Quintana Island, Texas, and, in 2011, 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 projects have been proposed worldwide, including in Canada and gas-rich Australia.
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,” Murkowski said.
Murkowski and other export boosters say the administration is moving too slowly on the issue, potentially imperiling a rare opportunity for the United States to shift its trade balance while bolstering allies abroad.
“The slow permitting process at the Energy Department is jeopardizing the U.S.’s ability to contribute our abundant natural gas resources to the global market,” said Margo Thorning, senior vice president of the American Council for Capital Formation.
A federal law dictates that the Energy Department must affirm proposed exports are in the public interest before granting licenses to sell the fossil fuel 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.”
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 have argued that the costs of liquefying natural gas by chilling it to 256 degrees below zero, shipping it by tanker across the globe, and regasifying it ensure a market-based limit on how much LNG the U.S. ends up selling overseas.
Analysts at ClearView Energy Partners said the administration used Wednesday’s approval to signal pending proposals may receive increasingly greater scrutiny.
In the Lake Charles order, the Energy Department said it “would continue to assess authorization on the public interest with due regard to the effect on domestic natural gas supply and demand fundamentals.”
In a separate statement, the administration also affirmed its plan for a case-by-case review of applications and signaled a possible pause to asses the cumulative effects of export approvals at the end of the year, when the government releases new data about U.S. natural gas resources:
“As further information becomes available at the end of 2013, including the Energy Information Administration’s’s Annual Energy Outlook Report, the Department will assess the impact of any market developments on subsequent public interest determinations.”
Energy Secretary Ernest Moniz last week told reporters that the Obama administration is “working hard” to evaluate companies’ bids to broadly export U.S. natural gas.
In vetting the Lake Charles LNG proposal, the Energy Department said it considered the project’s economic, energy security and environmental impacts, as well as nearly 200,000 public comments filed in response to the 2012 NERA economic study.
Public comment periods have closed for 16 of the remaining 19 applications, limiting the Energy Department’s ability to accept and consider new information about those proposals.
As a result, said Bill Cooper, president of the Center for Liquefied Natural Gas, “it is time for DOE to follow its rules and act quickly on the pending applications.”
Erica Bowman, chief economist for America’s Natural Gas Alliance, urged the administration to “pick up the pace of approvals so that the markets can decide which projects go forward.”
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